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CSSSSB 230(FIN) am: "An Act establishing the film office in the Department of Commerce, Community, and Economic Development; creating a transferable tax credit applicable to certain film production expenditures incurred in the state; and providing for an effective date."

00          CS FOR SPONSOR SUBSTITUTE FOR SENATE BILL NO. 230(FIN) am                                                      
01 "An Act establishing the film office in the Department of Commerce, Community, and                                      
02 Economic Development; creating a transferable tax credit applicable to certain film                                     
03 production expenditures incurred in the state; and providing for an effective date."                                    
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 film                               
07       office in the Department of Commerce, Community, and Economic Development, the                                    
08       department shall provide a transferable film production tax credit to a producer, as                              
09       defined in AS 44.33.239, for qualified production expenditures under AS 44.33.231 -                               
10       44.33.239.                                                                                                        
11            (b)  A tax credit provided under (a) of this section may be sold, assigned,                                  
12       exchanged, conveyed, or otherwise transferred in whole or in part.                                                
13            (c)  A taxpayer acquiring a transferable credit may use the credit or a portion of                           
14       the credit to offset taxes imposed under AS 43.20 (Alaska Net Income Tax Act). Any                                
01       portion of the credit not used may be used at a later period or transferred under (b) of                          
02       this section.                                                                                                     
03            (d)  The department shall adopt regulations necessary for the administration of                              
04       this section.                                                                                                     
05            (e)  A credit provided under (a) of this section, whether sold, assigned,                                    
06       exchanged, conveyed, or otherwise transferred, in whole or in part, must be used                                  
07       within three years after being provided by the department.                                                        
08    * Sec. 2. AS 44.33 is amended by adding new sections to read:                                                      
09                         Article 2A. Film Office.                                                                      
10            Sec. 44.33.231. Duties. (a) There is created a film office in the Department of                            
11       Commerce, Community, and Economic Development. The film office shall                                              
12                 (1)  cooperate with organizations in the private sector for the expansion                               
13       and development of film production industries in the state;                                                       
14                 (2)  promote Alaska as an appropriate location for film production;                                     
15                 (3)  provide production assistance through connecting film directors,                                   
16       makers, and producers with Alaska location scouts and contractors, including                                      
17       contractors providing assistance with permit applications;                                                        
18                 (4)  certify Alaska film production internship training programs and                                    
19       promote the employment of program interns by eligible productions; and                                            
20                 (5)  in cooperation with the Department of Revenue, administer the                                      
21       Alaska film production incentive program.                                                                         
22            (b)  The film office shall make available to the legislature, within 30 days after                           
23       the start of each regular session, a report of the activities conducted by the film office                        
24       under AS 43.33.231 - 43.33.239. The report must include                                                           
25                 (1)  the number of applications received under AS 44.33.234;                                            
26                 (2)  the number of applications approved by the film office; and                                        
27                 (3)  the number of, and amount of, tax credits disbursed under                                          
28       AS 44.33.232.                                                                                                     
29            (c)  The commissioner shall appoint a director to oversee the film office and                                
30       carry out its duties under AS 44.43.231 - 44.43.239.                                                              
31            (d)  When appointing a director under (c) of this section, the commissioner                                  
01       shall consider individuals suggested by the Alaska Film Group.  The Alaska Film                                   
02       Group may provide a list of not more than five names.                                                             
03            Sec. 44.33.232. Alaska film production incentive program. Subject to                                       
04       appropriations for the purpose, the film office shall administer in cooperation with the                          
05       Department of Revenue the Alaska film production incentive program to provide a tax                               
06       credit under AS 43.98.030 for certain film production expenditures incurred in the                                
07       state.                                                                                                            
08            Sec. 44.33.233. Eligibility. (a) A film production is eligible for a tax credit                            
09       under AS 43.98.030, if the                                                                                        
10                 (1)  producer has $100,000 or more in qualified expenditures in a                                       
11       consecutive 24-month period under AS 44.33.236;                                                                   
12                 (2)  production is approved by the film office.                                                         
13            (b)  The following productions are not eligible, regardless of the production                                
14       costs:                                                                                                            
15                 (1)  news, weather, or current events programming;                                                      
16                 (2)  a production produced primarily for industrial, corporate, or                                      
17       institutional purposes, and for internal use;                                                                     
18                 (3)  an advertisement infomercial, or any production that solicits funds,                               
19       except for a commercial television advertisement produced for national distribution;                              
20                 (4)  a political advertisement; or                                                                      
21                 (5)  a production that is determined by the film office to contain                                      
22       sexually explicit conduct as defined in 18 U.S.C. 2256.                                                           
23            Sec. 44.33.234. Qualification for film production tax credit. (a) A film                                   
24       producer may apply for the film production tax credit under AS 43.98.030 by                                       
25       submitting an application to the film office on a form provided by the film office. The                           
26       application must include                                                                                          
27                 (1)  a script or synopsis of the production;                                                            
28                 (2)  the names of the producer, director, and proposed cast;                                            
29                 (3)  estimated start, completion, and filming dates; and                                                
30                 (4)  other information the film office may require to determine the                                     
31       producer's eligibility for a credit and the estimated amount of the credit.                                       
01            (b)  If the film office approves an application submitted under (a) of this                                  
02       section, the film office shall issue a preliminary certificate to the producer. The                               
03       certificate must include a determination by the film office of the estimated film                                 
04       production tax credit for which the production qualifies.                                                         
05            Sec. 44.33.235. Award of film production tax credit. (a) The film office shall                             
06       determine the amount of the tax credit under AS 43.98.030 available to a producer                                 
07       who has obtained a preliminary certificate under AS 43.33.234(b), based on the                                    
08       qualified expenditures of the production under AS 44.33.236.                                                      
09            (b)  The base amount of a tax credit awarded under this section is equal to 30                               
10       percent of the qualified expenditures of the production.                                                          
11            (c)  In determining the amount of the tax credit, the percentage provided by (b)                             
12       of this section shall be increased by the film office based on the following criteria:                            
13                 (1)  an additional 10 percent of qualified expenditures that are wages                                  
14       paid to Alaska residents;                                                                                         
15                 (2)  an additional two percent of qualified expenditures made in a rural                                
16       area; and                                                                                                         
17                 (3)  an additional two percent of qualified expenditures made in the                                    
18       state between October 1 and March 30.                                                                             
19            (d)  After completion of the production, the producer shall provide the film                                 
20       office with a production cost report detailing the qualified expenditures of the                                  
21       production, with verification by an independent certified public accountant that the                              
22       costs claimed in the report are qualified expenditures under AS 44.33.236.                                        
23            (e)  The film office, in cooperation with the Department of Revenue, shall                                   
24       award a tax credit under AS 43.98.030 based on the information provided under (d) of                              
25       this section.                                                                                                     
26            (f)  The film office may not seek recourse against a producer or a taxpayer who                              
27       has acquired a tax credit under AS 43.98.030(b) for any portion of the credit that may                            
28       be subsequently disqualified.                                                                                     
29            Sec. 44.33.236. Determination of qualified expenditures. (a) Expenditures                                  
30       made by a production company in connection with a film production approved by the                                 
31       film office that shall be considered qualified expenditures include preproduction,                                
01       production, and postproduction expenditures directly incurred in this state that are                              
02       directly used in the production, including                                                                        
03                 (1)  costs of set construction and operation;                                                           
04                 (2)  costs of wardrobes, make-up, accessories, and related services;                                    
05                 (3)  costs associated with photography and sound synchronization;                                       
06                 (4)  costs of lighting and related services and materials;                                              
07                 (5)  costs of editing and related services;                                                             
08                 (6)  rental of facilities and equipment;                                                                
09                 (7)  leasing of vehicles;                                                                               
10                 (8)  costs of food and lodging;                                                                         
11                 (9)  costs of digital or tape editing, film processing, transfer of film to                             
12       tape or digital format, sound mixing, and special and visual effects;                                             
13                 (10)  the total aggregate payroll for services performed in Alaska,                                     
14       including all salaries, wages, compensation, and related benefits provided to                                     
15       producers, directors, writers, actors, and other personnel;                                                       
16                 (11)  the costs of the use of an Alaska payroll company;                                                
17                 (12)  costs of music, if performed, composed, or recorded by an Alaska                                  
18       musician, or released or published by an Alaska-domiciled company;                                                
19                 (13)  airfare, if purchased through an Alaska-based travel agency or                                    
20       travel company;                                                                                                   
21                 (14)  insurance costs or bonding, if purchased through an Alaska-based                                  
22       insurance agency;                                                                                                 
23                 (15)  costs relating to the design, construction, improvement, or repair                                
24       of a film, video, television, or digital production or postproduction facility or related                         
25       property, infrastructure, or equipment, except commercial exhibition facilities, as                               
26       determined by the film office;                                                                                    
27                 (16)  costs of state or municipal taxes levied in Alaska on the lease or                                
28       rental of passenger or recreational vehicles or the rental of rooms or other lodging; or                          
29                 (17)  other similar production expenditures as determined by the film                                   
30       office.                                                                                                           
31            (b)  Production costs that may not be considered qualified expenditures include                              
01                 (1)  the cost of a report or examination prepared for eligibility for the                               
02       film production tax credit;                                                                                       
03                 (2)  postproduction expenditures for marketing and distribution;                                        
04                 (3)  expenditures not directly attributable to the production;                                          
05                 (4)  amounts that are later reimbursed, resulting in a reduction in                                     
06       production costs;                                                                                                 
07                 (5)  amounts that are paid to a person or entity as a result of                                         
08       participation in profits from the exploitation of the production;                                                 
09                 (6)  costs related to the transfer or use of a film production tax credit                               
10       under AS 43.98.030;                                                                                               
11                 (7)  compensation and wages in excess of $2,000,000 paid to a person                                    
12       in connection with a single qualified film production.                                                            
13            Sec. 44.33.238. Regulations. The film office may adopt procedures and                                      
14       regulations to carry out its functions under AS 44.33.231 - 44.33.239.                                            
15            Sec. 44.33.239. Definitions. In AS 44.33.231 - 44.33.239,                                                  
16                 (1)  "commissioner" means the commissioner of commerce,                                                 
17       community, and economic development;                                                                              
18                 (2)  "department" means the Department of Commerce, Community,                                          
19       and Economic Development;                                                                                         
20                 (3)  "film" includes television, commercials, and videos;                                               
21                 (4)  "film office" means the film office created under AS 44.33.231;                                    
22                 (5)  "producer" means a person who arranges financing for or                                            
23       supervises the production of a film, video, commercial, or television production or                               
24       pilot;                                                                                                            
25                 (6)  "rural area" means a community with a population of 1,500 or less                                  
26       or a community with a population of 5,500 or less that is not connected by road or rail                           
27       to Anchorage or Fairbanks.                                                                                        
28    * Sec. 3. AS 43.98.030; AS 44.33.231(a)(5), 44.33.231(b), 44.33.232, 44.33.233, 44.33.234,                         
29 44.33.235, 44.33.236, and 44.33.239(6) are repealed.                                                                    
30    * Sec. 4. The uncodified law of the State of Alaska is amended by adding a new section to                          
31 read:                                                                                                                   
01       TRANSITION. (a) Notwithstanding secs. 3 and 5 of this Act, the film office shall                                  
02 award a tax credit to a film production that has submitted a production cost report under                               
03 AS 44.33.235(d), enacted by sec. 2 of this Act, before July 1, 2013.                                                    
04       (b)  A film production tax credit may be used to offset taxes imposed under AS 43.20                              
05 (Alaska Net Income Tax Act) or sold, assigned, exchanged, conveyed, or otherwise                                        
06 transferred, in whole or in part, within three years after being provided by the Department of                          
07 Revenue under AS 43.98.030, enacted by sec. 1 of this Act, notwithstanding the repeal of                                
08 AS 43.98.030 in sec. 3 of this Act.                                                                                     
09    * Sec. 5. Section 3 of this Act takes effect July 1, 2013.