Bill Text: MI HB4122 | 2015-2016 | 98th Legislature | Engrossed
Bill Title: Taxation; administration; film credits; sunset. Amends sec. 29h of 1984 PA 270 (MCL 125.2029h).
Spectrum: Partisan Bill (Republican 12-0)
Status: (Passed) 2015-07-14 - Assigned Pa 117'15 With Immediate Effect [HB4122 Detail]
Download: Michigan-2015-HB4122-Engrossed.html
HB-4122, As Passed House, March 11, 2015
SUBSTITUTE FOR
HOUSE BILL NO. 4122
A bill to amend 1984 PA 270, entitled
"Michigan strategic fund act,"
by amending section 29h (MCL 125.2029h), as amended by 2014 PA 396.
THE PEOPLE OF THE STATE OF MICHIGAN ENACT:
Sec. 29h. (1) The Michigan film office shall create and
operate the film and digital media production assistance program.
The film and digital media production assistance program may
provide funds to eligible production companies for direct
production expenditures or qualified personnel expenditures for
state certified qualified productions. Beginning October 1, 2015,
the Michigan film office and the fund shall not provide new
funding, or increase funding through an amendment to an existing
agreement, for direct production expenditures, Michigan personnel
expenditures, crew personnel expenditures, or qualified personnel
expenditures under this section.
(2) If the office receives applications that would exceed what
the office can award in any year, the office may prioritize that
application for funding in the subsequent year.
(3) The film and digital media production assistance program
shall provide for all of the following:
(a) Funding shall be provided only to reimburse direct
production expenditures or qualified personnel expenditures.
(b) To be eligible to apply for funding, the eligible
production company shall have direct production expenditures or
qualified personnel expenditures, or a combination of direct
production expenditures and qualified personnel expenditures, of
$100,000.00 or more.
(c) To be eligible to apply for funding, the eligible
production company shall not be delinquent in a tax or other
obligation owed to this state or be owned or under common control
of an entity that is delinquent in a tax or other obligation owed
to this state.
(d)
For Except as otherwise provided in this section,
for
state certified qualified production expenditures on or before
December 1, 2014, funding as provided in the agreement if that
agreement
was entered into on or before December 1, 2014. For
Except as otherwise provided in this section, for state certified
qualified production expenditures after December 1, 2014 through
September 30, 2015, an agreement under this section shall provide
for funding equal to the sum of the following:
(i) 25% of direct production expenditures and qualified
personnel expenditures.
(ii) In addition to the expenditures described in subparagraph
(i), 3% of direct production expenditures and qualified personnel
expenditures at a qualified facility or 10% of direct production
expenditures and qualified personnel expenditures at a
postproduction facility for a qualified production produced at the
facility.
(e) A television show may submit an application for 1 or more
successive seasons, notwithstanding the fact that the successive
seasons have not been ordered. The successive season's direct
production expenditures and qualified personnel expenditures shall
be based on the current season's estimated expenditures. Upon the
completion of production of each season, a television show may
submit an application for successive additional seasons. If a
television show received funding under this section and completed
the production of that television show season, the television show
shall receive a preference for funding the immediately succeeding
season for that television show.
(f) As a separate and distinct part of the film and digital
media production assistance program, the office may create a
program to directly support and promote qualified facilities and
other infrastructure throughout this state.
(g) That not less than 10% of the funding awarded under this
section is awarded for qualified productions that are motion
pictures, documentaries, or television series with a budget of less
than $15,000,000.00.
(h) For agreements entered into after the effective date of
the amendatory act that added this subdivision, the agreement shall
provide that only the direct production expenditures, the qualified
personnel expenditures and the combination of direct production
expenditures and qualified personnel expenditures incurred on or
before September 30, 2016 are eligible for funding.
(4) An eligible production company intending to produce a
qualified production in this state may submit an application for
funding under this section to the Michigan film office. The request
shall be submitted in a form prescribed by the office and shall be
accompanied by an application fee equal to 0.2% of the funding
requested but not less than $200.00 and not more than $5,000.00 and
all of the information and records requested by the office. An
application fee received by the office under this subsection shall
be deposited in the Michigan film promotion fund. The office shall
not process the application until it is complete. If an eligible
production company is producing a qualified production at a
qualified facility, a copy of the agreement between the eligible
production company and the qualified facility shall be provided to
the office before the office enters into an agreement to award
funding under this section. The office shall process each
application within 21 days after the application is complete as
determined by the office. As part of the application, the company
shall estimate direct production expenditures and qualified
personnel expenditures for an identified qualified production. If
the office determines to award funding under this section to an
eligible production company, the office with the concurrence of the
fund president or his or her designee shall enter into an agreement
under this section. The agreement shall include, but is not limited
to, all of the following:
(a) A requirement that the eligible production company
commence work in this state on the identified qualified production
within 90 days of the date of the agreement or else the agreement
shall expire. However, upon request submitted by the company based
on good cause, the office may extend the period for commencement of
work in this state for up to an additional 90 days.
(b) A statement identifying the company and the qualified
production that the company intends to produce in whole or in part
in this state.
(c) A unique number assigned to the qualified production by
the office.
(d) A requirement that the qualified production not depict
obscene matter or an obscene performance.
(e) If the qualified production is a long-form narrative film
production, a requirement that the qualified production include
within its presentation worldwide for the life of the qualified
production an acknowledgment as provided by the office that
promotes
the pure Pure Michigan tourism campaign or any successor
campaign. If the qualified production is a television show, a
requirement that the qualified production include within each
broadcast of 30 minutes or longer an acknowledgment as provided by
the
office that promotes the pure Pure
Michigan tourism campaign or
any successor campaign. If the qualified production is a music
video, a requirement that the music video include an acknowledgment
as
provided by the office that promotes the pure Pure Michigan
tourism campaign or any successor campaign. If the qualified
production is an interactive game, a requirement that the qualified
production include with each unit distributed and online promotions
an
acknowledgment as provided by the office that promotes the pure
Pure Michigan tourism campaign or any successor campaign. If the
qualified production is a long-form narrative film production, the
office also may require that, if the qualified production is
distributed by digital video disc or other digital media for the
secondary market, the qualified production include a video between
30 and 60 seconds long in a form approved by the office that
promotes
the pure Pure Michigan tourism campaign or any successor
campaign.
(f) A requirement that the company provide the office with the
information and independent certification the office deems
necessary to verify direct production expenditures and qualified
personnel expenditures, and eligibility for funding under this
section, which may include a report of direct production
expenditures and qualified personnel expenditures for the qualified
production audited and certified by an independent certified public
accountant.
(g) If determined to be necessary by the office, a provision
for addressing expenditures in excess of those identified in the
agreement.
(h) A requirement that residual payments to above the line
personnel, personal service corporations, loan out companies,
professional employer organizations, limited liability companies,
corporations, or other entities for a qualified production are
subject to taxation in this state under the income tax act of 1967,
1967 PA 281, MCL 206.1 to 206.713. With respect to residual
payments not otherwise subject to withholding under section 703 of
the income tax act of 1967, 1967 PA 281, MCL 206.703, the eligible
production company, affiliate entity, or its successor company
shall elect to either, for a period of not less than 12 years
following theatrical release of the qualified production, withhold
taxes from those residual payments and pay to this state the amount
provided under section 51 of the income tax act of 1967, 1967 PA
281, MCL 206.51, or require above the line personnel paid directly
or through, except as otherwise provided in this subdivision,
personal services corporations, loan out companies, professional
employer organizations, limited liability companies, corporations,
or other entities for the services of above the line personnel
receiving payments for direct production expenditures or qualified
personnel expenditures under this section to register to do
business under the laws of this state. To the extent that the
production company elects not to withhold, it shall notify the
above the line personnel of their registration obligations in
writing at the time of engagement for their services. Residual
payments shall include deferred, residual, or contingent
compensation, royalties, or profit participation relating to the
qualified production. A personal service corporation, loan out
company, professional employer organization, limited liability
company, corporation, or other entity is exempt from the
requirement to be registered to do business under the laws of this
state if it receives less than $250,000.00 for the above the line
services of an actor during the period that the qualified
production is produced in this state and any related residual
payments are based solely on a collective bargaining agreement. As
used in this subdivision, "loan out company" means a personal
service corporation or other entity contracted with and retained by
the production company to provide individual personnel, including
artists, crew, actors, directors, and producers, for the
performance of services used directly in a production, but not
including entities retained by the production company to provide
tangible property or outside contractor service, including
catering, construction, trailers, equipment, and transportation.
(5) In determining whether to award funding under this
section, the Michigan film office shall consider all of the
following:
(a) The potential that, in the absence of funding, the
qualified production will be produced in a location other than this
state.
(b) The extent to which the qualified production may have the
effect of promoting this state as a tourist destination.
(c) The extent to which the qualified production may have the
effect of promoting economic development or job creation in this
state.
(d) The extent to which state funding will attract private
investment for the production of qualified productions in this
state.
(e) The record of the eligible production company in
completing commitments to engage in a qualified production.
(f) The extent to which the qualified production will employ
Michigan residents.
(g) Whether the eligible production company will hold a
premiere in this state for the qualified production.
(h) Whether the eligible production company will make film
trailers
and clips available to the office for the Pure Michigan
tourism campaign or any successor campaign to promote the qualified
production and the Pure Michigan tourism campaign or any successor
campaign.
(6) If the Michigan film office determines that an eligible
production company has complied with the terms of an agreement
entered into under this section, the office shall award funding as
provided in this section. A person that willfully submits
information under this section that the person knows to be
fraudulent or false shall, in addition to any other penalties
provided by law, be liable for a civil penalty equal to the amount
of funding provided to the person under this section. A penalty
collected under this section shall be deposited in the Michigan
film promotion fund.
(7) Information, records, or other data received, prepared,
used, or retained by the Michigan film office under this section
that are submitted by an eligible production company and considered
by the applicant and acknowledged by the office as confidential
shall not be subject to the disclosure requirements of the freedom
of information act, 1976 PA 442, MCL 15.231 to 15.246. Information,
records, or other data shall only be considered confidential to the
extent that the information or records describe the commercial and
financial operations or intellectual property of the company, the
information or records have not been publicly disseminated at any
time, and disclosure of the information or records may put the
company at a competitive disadvantage. For purposes of this
subsection, information or records that describe commercial and
financial operations do not include that portion of information or
records that include any expenses that qualify under this section
as direct production expenditures or qualified personnel
expenditures.
(8) The office shall produce a performance dashboard for the
assistance authorized by this section. The performance dashboard
shall be made available by the office on the fund's website and
shall be updated at least annually. The performance dashboard shall
include the following measures:
(a) Direct and indirect economic impacts in this state of the
assistance authorized by this section.
(b) Direct and indirect job creation attributable to the
assistance authorized by this section.
(c) Direct and indirect private investment in this state
attributable to the assistance authorized by this section.
(d) Any other measures considered relevant by the office or
the Michigan film advisory council.
(e) The name of each eligible production company and the
amount
of each incentive dispersed disbursed
for each state
certified qualified production.
(9) Funding under this section for above the line personnel
shall not exceed 30% of total funding under this section for each
qualified production.
(10) To be eligible for funding under this section, except as
otherwise provided in subsection (11), Michigan residents shall be
hired
to work on qualified productions as follows:
(a)
Through through September 30, 2017, 2015, at
a ratio of
not less than 1 Michigan resident for every nonresident hired.
(b)
Beginning October 1, 2017 through September 30, 2020, at a
ratio
of not less than 1.5 Michigan residents for every nonresident
hired.
(c)
Beginning October 1, 2020 through September 30, 2022, at a
ratio
of not less than 2 Michigan residents for every nonresident
hired.
(d)
Beginning October 1, 2022, at a ratio of not less than 3
Michigan
residents for every nonresident hired.
(11) A producer may apply to the Michigan economic development
corporation for a waiver of the Michigan resident hiring
requirements described in subsection (10), based on the
unavailability of qualified Michigan residents. The Michigan
economic development corporation may waive the Michigan resident
hiring requirement described in subsection (10) if the Michigan
economic development corporation determines that there is an
insufficient number of qualified Michigan residents for the
qualified production.
(12) The legislature finds and declares that funding
authorized under this section to encourage diversification of the
economy, to encourage film production, to encourage investment, and
to encourage the creation of jobs in this state is a public purpose
House Bill No. 4122 as amended March 10, 2015
and of paramount concern in the interest of the health, safety, and
general welfare of the citizens of this state. It is the intent of
the legislature that the economic benefits, film production,
investment, and the creation of jobs resulting from this section
shall accrue substantially within this state.
(13) The fund board may authorize the use of money
appropriated for the program authorized by this section for
administration of the program. However, the fund board shall not
use more than 4% of the annual appropriation for administering the
program authorized under this section.
(14) At the end of each fiscal year, the commissioner shall
certify the total amount of unclaimed certificates of completion,
agreements where work has not commenced as required in subsection
(4), and agreements for qualified productions the commissioner
reasonably believes will not be completed. Funding allocated for
qualified productions described in the preceding sentence may be
reallocated.
(15)
The Michigan film office shall not award funding 7 years
after
the effective date of the amendatory act that added this
subsection.Notwithstanding any other provision in section
29d,
after September 30, 2016 after all payments and obligations under
this section have been satisfied, the money remaining in the
Michigan film promotion fund shall revert back to the general fund
of this state [and shall only be used to repay state public employee
retirement systems for any losses incurred due to the construction or operation of a qualified facility].
(16) As used in this section:
(a) "Above the line personnel" means a producer, director,
writer, actor, other than extras and stunt performers, or other
similar personnel whose compensation is negotiated prior to the
start of the production.
(b) "Below the line crew" means persons employed by an
eligible production company for state certified qualified
production expenditures made after production begins and before
production is completed, including, but not limited to, a best boy,
boom operator, camera loader, camera operator, assistant camera
operator, compositor, cook, driver, dialogue editor, film editor,
assistant film editor, focus puller, Foley operator, Foley editor,
gaffer, grip, key grip, lighting crew, lighting board operator,
lighting technician, music editor, sound editor, sound effects
editor, sound mixer, steadicam operator, first assistant camera
operator, second assistant camera operator, digital imaging
technician, camera operator working with a director of photography,
electric best boy, grip best boy, dolly grip, rigging grip,
assistant key for makeup, assistant key for hair, assistant script
supervisor, set construction foreperson, lead set dresser,
assistant key for wardrobe, scenic foreperson, assistant
propmaster, assistant audio mixer, assistant boom person, assistant
key for special effects, stunt performer, and other similar
personnel. Below the line crew does not include a producer,
director, writer, actor, or other similar personnel.
(c) "Direct production expenditure" means a development,
preproduction, production, or postproduction expenditure made in
this state directly attributable to the production or development
of a qualified production that is a transaction subject to taxation
in this state. Direct production expenditure does not include out-
of-state production costs that are made in this state even if the
costs are passed through a third-party company in this state or
payments made by an eligible production company to its parent
company, affiliate, subsidiary, or joint venture partner except
where the payments are for transactions entered into pursuant to
arm's-length negotiations and which reflect a commercially
reasonable price for the goods and services purchased. A direct
production expenditure must have true economic substance within the
state. Direct production expenditure does not include a prize
payable to participants in a game show; an expenditure for
entertainment, amusement, or recreation; or an expenditure of more
than $2,500.00 for the purchase of artwork or jewelry used in a
production. Direct production expenditure does not include a
qualified personnel expenditure. Direct production expenditure
includes payments to vendors doing business in this state to
purchase or use tangible personal property in producing the
qualified production or to purchase services relating to the
production or development of the qualified production, including
all of the following:
(i) Production work, production equipment, production software,
development work, postproduction work, postproduction equipment,
postproduction software, set design, set construction, set
operations, props, lighting, wardrobe, makeup, makeup accessories,
photography, sound synchronization, special effects, visual
effects, audio effects, digital effects, film processing, music,
sound mixing, editing, interactive game development and
programming, and related services and materials.
(ii) Use of facilities or equipment, use of soundstages or
studios, location fees, and related services and materials.
(iii) Catering, food, lodging, and related services and
materials.
(iv) Use of vehicles, which may include chartered aircraft
based in this state used for transportation in this state directly
attributable to production of a qualified production, but may not
include the chartering of aircraft for transportation outside of
this state.
(v) Commercial airfare if purchased through a travel agency or
travel company based in this state for travel to this state or
within this state directly attributable to production or
development of a qualified production.
(vi) Insurance coverage or bonding if purchased from an
insurance agent based in this state.
(vii) Interest on a loan, if the entity from which the
financing is obtained is a public, private, or institutional entity
with the requisite level of physical presence in this state that is
not related to or affiliated with the eligible production company
or any above the line personnel or cast members, and whose
principal business activity is the lending of money to individuals
and businesses. In addition, the financing shall be a good faith
loan, payable by the eligible production company, evidenced by an
enforceable promissory note or other debt instrument with clear
repayment obligations and bearing a market-related rate of
interest.
(viii) Other expenditures for production of a qualified
production in accordance with generally accepted entertainment
industry practices.
(d) "Eligible production company" or "company" means an entity
in the business of producing qualified productions or for
interactive games in the business of developing interactive games,
but does not include an entity that is more than 30% owned,
affiliated, or controlled by an entity or individual who is in
default on a loan made by this state, a loan guaranteed by this
state, or a loan made or guaranteed by any other state. For an
interactive game, an eligible production company need not possess
ownership of or legal control over all of the intellectual property
rights or other rights necessary to complete the qualified
production in its entirety nor be the same entity that distributes
or publishes the interactive game.
(e) "Made in this state" means all of the following:
(i) Tangible personal property and services acquired by the
eligible production company from a source within this state. If an
item of tangible personal property is not available from a source
within this state and a vendor with the requisite physical presence
in this state that regularly sells or leases property of that kind
obtains the property from an out-of-state vendor and sells or
leases it to an eligible production company, that expenditure is
considered made in this state and is a direct production
expenditure and not an out-of-state production cost.
(ii) Services wholly performed within this state.
(f) "Obscene matter or an obscene performance" means matter
described in 1984 PA 343, MCL 752.361 to 752.374.
(g) "Postproduction expenditure" means a direct expenditure
for editing, Foley recording, automatic dialogue replacement, sound
editing, special or visual effects including computer-generated
imagery or other effects, scoring and music editing, beginning and
end credits, negative cutting, soundtrack production, dubbing,
subtitling, or addition of sound or visual effects. Postproduction
expenditure includes direct expenditures for advertising,
marketing, or related expenses.
(h) "Postproduction facility" means a permanent facility
within this state equipped for the postproduction of motion
pictures, television shows, or digital media production that meets
all of the following requirements:
(i) Includes at least 3,000 square feet of contiguous space.
(ii) Includes at least 8 work stations.
(iii) Has been a qualified film and digital media infrastructure
project from which an investment expenditure certificate was issued
under section 457 of the Michigan business tax act, 2007 PA 36, MCL
208.1457, or has been the location of a state certified qualified
production for which a postproduction certificate of completion was
issued under section 455 of the Michigan business tax act, 2007 PA
36, MCL 208.1455, or both.
(i) "Producer" means an individual without regard to his or
her actual title or screen credit involved in or responsible for
any of the following:
(i) Funding for financing in whole or in part, or arranging for
the funding, or financing, of the qualified production.
(ii) Obtaining the creative rights to or the intellectual
property for development or production of the qualified production.
(iii) Hiring above the line personnel.
(iv) Supervising the overall production of the qualified
production.
(v) Arranging for the exhibition of the qualified production.
(j) "Qualified facility" means a permanent facility within
this state equipped for the production of motion pictures,
television shows, or digital media production that meets all of the
following requirements:
(i) Includes more than 1 soundstage.
(ii) Includes not less than 3,000 square feet of contiguous,
column-free space for production activities with a height of at
least 12 feet.
(iii) Includes any grid and sufficient built-in electric service
for shooting without the need of portable electric generators.
(iv) Has been a qualified film and digital media infrastructure
project for which an investment expenditure certificate was issued
under section 457 of the Michigan business tax act, 2007 PA 36, MCL
208.1457, or has been the location of a state certified qualified
production for which a postproduction certificate of completion was
issued under section 455 of the Michigan business tax act, 2007 PA
36, MCL 208.1455, or both.
(k) "Qualified personnel expenditure" means an expenditure
made in this state directly attributable to the production or
development of a qualified production that is a transaction subject
to taxation in this state and is a payment or compensation for
personnel, talent, management, or labor, including both of the
following:
(i) Payment of wages, benefits, or fees for talent, management,
or labor.
(ii) Payment to a personal services corporation or professional
employer organization for the services of a performing artist or
crew member if the personal services corporation or professional
employer organization is subject to taxation in this state on the
portion of the payment qualifying for funding under this section
and the payments received by the performing artist or crew member
that are subject to taxation under the income tax act of 1967, 1967
PA 281, MCL 206.1 to 206.713, and are withheld and paid to this
state in the amount provided under section 703 of the income tax
act of 1967, 1967 PA 281, MCL 206.703.
(l) "State certified qualified production" or "qualified
production" means single media or multimedia entertainment content
created in whole or in part in this state for distribution or
exhibition to the general public in 2 or more states by any means
and media in any digital media format, film, or video tape,
including, but not limited to, a motion picture, a documentary, a
television series, a television miniseries, a television special,
interstitial television programming, long-form television,
interactive television, music videos, interactive games such as
video games or wireless games, including console, computer, mobile,
and online games, internet programming, an internet video, a sound
recording, a video, digital animation, or an interactive website.
Qualified production also includes any trailer, pilot, video
teaser, or demo created primarily to stimulate the sale, marketing,
promotion, or exploitation of future investment in a production.
Qualified production does not include any of the following:
(i) A production for which records are required to be
maintained with respect to any performer in the production under 18
USC 2257.
(ii) A production that includes obscene matter or an obscene
performance.
(iii) A production that primarily consists of televised news or
current events.
(iv) A production that primarily consists of a live sporting
event.
(v) A production that primarily consists of political
advertising.
(vi) A radio program.
(vii) A weather show.
(viii) A financial market report.
(ix) An awards show or other gala event production.
(x) A production with the primary purpose of fund-raising.
(xi) A production that primarily is for employee training or
in-house corporate advertising or other similar production.
(xii) A commercial.
