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SB 230: "An Act establishing the division of film in the Department of Commerce, Community, and Economic Development; and creating a transferable tax credit applicable to certain film production expenditures incurred in the state."

00                             SENATE BILL NO. 230                                                                         
01 "An Act establishing the division of film in the Department of Commerce, Community,                                     
02 and Economic Development; and creating a transferable tax credit applicable to certain                                  
03 film production expenditures incurred in the state."                                                                    
04 BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF ALASKA:                                                                
05    * Section 1. AS 43.98 is amended by adding a new section to read:                                                  
06            Sec. 43.98.030. Film production tax credit. (a) In cooperation with the                                    
07       Department of Commerce, Community, and Economic Development, the department                                       
08       shall provide a transferable film production tax credit to a producer, as defined in                              
09       AS 44.33.239, for qualified production expenditures under AS 44.33.231 - 44.33.239.                               
10            (b)  A tax credit provided under (a) of this section may be sold, assigned,                                  
11       exchanged, conveyed, or otherwise transferred.                                                                    
12            (c)  A taxpayer acquiring a transferable credit may use the credit to offset taxes                           
13       imposed under this title, including income taxes due under AS 43.20 (Alaska Net                                   
14       Income Tax Act) or oil and gas production taxes due under AS 43.55.                                               
01            (d)  The department shall honor a transferable credit provided under (a) of this                             
02       section for the full face value of the credit.                                                                    
03            (e)  The department shall adopt regulations necessary for the administration of                              
04       this section.                                                                                                     
05    * Sec. 2. AS 44.33 is amended by adding new sections to read:                                                      
06                            Article 2A. Film.                                                                          
07            Sec. 44.33.231. Duties. (a) The Department of Commerce, Community, and                                     
08       Economic Development shall                                                                                        
09                 (1)  cooperate with organizations in the private sector for the expansion                               
10       and development of film production industries in the state;                                                       
11                 (2)  promote Alaska as an appropriate location for film production;                                     
12                 (3)  provide production assistance through connecting film directors,                                   
13       makers, and producers with Alaska contractors;                                                                    
14                 (4)  provide location scouting assistance;                                                              
15                 (5)  assist with permit applications and agreements pertaining to                                       
16       filming on local, state, and federal land;                                                                        
17                 (6)  certify an Alaska film production internship training program; and                                 
18                 (7)  in cooperation with the Department of Revenue, administer the                                      
19       Alaska film production incentive program.                                                                         
20            (b)  The department shall make available to the legislature, within 30 days after                            
21       the start of each regular session, a report of the activities conducted by the department                         
22       under AS 43.33.231 - 43.33.239. The report must include                                                           
23                 (1)  the number of applications received under AS 44.33.234;                                            
24                 (2)  the number of applications approved by the department; and                                         
25                 (3)  the number of, and amount of, tax credits disbursed under                                          
26       AS 44.33.232.                                                                                                     
27            Sec. 44.33.232. Alaska film production incentive program. Subject to                                       
28       appropriations for the purpose, the Department of Commerce, Community, and                                        
29       Economic Development shall administer in cooperation with the Department of                                       
30       Revenue the Alaska film production incentive program to provide a tax credit under                                
31       AS 43.98.030 for certain film production expenditures incurred in the state.                                      
01            Sec. 44.33.233. Eligibility. (a) A film production is eligible for a tax credit                            
02       under AS 43.98.030, if the                                                                                        
03                 (1)  producer has $50,000 or more in qualified expenditures under                                       
04       AS 44.33.236;                                                                                                     
05                 (2)  producer employs interns from the Alaska film production                                           
06       internship training program certified by the department; and                                                      
07                 (3)  production is approved by the department.                                                          
08            (b)  The following productions are not eligible, regardless of the production                                
09       costs:                                                                                                            
10                 (1)  news, weather, or current events programming;                                                      
11                 (2)  a financial, talk, or game show;                                                                   
12                 (3)  a production produced primarily for industrial, corporate, or                                      
13       institutional purposes, and for internal use;                                                                     
14                 (4)  a sports event or sports program;                                                                  
15                 (5)  a gala presentation or awards show;                                                                
16                 (6)  an infomercial or any production that solicits funds;                                              
17                 (7)  a political advertisement; or                                                                      
18                 (8)  a production that is determined by the department to be obscene,                                   
19       pornographic, or detrimental to the people of the state.                                                          
20            Sec. 44.33.234. Qualification for film production tax credit. (a) A film                                   
21       producer may apply for the film production tax credit under AS 43.98.030 by                                       
22       submitting an application to the department on a form provided by the department.                                 
23       The application must include                                                                                      
24                 (1)  a script or synopsis of the production;                                                            
25                 (2)  the names of the producer, director, and proposed cast;                                            
26                 (3)  estimated start, completion, and filming dates;                                                    
27                 (4)  a distribution plan for the finished production; and                                               
28                 (5)  other information the department may require to determine the                                      
29       producer's eligibility for a credit and the estimated amount of the credit.                                       
30            (b)  If the department approves an application submitted under (a) of this                                   
31       section, the department shall issue a preliminary certificate to the producer. The                                
01       certificate must include a determination by the department of the estimated film                                  
02       production tax credit for which the production qualifies.                                                         
03            Sec. 44.33.235. Award of film production tax credit. (a) The department                                    
04       shall determine the amount of the tax credit under AS 43.98.030 available to a                                    
05       producer who has obtained a preliminary certificate under AS 43.33.234(b), based on                               
06       the qualified expenditures of the production under AS 44.33.236.                                                  
07            (b)  The base amount of a tax credit awarded under this section is equal to 25                               
08       percent of the qualified expenditures of the production.                                                          
09            (c)  In determining the amount of the tax credit, the percentage provided by (b)                             
10       of this section shall be increased by the department based on the following criteria:                             
11                 (1)  an additional 10 percent of qualified expenditures that are wages                                  
12       paid to Alaska residents;                                                                                         
13                 (2)  an additional one percent of qualified expenditures made in a rural                                
14       area; and                                                                                                         
15                 (3)  an additional one percent of qualified expenditures made in the                                    
16       state between October 1 and March 30.                                                                             
17            (d)  After completion of the production, the producer shall provide the                                      
18       department with a production cost report audited by an independent certified public                               
19       accountant.                                                                                                       
20            (e)  The department, in cooperation with the Department of Revenue, shall                                    
21       issue a tax credit under AS 43.98.030 based on the information provided under (d) of                              
22       this section.                                                                                                     
23            Sec. 44.33.236. Determination of qualified expenditures. (a) Expenditures                                  
24       made by a production company in connection with a film production approved by the                                 
25       department that shall be considered qualified expenditures include preproduction,                                 
26       production, and postproduction expenditures directly incurred in this state that are                              
27       directly used in the production, including                                                                        
28                 (1)  costs of set construction and operation;                                                           
29                 (2)  costs of wardrobes, make-up, accessories, and related services;                                    
30                 (3)  costs associated with photography and sound synchronization;                                       
31                 (4)  costs of lighting and related services and materials;                                              
01                 (5)  costs of editing and related services;                                                             
02                 (6)  rental of facilities and equipment;                                                                
03                 (7)  leasing of vehicles;                                                                               
04                 (8)  costs of food and lodging;                                                                         
05                 (9)  costs of digital or tape editing, film processing, transfer of film to                             
06       tape or digital format, sound mixing, and special and visual effects;                                             
07                 (10)  the total aggregate payroll and the use of an Alaska payroll                                      
08       company;                                                                                                          
09                 (11)  costs of music, if performed, composed, or recorded by an Alaska                                  
10       musician, or released or published by an Alaska-domiciled company;                                                
11                 (12)  airfare, if purchased through an Alaska-based travel agency or                                    
12       travel company;                                                                                                   
13                 (13)  insurance costs or bonding, if purchased through an Alaska-based                                  
14       insurance agency; or                                                                                              
15                 (14)  other similar production expenditures as determined by the                                        
16       department.                                                                                                       
17            (b)  Production costs that may not be considered include                                                     
18                 (1)  the cost of an audit, report, or examination prepared for eligibility                              
19       for the film production tax credit;                                                                               
20                 (2)  postproduction expenditures for marketing and distribution;                                        
21                 (3)  indirect costs;                                                                                    
22                 (4)  amounts that are later reimbursed;                                                                 
23                 (5)  amounts that are paid to a person or entity as a result of                                         
24       participation in profits from the exploitation of the production;                                                 
25                 (6)  costs related to the transfer or use of a film production tax credit                               
26       under AS 43.98.030.                                                                                               
27            Sec. 44.33.237. Alaska film production internship training program. The                                    
28       department may establish an Alaska film production internship training program on a                               
29       cooperative basis with the University of Alaska.                                                                  
30            Sec. 44.33.238. Regulations. The department may adopt procedures and                                       
31       regulations to carry out its functions under AS 44.33.231 - 44.33.239.                                            
01            Sec. 44.33.239. Definitions. In AS 43.33.231 - 43.33.239,                                                  
02                 (1)  "department" means the Department of Commerce, Community,                                          
03       and Economic Development;                                                                                         
04                 (2)  "film" includes television, commercials, and videos;                                               
05                 (3)  "producer" means a person who arranges financing for or                                            
06       supervises the production of a film, video, commercial, or television production;                                 
07                 (4)  "rural area" means a community with a population of 5,500 or less                                  
08       that is not connected by road or rail to Anchorage or Fairbanks.