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CSSB 23(FIN): "An Act relating to transferable film production tax credits and film production tax credit certificates; requiring the legislative audit division to audit the Alaska film production incentive program; and providing for an effective date by amending the effective dates of secs. 3 and 4, ch. 63, SLA 2008."

00                       CS FOR SENATE BILL NO. 23(FIN)                                                                    
01 "An Act relating to transferable film production tax credits and film production tax                                    
02 credit certificates; requiring the legislative audit division to audit the Alaska film                                  
03 production incentive program; and providing for an effective date by amending the                                       
04 effective dates of secs. 3 and 4, ch. 63, SLA 2008."                                                                    
05 BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF ALASKA:                                                                
06    * Section 1. AS 24.20.271 is amended to read:                                                                      
07            Sec. 24.20.271. Powers and duties. The legislative audit division shall                                    
08                 (1)  conduct a performance post-audit of boards and commissions                                         
09       designated in AS 44.66.010 and of those programs and activities of agencies subject to                            
10       termination as determined in the manner set out in AS 44.66.020 and 44.66.030, and                                
11       make the audit, together with a written report, available to the legislature not later than                       
12       the first day of the regular session of the legislature convening in each year set out                            
13       with reference to boards, commissions, or agency programs whose activities are                                    
14       subject to termination as prescribed in AS 44.66; the division shall notify the                                   
01       legislature that the audit and report are available;                                                              
02                 (2)  audit at least once every three years the books and accounts of all                                
03       custodians of public funds and all disbursing officers of the state;                                              
04                 (3)  at the direction of the Legislative Budget and Audit Committee,                                    
05       conduct performance post-audits on any agency of state government;                                                
06                 (4)  cooperate with state agencies by offering advice and assistance as                                 
07       requested in establishing or improving the accounting systems used by state agencies;                             
08                 (5)  require the assistance and cooperation of all state officials and                                  
09       other state employees in the inspection, examination, and audit of state agency books                             
10       and accounts;                                                                                                     
11                 (6)  have access at all times to the books, accounts, reports, or other                                 
12       records, whether confidential or not, of every state agency;                                                      
13                 (7)  ascertain, as necessary for audit verification, the amount of agency                               
14       funds on deposit in any bank as shown on the books of the bank; no bank may be held                               
15       liable for making information required under this paragraph available to the legislative                          
16       audit division;                                                                                                   
17                 (8)  complete studies and prepare reports, memoranda, or other                                          
18       materials as directed by the Legislative Budget and Audit Committee;                                              
19                 (9)  have direct access to any information related to the management of                                 
20       the University of Alaska and have the same right of access as exists with respect to                              
21       every other state agency;                                                                                         
22                 (10)  conduct an audit every two years of information found in the                                      
23       annual reports required under AS 42.05.211 and AS 42.06.220 regarding compliance                                  
24       by the Regulatory Commission of Alaska with the requirements of AS 42.05.175(a) -                                 
25       (e) and of the timeline extensions made by the commission under AS 42.05.175(f),                                  
26       and of other performance measures adopted by the commission;                                                  
27                 (11)  conduct audits of the Alaska film production incentive                                        
28       program (AS 44.33.231 - 44.33.239) for the periods September 2, 2008, through                                 
29       June 30, 2013; July 1, 2013, through June 30, 2018; and July 1, 2018, through                                 
30       June 30, 2023.                                                                                                
31    * Sec. 2. AS 43.98.030(a) is amended to read:                                                                      
01            (a)  In cooperation with the film office in the Department of Commerce,                                      
02       Community, and Economic Development, the department shall provide a transferable                                  
03       film production tax credit certificate to a producer, as defined in AS 44.33.239, for                         
04       qualified production expenditures under AS 44.33.231 - 44.33.239.                                                 
05    * Sec. 3. AS 43.98.030(b) is amended to read:                                                                      
06            (b)  A tax credit certificate provided under (a) of this section may be sold,                            
07       assigned, exchanged, conveyed, or otherwise transferred in whole or in part.                                      
08    * Sec. 4. AS 43.98.030(c) is amended to read:                                                                      
09            (c)  A taxpayer acquiring a transferable tax credit certificate may use the                          
10       credit or a portion of the credit to offset taxes imposed under AS 43.20 (Alaska Net                              
11       Income Tax Act). Except as provided in (e) of this section, any [ANY] portion of                              
12       the credit not used may be used at a later period or transferred under (b) of this                                
13       section.                                                                                                          
14    * Sec. 5. AS 43.98.030(e) is amended to read:                                                                      
15            (e)  A transferable film production tax credit certificate provided under (a)                        
16       of this section, whether sold, assigned, exchanged, conveyed, or otherwise transferred,                           
17       in whole or in part, must be used within six [THREE] years after being provided by                            
18       the department.                                                                                                   
19    * Sec. 6. AS 43.98.030(f) is amended to read:                                                                      
20            (f)  The amount [NUMBER] of tax credits provided [IN THE AGGREGATE]                                      
21       under this section may not exceed                                                                                 
22                 (1)  $100,000,000 before July 1, 2018;                                                          
23                 (2)  $200,000,000 in the aggregate.                                                                 
24    * Sec. 7. AS 43.98.030 is amended by adding new subsections to read:                                               
25            (g)  The total amount of tax credits for a single production may not exceed 44                               
26       percent of the qualified production expenditures.                                                                 
27            (h)  A person acquiring two or more film production tax credit certificates                                  
28       provided under (a) of this section may combine the unused amounts of the credits for                              
29       sale, assignment, exchange, conveyance, or other transfer. At the request of a person                             
30       holding a film production tax credit, the department shall replace a certificate that                             
31       represents the full amount of tax credit available with multiple certificates that each                           
01       represent a portion of the total tax credit available for the purpose of sale, assignment,                        
02       exchange, conveyance, or other transfer under this subsection, or, on request, shall                              
03       provide one tax credit certificate that represents the combined value of multiple tax                             
04       credit certificates. A tax credit certificate provided by the department under this                               
05       subsection must state the expiration date and the amount of each credit that is included                          
06       in the certificate. Combining or splitting unused amounts of credits under this                                   
07       subsection does not change or extend the time period in which each credit that is                                 
08       included in the combination or split must be used.                                                                
09    * Sec. 8. AS 44.33.231(b) is amended to read:                                                                      
10            (b)  The film office shall make available to the legislature, within 30 days after                           
11       the start of each regular session, a report of the activities conducted by the film office                        
12       under AS 43.33.231 - 43.33.239. The report must include                                                           
13                 (1)  the number of applications received under AS 44.33.234;                                            
14                 (2)  the number of applications approved by the film office; [AND]                                      
15                 (3)  the number of, and amount of, tax credits disbursed under                                          
16       AS 44.33.232; and                                                                                             
17                 (4)  the total amount of qualified expenditures that were paid by                                   
18       productions qualifying for the film production tax credit to Alaska                                           
19                      (A)  businesses; and                                                                           
20                      (B)  residents as wages.                                                                       
21    * Sec. 9. AS 44.33.231 is amended by adding a new subsection to read:                                              
22            (d)  The film office shall design a logo that represents the film office and must                            
23       be included in a film qualifying for a film production tax credit under AS 44.33.231 -                            
24       44.33.239.                                                                                                        
25    * Sec. 10. AS 44.33.233(a) is amended to read:                                                                     
26            (a)  A film production is eligible for a tax credit under AS 43.98.030, if the                               
27                 (1)  producer has $100,000 or more in qualified expenditures in a                                       
28       consecutive 36-month [24-MONTH] period under AS 44.33.236;                                                    
29                 (2)  film office determines that the production is not contrary to the best                             
30       interests of the state; and                                                                                       
31                 (3)  production is approved by the film office.                                                         
01    * Sec. 11. AS 44.33.233(b) is amended to read:                                                                     
02            (b)  In determining under (a) of this section whether a production is not                                    
03       contrary to the best interests of the state, the film office may consider                                         
04                 [(1)]  the effect of the production on                                                                  
05                 (1)  both the immediate and long-term prospects for the film industry in                            
06       Alaska;                                                                                                           
07                 (2)  [THE EFFECT OF THE PRODUCTION ON] the employment of                                                
08       Alaska residents; [AND]                                                                                           
09                 (3)  [THE EFFECT OF THE PRODUCTION ON] the economy of the                                               
10       state; and                                                                                                    
11                 (4)  natural resource development in the state.                                                     
12    * Sec. 12. AS 44.33.234 is amended by adding a new subsection to read:                                             
13            (c)  Information submitted in an application under (a) of this section is                                    
14       confidential and is not subject to inspection or copying under AS 40.25.110 -                                     
15       40.25.125.                                                                                                        
16    * Sec. 13. AS 44.33.235(a) is amended to read:                                                                     
17            (a)  Subject to AS 43.98.030(f) and (i) of this section, the film office, in                             
18       cooperation with the Department of Revenue, shall determine the amount of the tax                                 
19       credit under AS 43.98.030 available to a producer who has obtained a notice of                                    
20       qualification under AS 43.33.234(b), based on the qualified expenditures of the                                   
21       production under AS 44.33.236.                                                                                    
22    * Sec. 14. AS 44.33.235(b) is amended to read:                                                                     
23            (b)  The base amount of a tax credit awarded under this section is equal to 30                               
24       percent of the qualified expenditures of a [THE] production other than a nonfiction                       
25       production produced for television and 20 percent of the qualified expenditures                               
26       for a nonfiction production produced for television.                                                          
27    * Sec. 15. AS 44.33.235(c) is amended to read:                                                                     
28            (c)  In determining the amount of the tax credit, the applicable percentage                              
29       provided by (b) of this section shall be increased by the film office based on the                                
30       following criteria:                                                                                               
31                 (1)  an additional 10 percent of qualified expenditures that are wages                                  
01       paid to Alaska residents;                                                                                         
02                 (2)  an additional six [TWO] percent of qualified expenditures made in                              
03       a rural area; and                                                                                                 
04                 (3)  an additional two percent of qualified expenditures made in the                                    
05       state between October 1 and March 30.                                                                             
06    * Sec. 16. AS 44.33.235(d) is amended to read:                                                                     
07            (d)  After completion of the production, the producer shall provide the film                                 
08       office with a production cost report detailing the qualified expenditures of the                                  
09       production, with verification by an independent certified public accountant approved                              
10       by the film office that the costs claimed in the report are qualified expenditures under                          
11       AS 44.33.236 and that there is no outstanding balance for a qualified expenditure                             
12       that is due to a person in the state.                                                                         
13    * Sec. 17. AS 44.33.235 is amended by adding new subsections to read:                                              
14            (i)  To qualify for the tax credit under AS 43.98.030, a producer shall include,                             
15                 (1)  in the end credits of each qualified film, the film office logo                                    
16       designed under AS 44.33.231(d) and the words, "Filmed in Alaska with the Support of                               
17       the State of Alaska and the Film Office, Alaska Department of Commerce,                                           
18       Community, and Economic Development"; or                                                                          
19                 (2)  on each DVD or other media produced for distribution, a short                                      
20       Alaska promotional video or advertisement approved by the film office.                                            
21            (j)  The Department of Revenue may not provide a tax credit certificate under                                
22       AS 43.98.030 to a producer that fails to meet the requirements in (i) of this section.                            
23    * Sec. 18. AS 44.33.236(a) is amended to read:                                                                     
24            (a)  Expenditures made by a production company in connection with a film                                     
25       production approved by the film office that shall be considered qualified expenditures                            
26       must be directly related to the production and be incurred in the state. Only                                     
27       expenditures that are ordinary, reasonable, and not in excess of fair market value and                            
28       that are for real or tangible property, fees, services, or state or municipal taxes shall be                      
29       considered. Expenditures may include                                                                              
30                 (1)  costs of set construction and operation;                                                           
31                 (2)  costs of wardrobes, make-up, accessories, and related services;                                    
01                 (3)  costs associated with photography and sound synchronization;                                       
02                 (4)  costs of lighting and related services and materials;                                              
03                 (5)  costs of editing and related services;                                                             
04                 (6)  rental of facilities and equipment;                                                                
05                 (7)  leasing of vehicles;                                                                               
06                 (8)  costs of food and lodging;                                                                         
07                 (9)  costs of digital or tape editing, film processing, transfer of film to                             
08       tape or digital format, transfer of digital media to film or tape, sound mixing, and                          
09       special and visual effects;                                                                                       
10                 (10)  the total aggregate payroll for services performed in Alaska,                                     
11       including all salaries, wages, compensation, and related benefits provided to                                     
12       producers, directors, writers, actors, and other personnel that are directly attributable                         
13       to services performed in Alaska;                                                                                  
14                 (11)  the costs of the use of an Alaska business for processing qualified                               
15       payroll and related expenditures;                                                                                 
16                 (12)  costs of music, if performed, composed, or recorded by an Alaska                                  
17       musician, or released or published by an Alaska business;                                                         
18                 (13)  costs of intrastate travel, if provided by an Alaska business;                                    
19                 (14)  costs relating to the design, construction, improvement, or repair                                
20       of a film, video, television, or digital production or postproduction facility or related                         
21       property, infrastructure, or equipment, except commercial exhibition facilities, as                               
22       determined by the film office;                                                                                    
23                 (15)  costs of state or municipal taxes levied in Alaska on the lease or                                
24       rental of passenger or recreational vehicles or the rental of rooms or other lodging; or                          
25                 (16)  other similar production expenditures as determined by the film                                   
26       office in cooperation with the Department of Revenue.                                                             
27    * Sec. 19. AS 44.33.239(7) is amended to read:                                                                     
28                 (7)  "rural area" means a community with a population of 1,500 or less                                  
29       or a community with a population of 10,000 [5,500] or less that is not connected by                           
30       road or rail to Anchorage or Fairbanks.                                                                           
31    * Sec. 20. The uncodified law of the state of Alaska enacted in sec. 5(a), ch. 63, SLA 2008,                       
01 is amended to read:                                                                                                     
02            (a)  Subject to AS 43.98.030(f), enacted by sec. 1, ch. 63, SLA 2008 [OF THIS                            
03       ACT], secs. 3 and 7, ch. 63, SLA 2008, [OF THIS ACT] do not prevent the film                                  
04       office from determining a film production's qualified expenditures, awarding a tax                                
05       credit, or reviewing a tax credit under the provisions repealed by secs. 3 and 4, ch. 63,                     
06       SLA 2008, [OF THIS ACT] to a film production that has received a notice of                                    
07       qualification under AS 44.33.234(b), enacted by sec. 2, ch. 63, SLA 2008 [OF THIS                             
08       ACT], before July 1, 2023 [JULY 1, 2013].                                                                     
09    * Sec. 21. The uncodified law of the state of Alaska enacted in sec. 6, ch. 63, SLA 2008, is                       
10 amended to read:                                                                                                        
11            Sec. 6. NOTIFICATION. When the amount [NUMBER] of tax credits                                          
12       provided under AS 43.98.030(f), enacted by sec. 1, ch. 63, SLA 2008 [OF THIS                                  
13       ACT], in the aggregate and the estimated amount of tax credits that could be claimed                              
14       based on notices of qualification issued by the film office under AS 44.33.234(b),                                
15       together equal $200,000,000 [$100,000,000], the commissioner shall notify the                                 
16       presiding officers of each house of the legislature and the revisor of statutes in writing.                       
17    * Sec. 22. Section 7, ch. 63, SLA 2008, is amended to read:                                                        
18            Sec. 7. Section 3, ch. 63, SLA 2008, [OF THIS ACT] takes effect on the                                 
19       earlier of the following:                                                                                         
20                 (1)  July 1, 2023 [2013]; or                                                                        
21                 (2)  the date of the commissioner of revenue's notification to the                                      
22       presiding officers of each house of the legislature and to the revisor of statutes under                          
23       sec. 6, ch. 63, SLA 2008 [OF THIS ACT].                                                                       
24    * Sec. 23. Section 8, ch. 63, SLA 2008, is amended to read:                                                        
25            Sec. 8. Section 4 of this Act takes effect on the earlier of the following:                                
26                 (1)  July 1, 2024 [2014]; or                                                                        
27                 (2)  one year after the date of the commissioner of revenue's                                           
28       notification to the legislature and to the revisor of statutes under sec. 6, ch. 63, SLA                      
29       2008 [OF THIS ACT].