HB 1360-FN - AS INTRODUCED
2016 SESSION
\t16-2519
\t10/09
HOUSE BILL\t1360-FN
AN ACT\testablishing a credit against business profits taxes for media production expenditures in New Hampshire.
SPONSORS:\tRep. Eastman, Hills. 28; Rep. Gidge, Hills. 33; Rep. Gannon, Rock. 4; Rep. Baldasaro, Rock. 5; Rep. Murotake, Hills. 32; Rep. Hogan, Hills. 34; Rep. Biggie, Hills. 23; Rep. Danielson, Hills. 7; Rep. F. Rice, Rock. 21; Sen. D'Allesandro, Dist 20
COMMITTEE:\tWays and Means
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ANALYSIS
\tThis bill establishes a credit against business profits taxes for media production expenditures made in New Hampshire.
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Explanation:\tMatter added to current law appears in bold italics.
\t\tMatter removed from current law appears [in brackets and struckthrough.]
\t\tMatter which is either (a) all new or (b) repealed and reenacted appears in regular type.
\t16-2519
\t10/09
STATE OF NEW HAMPSHIRE
In the Year of Our Lord Two Thousand Sixteen
AN ACT\testablishing a credit against business profits taxes for media production expenditures in New Hampshire.
Be it Enacted by the Senate and House of Representatives in General Court convened:
\t1 New Paragraph; Business Profits Tax; Credit for Media Production Expenditures. Amend RSA 77-A:5 by inserting after paragraph XV the following new paragraph:
\t\tXVI.(a) A taxpayer engaged in the making of a media production shall be allowed a credit against the taxes imposed by this chapter for the employment of persons within the state of New Hampshire in connection with the filming or production of one or more media productions in the state within any consecutive 12-month period. The credit shall be equal to 12.5 percent of the total aggregate payroll paid by a media production company that constitutes New Hampshire source income, when total production costs incurred in the state of New Hampshire equal or exceed $25,000 during the taxable year.
\t\t\t(b) A taxpayer shall be allowed an additional credit against the taxes imposed by this chapter equal to 12.5 percent of all New Hampshire production expenses and qualified non-New Hampshire expenses, not including the payroll expenses used to claim a credit pursuant to subparagraph (a), where the media production is also eligible for a credit pursuant to subparagraph (a) and either New Hampshire production expenses exceed 50 percent of the total production expenses for a media production or at a least 50 percent of the total photography days of the film take place in the state of New Hampshire or in excess of $100,000 in eligible New Hampshire production expenses are incurred.
\t\t\t(c) The tax credit shall be taken against the taxes imposed under this chapter. Any amount of the tax credit that exceeds the tax due for a taxable year may be carried forward by the taxpayer to any of the 5 subsequent taxable years.
\t\t\t(d) Notwithstanding any other provision of this paragraph, aggregate salary and compensation amounts including all per diems, housing, and other allowances, paid to, or for the services of, an individual shall not qualify for the credit under this paragraph to the extent such amounts exceed $2,000,000.
\t\t\t(e) The aggregate of tax credits to all taxpayers claiming the credit under this paragraph shall not exceed $10,000,000 for any fiscal year. If the commissioner determines the aggregate limit is claimed in any fiscal year the commissioner shall grant each taxpayer claiming the credit the proportional share of the maximum aggregate credit amount.
\t\t\t(f)(1) All or any portion of tax credits issued in accordance with the provisions of this paragraph may be transferred, sold, or assigned to a New Hampshire resident taxpayer with tax liabilities under this chapter. Any tax credit that is transferred, sold, or assigned and taken against taxes imposed by this chapter shall not be refundable. Any amount of the tax credit that exceeds the tax due of a New Hampshire resident taxpayer for a taxable year may be carried forward by the transferee, buyer, or assignee to any of the 5 subsequent taxable years from which a certificate is initially issued by the department of revenue administration.
\t\t\t\t(2) An owner, transferee, or assignee desiring to make a transfer, sale, or assignment shall submit to the commissioner a statement which describes the amount of tax credit for which such transfer, sale, or assignment of tax credit is eligible. The owner, transferee, or assignee shall provide to the commissioner such information as he or she may require for the proper allocation of the credit. The commissioner shall provide to the taxpayer a certificate of eligibility to transfer, sell, or assign the tax credits. The commissioner shall not issue a certificate to a taxpayer that has an outstanding tax obligation with the state of New Hampshire in connection with any media production for any prior taxable year. No tax credit may be transferred, sold, or assigned without a certificate.
\t\t\t(g) In this paragraph:
\t\t\t\t(1) “Agreement” means an agreement between a media production company and the film office. To enter an agreement, a media production company shall submit an application complete with a $100 non-refundable application fee on a form prescribed by the film office, to the film office, along with all the information and records requested by the film office. The film office shall not process the application until it is complete. As part of the application, the media production company shall estimate production expenses for the media production. If the film office, with the concurrence of the state treasurer, determines to enter into an agreement under this paragraph, the agreement shall provide for all of the following:
\t\t\t\t\t(A) A requirement that the eligible media production company commence work in the state of New Hampshire on the identified media production within 90 days of the date of the agreement or else the agreement will expire. However, upon request submitted by the company based on good cause, the film office may extend the period for commencement of work in this state for up to an additional 90 days.
\t\t\t\t\t(B) A statement identifying the media production company and the media production that the media production company intends to produce in whole or in part in the state of New Hampshire.
\t\t\t\t\t(C) A unique number assigned to the media production by the film office.
\t\t\t\t\t(D) A requirement that the media production not depict any content for which records are required to be kept under 18 U.S.C. section 2257.
\t\t\t\t\t(E) A requirement that the qualified production include an acknowledgment that the media production was filmed in the state of New Hampshire and a logo prescribed by the film office.
\t\t\t\t\t(F) A requirement that the media production company provide the film office with the information and independent certification the film office and the department deem necessary to verify production expenses and eligibility for the credits provided under this paragraph.
\t\t\t\t\t(G) A requirement that not later than 90 days after the end of the annual period, or after the last production expenses or costs are incurred in the production of a qualified production, an eligible media production company shall apply to the department for a production tax credit voucher, and shall provide with such application such information and independent certification as the department may require pertaining to the amount of such company’s production expenses or costs. Such independent certification shall be provided by an audit professional chosen from a list compiled by the department. If the department determines that such company is eligible to be issued a production tax credit voucher, the department shall enter on the voucher the amount of production expenses or costs that has been established to the satisfaction of the department and the amount of such company’s credit under this paragraph. Notwithstanding anything in this definition to the contrary, a media production company shall be eligible to submit an application to and enter an agreement with the film office for a media production, if principal photography began after December 31, 2015 but prior to the enactment of this paragraph, if all other requirements of this paragraph are satisfied.
\t\t\t\t\t(H) If determined to be necessary by the film office and the state treasurer, a provision for addressing expenses in excess of those identified in the agreement.
\t\t\t\t(2) “Media production” means a feature-length film, video, digital media project, television series defined as a season not to exceed 27 episodes, a commercial, or any other recorded media as defined within the screen actor's guild new media contract provisions, made in the state of New Hampshire, in whole or in part, for theatrical or television viewing or as a television pilot. The term “media production” shall not include a production featuring news, current events, weather and financial market reports, talk show, game show, sporting events, awards show or other gala event, a production whose sole purpose is fundraising, a long-form production that primarily markets a product or service, a production containing obscene material or performances as defined by law.
\t\t\t\t(3) “Media production company” means a business organization engaged in the business of producing films, videos, television series, or commercials intended for a theatrical release or for television viewing.
\t\t\t\t(4) “New Hampshire production expense” means a production expense for the media production clearly and demonstrably incurred in the state of New Hampshire.
\t\t\t\t(5) “Principal photography” means the phase of production during which the media production is actually filmed. The term shall not include preproduction or postproduction.
\t\t\t\t(6) “Production expense” means preproduction, production, and postproduction expenditures directly incurred in the production of a media production. Said term includes wages and salaries paid to individuals employed in the production of the media production; the costs of set construction and operation, editing and related services, photography, sound synchronization, lighting, wardrobe, make-up and accessories; film processing, transfer, sound mixing, special and visual effects; music; location fees and the cost of purchase or rental of facilities; the cost of purchase or rental of equipment; vehicles rented; hotels or other lodging obtained; production insurance; or any other production expense as may be determined by the department of revenue administration to be an eligible production expense. The term shall not include costs incurred in marketing or advertising a media production, any costs related to the transfer of tax credits or any amounts paid to persons or businesses as a result of their participation in profits from the exploitation of the production.
\t\t\t\t(7) “Qualified non-New Hampshire expenses” means the cost of purchase or rental of equipment or the procurement of production insurance from outside the state of New Hampshire that may not be otherwise obtained from within the state of New Hampshire.
\t\t\t\t(8) “Film office” means the New Hampshire film and television commission established in RSA 21-K:23.
\t\t\t(h) The commissioner, in consultation with the director of the film office and the commissioner of the New Hampshire department of resources and economic development, shall adopt rules under RSA 541-A as necessary for the administration of the provisions of this paragraph.
\t2 Prospective Repeal. RSA 77-A:5, XVI, relative to the credit for media production, is repealed, provided that credits may be carried forward for 5 subsequent taxable years.
\t\tI. Section 2 of this act shall take effect July 1, 2020.
\t\tII. The remainder of this act shall take effect July 1, 2016.
\t\t\t\t\t\t\t\t\t\t\t16-2519
\t\t\t\t\t\t\t\t\t\t\t11/6/15
HB 1360-FN- FISCAL NOTE
AN ACT\testablishing a credit against business profits taxes for media production expenditures in New Hampshire.
FISCAL IMPACT:
The Department of Revenue Administrations states this bill, as introduced, will decrease state general fund and education trust fund revenue by an indeterminable amount in FY 2017 and each year thereafter and increase state expenditures by an indeterminable amount in FY 2016. The Department of Cultural Resources states this bill will increase state expenditures by an indeterminable amount in FY 2017 and each year thereafter. The Treasury Department states this bill may increase state expenditures by an indeterminable amount in FY 2017 and each year thereafter. There is no fiscal impact on county and local revenue or expenditures.
METHODOLOGY:
The Department of Revenue Administration states this bill establishes a tax credit against the business profits tax for media production expenditures made in New Hampshire. The tax credit is equal to 12.5 percent of the total aggregate payroll paid by the production company that constitutes New Hampshire source income when total production expenses incurred in New Hampshire are equal to or exceed $25,000 during the taxable year. An additional tax credit is available against the business profits tax equal to 12.5 percent of all New Hampshire production expenses, and qualified non-New Hampshire expenses, not including expenses used to claim the first credit, where the production company is eligible for the first credit and either: (1) New Hampshire production expenses exceed 50 percent of the total production expenses; (2) at least 50 percent of the total photography days of the film take place in New Hampshire; or, (3) in excess of $100,000 in eligible New Hampshire production expenses are incurred. The tax credit shall be used against business profits tax and may be carried forward to any of the 5 subsequent taxable years with the aggregate of this credit to all taxpayers claiming the credit not exceeding $10,000,000 for any fiscal year. Aggregate salary and compensation amounts for an individual in excess of $2,000,000 shall not qualify for either of the tax credits against the business profits tax under this bill. All or any portion of tax credits issued may be transferred, sold , or assigned to a New Hampshire resident taxpayer with business profits tax liabilities. If the full credit is not used it shall not be refunded, but carried forward by the transferee, buyer, or assignee for 5 subsequent taxable years. To be eligible for the tax credits, taxpayers would need to enter into an agreement with the Department of Cultural Resources Film Office. The Department states the bill would take effect July 1, 2016; however, production may begin as early as January 1, 2016. The tax credits are first available for use in the tax year in which the expenses occurred, which would mean that credit could be used for tax year 2016. The tax return for calendar year 2016 could be filed beginning in March 2017, which would cause the fiscal impact to begin during the second half of FY 2017. The Department is not able to estimate the decrease in state revenue; however in any one year the maximum impact is $10,000,000. The Department would have additional administrative and IT expenses, such as adoption of rules, revising business profits tax forms, and developing a certificate process for the transferring of credit, associated with implementing this program.
The Department of Cultural Resources states it would need to add one additional position (Program Assistant II) to its Film Office to handle the increased activity that would be generated by this tax credit program. This individual would assist with responding to inquiries about the program, begin tax credit agreement applications, and assist with locations and other logistics. The Department estimates the total cost of the program assistant II position to be $69,000 in FY 2017, $68,000 in FY 2018, $71,000 in FY 2019 and $74,000 in FY 2020. Additionally, the Film Office would have costs associated with traveling throughout the State obtaining photos for possible filming locations and coordinating with cities and towns potentially impacted by filming. The Film Office would also have increased marketing and promotion costs associated with attending trade shows and expos and developing print ads to market the program. The Department is not able to determine the exact increase in expenditures associated with this program.
The Department of Resources and Economic Development states it will provide consultation on the development of administrative rules and assumes it will work with the Film Office to support and co-promote marketing efforts. The Department states this bill will have no fiscal impact on the Department as it will be able to absorb any impact from this bill within its existing resources.
The Treasury Department states this bill requires the Department to have a role in the approval of an agreement between a media production company and the Film Office. The Department is not clear as to the responsibilities it would assume under this bill as it relates to approving the agreements to determine the fiscal impact on state expenditures.
This bill does not contain an appropriation or authorization for new positions.