Bill Text: HI SB3014 | 2012 | Regular Session | Introduced
Bill Title: Musical or Theatrical Production; Facility Infrastructure
Spectrum: Partisan Bill (Democrat 4-0)
Status: (Introduced - Dead) 2012-01-27 - (S) Referred to EDT, WAM. [SB3014 Detail]
Download: Hawaii-2012-SB3014-Introduced.html
|
THE SENATE |
S.B. NO. |
3014 |
|
TWENTY-SIXTH LEGISLATURE, 2012 |
|
|
|
STATE OF HAWAII |
|
|
|
|
|
|
|
|
||
|
|
||
A BILL FOR AN ACT
RElating to Taxation.
BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF HAWAII:
SECTION 1. The legislature finds that encouraging live musical and theatrical productions to debut in Hawaii will broaden the State's economic climate, improve the artistic and educational experiences of the people in the State, and provide an opportunity for the State to continue to bolster its reputation as a premier tourist destination. Securing live musical and theatrical productions will also offer numerous employment opportunities for Hawaii residents.
Tax credits for live musical and theatrical productions would provide the necessary financial incentive for worldwide production companies to be based in Hawaii or at least debut their productions in Hawaii. The tax credits would relate to costs incurred for:
(1) Construction, development, repair, or renovation of facilities related to qualified productions and performances;
(2) Qualified transportation for performance-related property;
(3) Wages paid to Hawaii residents employed in connection with a qualified musical or theatrical production; and
(4) Wages paid to college, university, and vocational-technical students enrolled in a program of study related to musical or theatrical productions, whether or not that student is a resident of Hawaii.
The purpose of this Act is to provide tax credits for qualified live musical and theatrical productions and qualified musical or theatrical facility infrastructure projects that would present Hawaii as one of the primary places in the United States in which to debut a live musical or theatrical production and in which to base a production company.
SECTION 2. Chapter 235, Hawaii Revised Statutes, is amended by adding a new section to be appropriately designated and to read as follows:
"§235- Live musical or theatrical production tax credits. (a) There shall be allowed to each qualified taxpayer subject to the tax imposed by this chapter an applicable tax credit that is described in this section, which shall be deductible from the taxpayer's net income tax liability, if any, imposed by this chapter for the taxable year in which the credit is properly claimed.
(b) For purposes of this section:
"Base investment" means the actual investment made and expended in this State by a qualified live musical or theatrical production as production-related costs or as capital costs of a qualified musical or theatrical facility infrastructure project.
"Expended in the State" or "expenditures in the State" means an expenditure to acquire or lease immovable property located in the State, an expenditure to acquire movable property from a source within the State that is subject to income, general excise, or use taxes of the State, or an expenditure as compensation for services performed within the State that is subject to income, employment, or withholding taxes in the State.
"Live musical or theatrical production" means the producing, rehearsing, marketing, administration, recording, performing, or filming of a live musical or theatrical performance in the State before live audiences, whether or not there is a charge for admission. The performances shall include drama, comedy, comedy revue, opera, ballet, jazz, cabaret, and variety entertainment.
"Payroll" means all salary, wages, and other compensation, including related benefits, for services performed in the State.
"Production expenditures" means a contemporaneous exchange of cash or cash equivalent for goods or services related to development, production, or operating expenditures in the State for a qualified live musical or theatrical production, including expenditures that are directly incurred in connection with filming a production, such as set construction and operation, special and visual effects, costumes, wardrobes, make-up, accessories, costs associated with sound, lighting, staging, payroll, and related direct costs. "Production expenditures" shall not include any indirect costs, any expenditures later reimbursed by a third party, costs related to the transfer of the tax credits, or any amounts that are paid to persons or entities as a result of their participation in profits from the exploitation of the production.
"Qualified live musical or theatrical production" means a musical or theatrical production or series of productions, and the recording or filming of the production or series of productions, which originate, are developed, or have their initial public performance before an audience within the State, or which have their United States debut within the State, and the production expenditures, expenditures for the payroll of residents, transportation expenditures, and expenditures for employing college, university, or vocational-technical students related to the production or series of productions, that are certified as provided for in this section. Non-qualifying projects include but are not limited to non-touring music and cultural festivals, industry seminars, and trade shows.
"Qualified musical or theatrical facility infrastructure project" means a capital infrastructure project in the State directly related to the production or performance of live musical or theatrical productions and movable and immovable property and equipment related thereto, or any other facility that supports and is a necessary component of the facility, and any expenditures in the State related to the construction, repair, or renovation of the project, that are certified as provided for in this section.
"Resident" means a natural person and, for the purpose of determining eligibility for the tax incentives provided by this section, a person who qualifies for any of the following reasons:
(1) The person is domiciled in the State; or
(2) The person maintains a permanent place of abode within the State and spends in the aggregate more than six months of each year within the State.
"Transportation expenditures" means expenditures for the packaging, crating, and transportation:
(1) To the State for use in a qualified live musical or theatrical production of sets, costumes, or other tangible property constructed or manufactured outside the State; or
(2) From the State after use in a qualified live musical or theatrical production of sets, costumes, or other tangible property constructed or manufactured in the State.
"Transportation expenditures" shall include the packaging, crating, and transporting of property and equipment used for special and visual effects, sound, lighting, and staging, costumes, wardrobes, make-up, and related accessories and materials, as well as any other performance or production-related property and equipment; provided that transportation services are purchased through a company that has a significant business presence in the State.
"Transportation expenditures" shall not include any costs to transport property and equipment to be used only for filming and not in a qualified live musical or theatrical production, any indirect costs, any expenditures that are later reimbursed by a third party, or any amounts that are paid to persons or entities as a result of their participation in profits from the exploitation of the production.
(c) The following tax credits may be claimed under this section and shall be determined as follows:
(1) A base investment tax credit for expenditures on a qualified live musical or theatrical production or a qualified musical or theatrical facility infrastructure project:
(A) Ten per cent of the total base investment when the base investment amount is greater than $100,000 and less than or equal to $300,000;
(B) Twenty per cent of the total base investment when the base investment amount is greater than $300,000 and less than or equal to $1,000,000; and
(C) Twenty-five per cent of the total base investment when the base investment amount is greater than $1,000,000;
provided that no single qualified musical or theatrical facility infrastructure project shall receive more than $ in credits in any taxable year;
(2) A transportation expenditure tax credit for transportation expenditures, as defined in subsection (b), purchased from a company that has a significant business presence in the State:
(A) One hundred per cent for expenditures incurred from January 1, 2012, through December 31, 2012;
(B) Fifty per cent for expenditures incurred from January 1, 2013, through December 31, 2013; and
(C) Twenty-five per cent for expenditures incurred from January 1, 2014, through December 31, 2014;
(3) A college student compensation tax credit of one-tenth of one per cent for the costs related to compensating students enrolled in a program of study related to musical or theatrical productions in a college, university, or vocational-technical school in the State who are employed to work on a qualified live musical or theatrical production; and
(4) A resident payroll tax credit when base investment is used to employ residents to work on either a qualified live musical or theatrical production or qualified musical or theatrical facility infrastructure project that is equal to ten per cent of the resident's compensation; provided that the payroll tax credit is limited to the first $ compensated to each resident;
provided that no more than $ in cumulative tax credits under this section shall be granted per taxable year; provided further that the credits under this section shall be granted on a first-come, first-served basis and if the credits applied for in any particular year exceeds the aggregate amount allowed in that taxable year, then the excess shall be treated as having been applied for on the first day of the subsequent taxable year.
(d) The tax credits for a qualified musical or theatrical facility infrastructure project shall be earned only as follows:
(1) Construction of the qualified musical or theatrical facility infrastructure project shall begin within six months of the certification as provided for in rules adopted pursuant to this section;
(2) The base investment and resident payroll costs shall be certified as provided for in this section, and credits are not earned or claimable until certified;
(3) Twenty-five per cent of the total base investment shall be certified to have been expended before any credits may be earned; and
(4) No tax credit shall be allowed for base investment and resident payroll costs for any qualified musical or theatrical facility infrastructure project two years after certification, unless fifty per cent of the total base investment has been previously expended.
(e) If all or a portion of a musical or theatrical facility infrastructure project is for a facility that may be used for purposes not directly related to qualified live musical or theatrical production activities, the musical or theatrical facility infrastructure project shall be considered qualified only if a determination is made by the department of business, economic development, and tourism that the multiple-use facility will support and will be necessary to secure live musical or theatrical productions and the applicant provides sufficient contractual assurances that the facility shall be used for the production or performance of a qualified live musical or theatrical production, or as support and a component thereof, for the useful life of the facility. No tax credits shall be earned on multiple-use facilities until the facility that is to be used in a qualified live musical or theatrical production is complete.
(f) If the tax credit under this section exceeds the taxpayer's net income tax liability, the excess of credit over liability may be used as a tax credit against the taxpayer's net income tax liability in subsequent years until exhausted. All claims for a tax credit under this section, including amended claims, shall be filed on or before the end of the twelfth month following the close of the taxable year for which the tax credit may be claimed. Failure to comply with the foregoing provision shall constitute a waiver of the right to claim any tax credits under this section. In addition, no other tax credit may be claimed under this chapter for the qualified costs used to properly claim a tax credit under this section for the taxable year.
(g) In the case of a partnership, S corporation, estate, or trust, the tax credits allowable are for the qualified costs incurred by the entity for the taxable year. The cost upon which the tax credits are computed shall be determined at the entity level. Distribution and share of the tax credit shall be determined pursuant to section 704(b) (with respect to partner's distributive share) of the Internal Revenue Code.
(h) A taxpayer, on a one-time basis, may transfer the tax credits that the taxpayer is eligible to claim under this section; provided that the transferee claims the credit in the same taxable year that the expenditures eligible for the credit were expended and the department of taxation receives written notice of the transfer.
(i) The department of business, economic development, and tourism shall certify which live musical or theatrical productions and which musical or theatrical facility infrastructure projects shall be qualified pursuant to this section through the adoption of rules. The rules shall provide for all of the following:
(1) The criteria for certification, including, at a minimum, the factors identified in subsection (j);
(2) The manner in which the department of business, economic development, and tourism shall decide which expenditures for a live musical or theatrical production or musical or theatrical facility infrastructure projects shall qualify for the tax credits provided for in this section;
(3) An appeals process in the event that an application for a live musical or theatrical production or musical or theatrical facility infrastructure project, or expenditure related to such production or project, is denied; and
(4) Any other factor directly related to the purposes or intent of this section.
(j) The department of business, economic development, and tourism shall consider, at a minimum, the following factors when determining whether or not a live musical or theatrical production or musical or theatrical facility infrastructure project shall be qualified for the tax credits under this section:
(1) The contribution of the live musical or theatrical production or musical or theatrical facility infrastructure project to establishing the State as a leader in the live performance industry;
(2) The impact of the live musical or theatrical production or musical or theatrical facility infrastructure project on the employment of residents;
(3) The extent to which students in Hawaii colleges, universities, and vocational-technical schools have an opportunity to work on the live musical or theatrical production in an arts-related position, such as an actor, writer, producer, stagehand, or director, or as a technician working on aspects of the production such as lighting, sound, and actual stage work, or working indirectly on the production in accounting, law, management, and marketing;
(4) The impact of the live musical or theatrical production or musical or theatrical facility infrastructure project on the overall economy of the State, including the manner in which available federal and state financial incentives will be utilized in the financing or operation of the live musical or theatrical production or musical or theatrical facility infrastructure project;
(5) The availability and capacity of musical or theatrical facilities within the area in which a musical or theatrical facility infrastructure project is proposed; and
(6) Any other factor directly related to the purposes or intent of this section;
provided that the department of business, economic development, and tourism shall not grant qualification to a live musical or theatrical production or musical or theatrical facility infrastructure project that is owned, affiliated, or controlled, in whole or in part, by any person or entity that is in default on a loan made or guaranteed by the State, or which has ever declared bankruptcy that resulted in public funds or moneys being discharged in bankruptcy.
(k) Upon approval, the department of business, economic development, and tourism shall certify that a live musical or theatrical production or musical or theatrical facility infrastructure project is qualified and send notice to the applicant and the department of taxation. The notice shall include the following:
(1) The total base investment to be expended on the qualified live musical or theatrical production or qualified musical or theatrical facility infrastructure project;
(2) The name or identification of the taxpayer to whom the credits shall be allocated;
(3) The estimated amount of the credits to be allocated; and
(4) A unique identifying number for the qualified live musical or theatrical production or qualified musical or theatrical facility infrastructure project.
(l) Prior to claiming any qualified live musical or theatrical production or musical or theatrical facility infrastructure project tax credits, the taxpayer shall submit to the department of business, economic development, and tourism a report of the final amount of expenditures qualifying for the tax credits during the taxable year. The department of business, economic development, and tourism shall review the report and shall issue a tax credit certification letter, certifying the tax credits that the taxpayer is eligible to claim for the taxable year. An applicant applying for the tax credits shall be required to reimburse the department of business, economic development, and tourism for any audits required in relation to granting the certification letter.
(m) Depending upon the type of tax credit that the applicant is applying for under this section, the applicant shall submit an application for certification of the tax credits to the department of business, economic development, and tourism that comprises the following:
(1) For a qualified live musical or theatrical production, the application shall include:
(A) A fee payable to the department of business, economic development, and tourism that shall be used to promote and market Hawaii within the entertainment industry, based upon the following:
(i) Two-tenths of one per cent times the estimated total incentive tax credits; and
(ii) An application fee of not less than $200 and not more than $5,000;
(B) A preliminary budget including estimated base investment, estimated transportation expenditures, estimated Hawaii payroll, estimated costs of hiring students enrolled in a related program of study, and the manner in which available federal and state financial incentives will be utilized in the financing or operation of the live musical or theatrical production;
(C) A general description of the live musical or theatrical production and performance which, at the request of the department of business, economic development, and tourism, may include the book, libretto, score, or concept, and plans for recording or filming the production;
(D) A list of the principal creative elements including the cast, musicians, headline performers, conductor, producer, or director;
(E) The likelihood of offering students in Hawaii colleges, universities, and vocational-technical schools an opportunity to work directly in the live musical or theatrical production in an arts-related position, including a description of possible job or trainee positions working with professional actors, writers, producers, stagehands, directors, or technicians working on all aspects of the production such as lighting, sound, and actual stage work, or working indirectly on the live musical or theatrical production with professionals in accounting, law, management, and marketing;
(F) Estimated dates for start and completion of rehearsals before paid performances and the estimated dates of performances in the State;
(G) Plans, if any, for a national tour or for performances in other states;
(H) The taxpayers to whom the credits shall be allocated and the estimated amounts of the credits to be allocated to each taxpayer; and
(I) A discussion of why the applicant believes the live musical or theatrical production should be considered a qualified live musical or theatrical production as defined in this section; and
(2) For a qualified musical or theatrical facility infrastructure project, the application shall include:
(A) A fee payable to the department of business, economic development, and tourism that shall be used to promote and market Hawaii within the entertainment industry and is based upon the following:
(i) Two-tenths of one per cent times the estimated total incentive tax credits; and
(ii) An application fee of not less than $200 and not more than $5,000;
(B) A detailed description of the musical or theatrical facility infrastructure project;
(C) A preliminary budget including estimated base investment, estimated Hawaii payroll, and the manner in which available federal and State financial incentives will be utilized in the financing or operation of the musical or theatrical facility infrastructure project;
(D) The taxpayers to whom the tax credits shall be allocated and the estimated amounts of the tax credits to be allocated to each taxpayer;
(E) A complete, detailed business plan and market analysis; and
(F) A discussion of any other reasons why the applicant believes the musical or theatrical facility infrastructure project should be considered a qualified musical or theatrical facility infrastructure project as defined in this section.
(n) The director of business, economic development, and tourism, in consultation with the director of taxation, shall adopt rules pursuant to chapter 91 as are necessary to carry out the purposes or intent of this section.
(o) Any tax credit claimed under this section by a taxpayer that is later determined to have been based on amounts that have not been expended or on non-qualifying expenditures for any taxable year shall be recaptured.
(p) The department of business, economic development, and tourism shall study the dynamic economic impact of the tax credits in this section and prepare an annual report for the governor and the legislature that includes the overall economic impact of the tax credits, the amount of the tax credits issued, the number of new jobs created, the amount of Hawaii payroll created, the number of students hired for a qualified live musical or theatrical production, the economic impact of each qualified live musical or theatrical production and qualified musical or theatrical facility infrastructure project, the amount of new infrastructure that has been developed in the State, and any other factors that describe the impact of the tax credits under this section.
(q) The director of taxation shall prepare any forms that may be necessary to claim a credit under this section. The director may require the taxpayer to furnish information to ascertain the validity of the claim for the tax credits made under this section.
(r) The tax credits allowable in this section shall be available for taxable years beginning after December 31, 2011."
SECTION 3. New statutory material is underscored.
SECTION 4. This Act shall take effect upon its approval and shall apply to taxable years beginning after December 31, 2011.
|
INTRODUCED BY: |
_____________________________ |
|
|
|
Report Title:
Musical or Theatrical Production; Facility Infrastructure
Description:
Provides tax credits for the investment, transportation expenditures, and certain payroll costs associated with a qualified live musical or theatrical production or qualified musical or theatrical facility infrastructure project.
The summary description of legislation appearing on this page is for informational purposes only and is not legislation or evidence of legislative intent.
