Bill Text: MI SB0404 | 2009-2010 | 95th Legislature | Introduced

Michigan Senate Bill 404 (Prior Session Legislation)

Introduced

Bill Title: Michigan business tax; credit; qualified film production credit; cap, and revise requirements. Amends sec. 455 of 2007 PA 36 (MCL 208.1455).

Spectrum: Slight Partisan Bill (Republican 3-1)

Status: (Introduced - Dead) 2009-03-25 - Referred To Committee On Finance [SB0404 Detail]

Download: Michigan-2009-SB0404-Introduced.html

SENATE BILL No. 404

March 25, 2009, Introduced by Senators GILBERT, CASSIS, GEORGE and SWITALSKI and referred to the Committee on Finance.

A bill to amend 2007 PA 36, entitled

"Michigan business tax act,"

by amending section 455 (MCL 208.1455), as added by 2008 PA 77.

THE PEOPLE OF THE STATE OF MICHIGAN ENACT:

Sec. 455. (1) The Michigan film office, with the concurrence

of the state treasurer, may enter into an agreement with an

eligible production company providing the company with a credit

against the tax imposed by this act or against taxes withheld under

chapter 7 of the income tax act of 1967, 1967 PA 281, MCL 206.351

to 206.367, as provided under this section and section 367 of the

income tax act of 1967, 1967 PA 281, MCL 206.367. The Michigan film

office, with the concurrence of the state treasurer, shall enter

into a limited number of agreements under this section during each

calendar year as provided in subsection (6). To qualify for the

credit under this section, a company shall meet all of the

following requirements:

(a) Spend at least $50,000.00 in this state for the

development, preproduction, production, or postproduction costs of

a state certified qualified production.

(b) Enter into an agreement as provided in this section.

the office under subsection (5).

(d) Submit the postproduction certificate of completion issued

by the office under subsection (5) to the department under

subsection ~~(7)~~ (8).

(e) 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.

(2) ~~For~~ Subject to the limitation provided in subsection (6),

for direct production expenditures or qualified personnel

expenditures made after February 29, 2008, an agreement under this

section may provide for an eligible production company to claim a

tax credit equal to ~~42%~~ 35% of direct production expenditures for a

state certified qualified production ~~in a core community, 40% of~~

~~direct production expenditures for a state certified qualified~~

~~production in part of this state other than a core community,~~ and

~~30%~~ 35% for qualified personnel expenditures. A taxpayer shall not

claim a credit under this section for any of the following:

(a) A direct expenditure, or qualified personnel expenditure,

for which the company claims a credit under section 459.

(b) A direct expenditure, or qualified personnel expenditure,

for which the company claims a credit under section 367 of the

income tax act of 1967, 1967 PA 281, MCL 206.367.

for which another taxpayer claims a credit under this section, a

credit under section 459, or a credit under section 367 of the

income tax act of 1967, 1967 PA 281, MCL 206.367.

(3) An eligible production company intending to produce a

qualified production in this state, or that initiated production of

a qualified production after February 29, 2008 and before ~~the~~

~~effective date of the amendatory act that added this section~~ April

8, 2008, may submit an application to enter into an agreement under

this section to the Michigan film office. Except for a qualified

production for which production was initiated after February 29,

2008 and before ~~the effective date of the amendatory act that added~~

~~this section~~ April 8, 2008, direct production expenditures and

qualified personnel expenditures incurred prior to approval of an

agreement under this section are not eligible for the credit under

this section. The request shall be submitted in a form prescribed

by the Michigan film office and shall be accompanied by a $100.00

application fee 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.

As part of the application, the company shall estimate direct

production expenditures and qualified personnel expenditures for an

identified qualified production. If the office, with the

concurrence of the state treasurer, determines to enter into an

agreement under this section, the agreement shall provide for 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.

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 an

acknowledgement that the qualified production was filmed in this

state.

(f) A requirement that the company provide the office with the

information and independent certification the office and the

department deem necessary to verify direct production expenditures,

qualified personnel expenditures, and eligibility for the credit

under this section.

(g) If determined to be necessary by the office and the state

treasurer, a provision for addressing expenditures in excess of

those identified in the agreement.

(h) A requirement that at least 90% of the company's employees

who perform services related to the production or distribution of a

qualified production are residents of this state.

(4) In determining whether to enter into an agreement under

this section, the Michigan film office and the state treasurer

shall consider all of the following:

(a) The potential that in the absence of the credit 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.

effect of promoting economic development or job creation in this

state.

(d) The extent to which the credit 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.

(5) 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 issue a

postproduction certificate of completion to the company. The

company shall submit a request to the office for a postproduction

certificate of completion on a form prescribed by the office, along

with any information or independent certification the office or the

department deems necessary. ~~The~~ Except as otherwise provided under

subsection (6), the office shall process each request within 60

days after the request is complete. However, the office may request

additional information or independent certification before issuing

a postproduction certificate of completion and need not issue the

postproduction certificate of completion until satisfied that

direct production expenditures, qualified personnel expenditures,

and eligibility are adequately established. The additional

information requested 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. Each postproduction certificate of completion shall be

signed by the Michigan film commissioner and shall include the

following information:

(a) The name of the eligible production company.

(b) The name of the certified production produced in whole or

in part in this state.

expenditures and qualified personnel expenditures for the qualified

production.

(d) The date of completion for the qualified production in

this state.

(e) The unique number assigned to the qualified production

project by the Michigan film office under subsection (3).

(f) The eligible production company's federal employer

identification number or Michigan treasury number.

(g) Any independent certification required by the department

or the Michigan film office.

(6) For the 2009 calendar year and each calendar year

thereafter, the credit under this section shall not exceed

$9,000,000.00 for any postproduction certificate of completion

issued under subsection (5). For the 2009 calendar year and each

calendar year thereafter, the total of all credits for all

postproduction certificates of completion issued under subsection

(5) during the calendar year shall not exceed $50,000,000.00. If

the total amount of all credits for which postproduction

certificates of completion are requested in accordance with

subsection (5) in 2009 exceeds $50,000,000.00, the office need not

process those requests and issue those postproduction certificates

of completion that exceed $50,000,000.00 until the first day of the

immediately succeeding tax year.

(7) ~~(6)~~ 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 taxpayer 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. Not

later than the fifteenth of each month, the Michigan film office

shall make available on its website a detailed monthly report that

includes, at a minimum, all of the following:

(a) The number of applications received for a credit under

this section in the immediately preceding month including the name

of the eligible production company that submitted the application

and a brief description of the proposed qualified production

including the locations in this state to be used in the production

and the proposed amount of money to be expended by the eligible

production company to produce the qualified production in this

state.

(b) The number of applications approved during the immediately

preceding month.

issued during the immediately preceding month.

(8) ~~(7)~~ An eligible production company shall submit a

postproduction certificate of completion issued under subsection

(5) to the department. If the credit allowed under this section

exceeds the tax liability of the company for the tax year or if the

company claiming the credit does not have a tax liability under

this act for the tax year, the department shall refund the excess

or pay the amount of the credit to the company. The credit under

this section shall be claimed after all other credits under this

act.

(9) ~~(8)~~ An eligible production company may assign all or a

portion of a credit under this section to any assignee. An assignee

may subsequently assign a credit or any portion of a credit

assigned under this subsection to 1 or more assignees. A company

may claim a portion of a credit and assign the remaining credit

amount. A credit assignment under this subsection is irrevocable.

The credit assignment under this subsection shall be made on a form

prescribed by the department. The qualified taxpayer shall send a

copy of the completed assignment form to the department in the tax

year in which the assignment is made and shall attach a copy of the

form to the return on which the credit is claimed.

(10) ~~(9)~~ The amount of the credit under this section shall be

reduced by a credit application and redemption fee equal to 0.5% of

the credit claimed, which shall be deducted from the credit

otherwise payable to the taxpayer claiming the credit and be

deposited by the department in the Michigan film promotion fund.

(11) ~~(10)~~ A taxpayer that willfully submits information under

this section that the taxpayer 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 the taxpayer's

credit under this section. A penalty collected under this section

shall be deposited in the Michigan film promotion fund.

(12) ~~(11)~~ Not later than March 1 of each year after 2008, the

Michigan film office shall submit to the governor, the president of

the Michigan strategic fund, the chairperson of the senate finance

committee, and the house tax policy committee an annual report

concerning the operation and effectiveness of the credit under this

section. The requirements of section 28(1)(f) of 1941 PA 122, MCL

205.28, do not apply to disclosure of tax information required by

this subsection. The report shall include all of the following:

(a) A brief assessment of the overall effectiveness of the

credit under this section at attracting qualified productions to

this state during the immediately preceding calendar year.

(b) The number of qualified productions for which the eligible

production company applied for a tax credit under this section

during the immediately preceding year, the names of the qualified

productions produced in this state for which credits were begun or

completed in the immediately preceding year, and the locations in

this state that were used in the production of qualified

productions in the immediately preceding calendar year.

company identified in subdivision (b) to produce each qualified

production in this state and a breakdown of all production spending

by all companies classified as goods, services, or salaries and

wages in the immediately preceding calendar year.

(d) An estimate of the number of persons employed in this

state by eligible production companies that qualified for the

credit under this section in the immediately preceding calendar

year.

(e) The value of all tax credit certificates of completion

issued under this section in the immediately preceding calendar

year.

(13) ~~(12)~~ As used in this section:

(a) "Below the line crew" means that term as defined under

section 459.

~~(b) "Core community" means a qualified local governmental unit~~

~~as defined under section 2 of the obsolete property rehabilitation~~

~~act, 2000 PA 146,~~ ~~MCL~~ ~~125.2782.~~

(b) ~~(c)~~ "Direct production expenditure" means a development,

preproduction, production, or postproduction expenditure made in

this state that is not a qualified personnel expenditure directly

attributable to the production or distribution of a qualified

production that is a transaction subject to taxation in this state,

including, but not limited to, all of the following:

(i) Payments to vendors doing business in this state to

purchase or use tangible personal property in producing or

distributing the qualified production or to purchase services

relating to the production or distribution of the qualified

production, including all of the following:

(A) Expenditures for optioning or purchasing intellectual

property including, but not limited to, books, scripts, music, or

trademarks relating to the development or purchase of a script,

story, scenario, screenplay, or format, including all expenditures

generally associated with the optioning or purchase of intellectual

property, including option money, agent fees, and attorney fees

relating to the transaction, but not including deferrals,

deferments, royalties, profit participation, or recourse or

nonrecourse loans negotiated by the eligible production company to

obtain the rights to the intellectual property.

(B) 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, film processing, music, sound

mixing, editing, and related services and materials.

studios, location fees, and related services and materials.

(D) Catering, food, lodging, and related services and

materials.

(E) 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.

(F) Commercial airfare if purchased through a travel agency or

travel company based in this state for travel to and from this

state or within this state directly attributable to production or

distribution of a qualified production.

(G) Insurance coverage or bonding if purchased from an

insurance agent based in this state.

(H) Expenditures for distribution, including, but not limited

to, both of the following:

(I) Preproduction, production, or postproduction costs

relating to the creation of trailers, marketing videos,

commercials, point-of-purchase videos, and content created on film

or digital media, including, but not limited to, the duplication of

films, videos, compact discs, digital video discs, and digital

files or other digital media created for consumer consumption.

(II) Purchase of equipment relating to the duplication or

market distribution of any content created or produced in this

state.

(I) Other expenditures for production of a qualified

production in accordance with generally accepted entertainment

industry practices.

(ii) Payments and compensation, not to exceed $2,000,000.00 in

2008 and $1,000,000.00 in 2009 and each year thereafter for any 1

employee or contractual or salaried employee who performs services

in this state for the production or distribution of a qualified

production, including all of the following:

(A) Payment of wages, benefits, or fees for talent,

management, or labor.

(B) 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 the tax levied under this act

on the portion of the payment qualifying for the tax credit 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 206.532, and are withheld and

paid to this state in the amount provided under section 351 of the

income tax act of 1967, 1967 PA 281, MCL 206.351.

entity in the business of producing qualified productions, 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.

(d) ~~(e)~~ "Interactive website" means a website, the production

costs of which exceed $500,000.00 in an annual period and primarily

includes interactive games, end user applications, animation,

simulation, sound, graphics, story lines, or video created or

repurposed for distribution over the internet. Interactive website

does not include a website primarily used for institutional,

private, industrial, retail, or wholesale marketing or promotional

purposes, or which contains obscene matter or an obscene

performance.

(e) ~~(f)~~ "Michigan film office" or "office" means the Michigan

film office created under chapter 2A of the Michigan strategic fund

act, 1984 PA 270, MCL 125.2029 to 125.2029g.

(f) ~~(g)~~ "Michigan film promotion fund" means the fund created

under chapter 2A of the Michigan strategic fund act, 1984 PA 270,

MCL 125.2029 to 125.2029g.

(g) ~~(h)~~ "Obscene matter or an obscene performance" means

matter described in 1984 PA 343, MCL 752.361 to 752.374.

(h) ~~(i)~~ "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, distribution, or related expenses.

(i) ~~(j)~~ "Qualified personnel expenditure" means an expenditure

made in this state directly attributable to the production or

distribution of a qualified production that is a transaction

subject to taxation in this state and is a payment or compensation

payable to below the line crew for below the line crew members who

~~were not~~ are residents of this state for at least 60 days before

approval of the agreement for the qualified production under

subsection (3), not to exceed $2,000,000.00 in 2008 and $250,000.00

in 2009 and each year thereafter for any 1 employee or contractual

or salaried employee who performs service in this state for the

production of a qualified production, including both of the

following:

(i) Payment of wages, benefits, or fees.

(ii) Payment to a personal services corporation or professional