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HCS CSSB 23(L&C): "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                HOUSE CS FOR CS FOR SENATE BILL NO. 23(L&C)                                                              
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                                   
15       legislature that the audit and report are available;                                                              
01                 (2)  audit at least once every three years the books and accounts of all                                
02       custodians of public funds and all disbursing officers of the state;                                              
03                 (3)  at the direction of the Legislative Budget and Audit Committee,                                    
04       conduct performance post-audits on any agency of state government;                                                
05                 (4)  cooperate with state agencies by offering advice and assistance as                                 
06       requested in establishing or improving the accounting systems used by state agencies;                             
07                 (5)  require the assistance and cooperation of all state officials and                                  
08       other state employees in the inspection, examination, and audit of state agency books                             
09       and accounts;                                                                                                     
10                 (6)  have access at all times to the books, accounts, reports, or other                                 
11       records, whether confidential or not, of every state agency;                                                      
12                 (7)  ascertain, as necessary for audit verification, the amount of agency                               
13       funds on deposit in any bank as shown on the books of the bank; no bank may be held                               
14       liable for making information required under this paragraph available to the legislative                          
15       audit division;                                                                                                   
16                 (8)  complete studies and prepare reports, memoranda, or other                                          
17       materials as directed by the Legislative Budget and Audit Committee;                                              
18                 (9)  have direct access to any information related to the management of                                 
19       the University of Alaska and have the same right of access as exists with respect to                              
20       every other state agency;                                                                                         
21                 (10)  conduct an audit every two years of information found in the                                      
22       annual reports required under AS 42.05.211 and AS 42.06.220 regarding compliance                                  
23       by the Regulatory Commission of Alaska with the requirements of AS 42.05.175(a) -                                 
24       (e) and of the timeline extensions made by the commission under AS 42.05.175(f),                                  
25       and of other performance measures adopted by the commission;                                                  
26                 (11)  conduct audits of the Alaska film production incentive                                        
27       program (AS 44.33.231 - 44.33.239) and make the audits available to the                                       
28       legislature on the first day of the regular session of the legislature in 2013, 2017,                         
29       and 2021.                                                                                                     
30    * Sec. 2. AS 43.98.030(a) is amended to read:                                                                      
31            (a)  In cooperation with the film office in the Department of Commerce,                                      
01       Community, and Economic Development, the department shall provide a transferable                                  
02       film production tax credit certificate to a producer, as defined in AS 44.33.239, for                         
03       qualified production expenditures under AS 44.33.231 - 44.33.239.                                                 
04    * Sec. 3. AS 43.98.030(b) is amended to read:                                                                      
05            (b)  A tax credit certificate provided under (a) of this section may be sold,                            
06       assigned, exchanged, conveyed, or otherwise transferred in whole or in part.                                      
07    * Sec. 4. AS 43.98.030(c) is amended to read:                                                                      
08            (c)  A taxpayer acquiring a transferable tax credit certificate may use the                          
09       credit or a portion of the credit to offset taxes imposed under AS 21.09.210,                                 
10       AS 21.66.110, AS 43.20, AS 43.55, AS 43.56, and AS 43.65. Except as provided in                               
11       (e) of this section, any [AS 43.20 (ALASKA NET INCOME TAX ACT). ANY]                                          
12       portion of the credit not used may be used at a later period or transferred under (b) of                          
13       this 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 total amount [NUMBER] of tax credits provided [IN THE                                           
21       AGGREGATE] under this section may not exceed $200,000,000 [$100,000,000].                                     
22    * Sec. 7. AS 43.98.030 is amended by adding new subsections to read:                                               
23            (g)  The total amount of tax credits for a single production may not exceed 44                               
24       percent of the qualified production expenditures.                                                                 
25            (h)  A person acquiring two or more film production tax credit certificates                                  
26       provided under (a) of this section may combine the unused amounts of the credits for                              
27       sale, assignment, exchange, conveyance, or other transfer. At the request of a person                             
28       holding a film production tax credit, the department shall replace a certificate that                             
29       represents the full amount of tax credit available with multiple certificates that each                           
30       represent a portion of the total tax credit available for the purpose of sale, assignment,                        
31       exchange, conveyance, or other transfer under this subsection, or, on request, shall                              
01       provide one tax credit certificate that represents the combined value of multiple tax                             
02       credit certificates. A tax credit certificate provided by the department under this                               
03       subsection must state the expiration date and the amount of each credit that is included                          
04       in the certificate. Combining or splitting unused amounts of credits under this                                   
05       subsection does not change or extend the time period in which each credit that is                                 
06       included in the combination or split must be used.                                                                
07    * Sec. 8. AS 44.33.231(b) is amended to read:                                                                      
08            (b)  The film office shall make available to the legislature, within 30 days after                           
09       the start of each regular session, a report of the activities conducted by the film office                        
10       under AS 43.33.231 - 43.33.239. The report must include                                                           
11                 (1)  the number of applications received under AS 44.33.234;                                            
12                 (2)  the number of applications approved by the film office; [AND]                                      
13                 (3)  the number of, and amount of, tax credits disbursed under                                          
14       AS 44.33.232;                                                                                                 
15                 (4)  the total amount of expenditures that were paid by productions                                 
16       qualifying for the film production tax credit that were not qualified expenditures;                           
17                 (5)  the total amount of qualified expenditures that were paid by                                   
18       productions qualifying for the film production tax credit to Alaska businesses;                               
19       and                                                                                                           
20                 (6)  the total amount of qualified expenditures that were paid by                                   
21       productions qualifying for the film production tax credit to Alaska residents as                              
22       wages.                                                                                                        
23    * Sec. 9. AS 44.33.231 is amended by adding a new subsection to read:                                              
24            (d)  The film office shall design a logo that represents the film office and must                            
25       be included in a film qualifying for a film production tax credit under AS 44.33.231 -                            
26       44.33.239.                                                                                                        
27    * Sec. 10. AS 44.33.233(a) is amended to read:                                                                     
28            (a)  A film production is eligible for a tax credit under AS 43.98.030, if the                               
29                 (1)  producer has $100,000 or more in qualified expenditures in a                                       
30       consecutive 36-month [24-MONTH] period under AS 44.33.236;                                                    
31                 (2)  film office determines that the production is not contrary to the best                             
01       interests of the state; and                                                                                       
02                 (3)  production is approved by the film office.                                                         
03    * Sec. 11. AS 44.33.233(b) is amended to read:                                                                     
04            (b)  In determining under (a) of this section whether a production is not                                    
05       contrary to the best interests of the state, the film office may consider                                         
06                 [(1)]  the effect of the production on                                                                  
07                 (1)  both the immediate and long-term prospects for the film industry in                            
08       Alaska;                                                                                                           
09                 (2)  both the immediate and long-term prospects for [THE EFFECT                                     
10       OF THE PRODUCTION ON] the employment of Alaska residents; [AND]                                                   
11                 (3)  both the immediate and long-term prospects for [THE EFFECT                                     
12       OF THE PRODUCTION ON] the economy of the state; and                                                           
13                 (4)  the public perception of state policy on the utilization and                                   
14       development of the natural resources of the state.                                                            
15    * Sec. 12. AS 44.33.234 is amended by adding a new subsection to read:                                             
16            (c)  Information submitted in an application under (a) of this section is                                    
17       confidential and is not subject to inspection or copying under AS 40.25.110 -                                     
18       40.25.125.                                                                                                        
19    * Sec. 13. AS 44.33.235(a) is amended to read:                                                                     
20            (a)  Subject to AS 43.98.030(f) and (i) of this section, the film office, in                             
21       cooperation with the Department of Revenue, shall determine the amount of the tax                                 
22       credit under AS 43.98.030 available to a producer who has obtained a notice of                                    
23       qualification under AS 43.33.234(b), based on the qualified expenditures of the                                   
24       production under AS 44.33.236.                                                                                    
25    * Sec. 14. AS 44.33.235(b) is amended to read:                                                                     
26            (b)  The base amount of a tax credit awarded under this section is equal to 30                               
27       percent of the qualified expenditures of a [THE] production other than a nonfiction                       
28       production produced for television and 20 percent of the qualified expenditures                               
29       for a nonfiction production produced for television.                                                          
30    * Sec. 15. AS 44.33.235(c) is amended to read:                                                                     
31            (c)  In determining the amount of the tax credit, the applicable percentage                              
01       provided by (b) of this section shall be increased by the film office based on the                                
02       following criteria:                                                                                               
03                 (1)  an additional 10 percent of qualified expenditures that are wages                                  
04       paid to Alaska residents;                                                                                         
05                 (2)  an additional six [TWO] percent of qualified expenditures made in                              
06       a rural area; and                                                                                                 
07                 (3)  an additional two percent of qualified expenditures made in the                                    
08       state between October 1 and March 30.                                                                             
09    * Sec. 16. AS 44.33.235(d) is amended to read:                                                                     
10            (d)  After completion of the production, the producer shall provide the film                                 
11       office with a production cost report detailing the qualified expenditures of the                                  
12       production, with verification by an independent certified public accountant, licensed                         
13       in the state and approved by the film office, that the costs claimed in the report are                    
14       qualified expenditures under AS 44.33.236 and that there is no outstanding balance                            
15       for a qualified expenditure that is due to a person in the state.                                             
16    * Sec. 17. AS 44.33.235 is amended by adding new subsections to read:                                              
17            (i)  To qualify for the tax credit under AS 43.98.030, a producer shall include,                             
18                 (1)  in the end credits of each qualified film, the film office logo                                    
19       designed under AS 44.33.231(d) and the words, "Filmed in Alaska with the Support of                               
20       the State of Alaska and the Film Office, Alaska Department of Commerce,                                           
21       Community, and Economic Development"; or                                                                          
22                 (2)  on each DVD or other media produced for distribution, a short                                      
23       Alaska promotional video or advertisement approved by the film office.                                            
24            (j)  The Department of Revenue may not provide a tax credit certificate under                                
25       AS 43.98.030 to a producer that fails to meet the requirements in (i) of this section.                            
26    * Sec. 18. AS 44.33.236(a) is amended to read:                                                                     
27            (a)  Expenditures made by a production company licensed to do business in                                
28       the state in connection with a film production approved by the film office that shall be                      
29       considered qualified expenditures must be directly related to the production and be                               
30       incurred in the state. Only expenditures that are ordinary, reasonable, and not in excess                         
31       of fair market value and that are for real or tangible property, fees, services, or state or                      
01       municipal taxes shall be considered. Expenditures may include                                                     
02                 (1)  costs of set construction and operation;                                                           
03                 (2)  costs of wardrobes, make-up, accessories, and related services;                                    
04                 (3)  costs associated with photography and sound synchronization;                                       
05                 (4)  costs of lighting and related services and materials;                                              
06                 (5)  costs of editing and related services;                                                             
07                 (6)  rental of facilities and equipment;                                                                
08                 (7)  leasing of vehicles;                                                                               
09                 (8)  costs of food and lodging;                                                                         
10                 (9)  costs of digital or tape editing, film processing, transfer of film to                             
11       tape or digital format, transfer of digital media to film or tape, sound mixing, and                          
12       special and visual effects;                                                                                       
13                 (10)  subject to the limitation in (c) of this section, the total aggregate                         
14       expenditures [PAYROLL] for services performed in Alaska, including all salaries,                              
15       wages, compensation, and related benefits provided to producers, directors, writers,                              
16       actors, and other personnel that are directly attributable to services performed in                               
17       Alaska;                                                                                                           
18                 (11)  the costs of the use of an Alaska business for processing qualified                               
19       payroll and related expenditures;                                                                                 
20                 (12)  costs of music, if performed, composed, or recorded by an Alaska                                  
21       musician, or released or published by an Alaska business;                                                         
22                 (13)  costs of intrastate travel, if provided by an Alaska business;                                    
23                 (14)  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                 (15)  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                 (16)  other similar production expenditures as determined by the film                                   
30       office in cooperation with the Department of Revenue.                                                             
31    * Sec. 19. AS 44.33.236 is amended by adding new subsections to read:                                              
01            (c)  The qualified expenditures described in (a)(10) of this section may not                                 
02       exceed                                                                                                            
03                 (1)  15 percent of the total production budget after June 30, 2013, and                                 
04       before July 1, 2016;                                                                                              
05                 (2)  12 percent of the total production budget after June 30, 2016, and                                 
06       before July 1, 2018; and                                                                                          
07                 (3)  10 percent of the total production budget after June 30, 2018.                                     
08            (d)  For the purposes of (c) of this section, "total production budget" means the                            
09       sum of the total qualified expenditures and the total expenditures that are not qualified                         
10       expenditures that are incurred by the producer in connection with a film production                               
11       approved by the film office.                                                                                      
12    * Sec. 20. AS 44.33.237(b) is amended to read:                                                                     
13            (b)  Legal proceedings may not be brought under (a) of this section more than                                
14       six years [ONE YEAR] after the date the tax credit was awarded under AS 44.33.235.                            
15    * Sec. 21. AS 44.33.239(7) is amended to read:                                                                     
16                 (7)  "rural area" means a community in the state with a population of                               
17       1,500 or less or a community with a population of 10,000 [5,500] or less that is not                          
18       connected by road or rail to Anchorage or Fairbanks.                                                              
19    * Sec. 22. The uncodified law of the state of Alaska enacted in sec. 5(a), ch. 63, SLA 2008,                       
20 is amended to read:                                                                                                     
21            (a)  Subject to AS 43.98.030(f), enacted by sec. 1, ch. 63, SLA 2008 [OF THIS                            
22       ACT], secs. 3 and 7, ch. 63, SLA 2008, [OF THIS ACT] do not prevent the film                                  
23       office from determining a film production's qualified expenditures, awarding a tax                                
24       credit, or reviewing a tax credit under the provisions repealed by secs. 3 and 4, ch. 63,                     
25       SLA 2008, [OF THIS ACT] to a film production that has received a notice of                                    
26       qualification under AS 44.33.234(b), enacted by sec. 2, ch. 63, SLA 2008 [OF THIS                             
27       ACT], before July 1, 2023 [2013].                                                                             
28    * Sec. 23. The uncodified law of the state of Alaska enacted in sec. 6, ch. 63, SLA 2008, is                       
29 amended to read:                                                                                                        
30            Sec. 6. NOTIFICATION. When the amount [NUMBER] of tax credits                                          
31       provided under AS 43.98.030(f), enacted by sec. 1, ch. 63, SLA 2008 [OF THIS                                  
01       ACT], in the aggregate and the estimated amount of tax credits that could be claimed                              
02       based on notices of qualification issued by the film office under AS 44.33.234(b),                                
03       together equal $200,000,000 [$100,000,000], the commissioner shall notify the                                 
04       presiding officers of each house of the legislature and the revisor of statutes in writing.                       
05    * Sec. 24. Section 7, ch. 63, SLA 2008, is amended to read:                                                        
06            Sec. 7. Section 3, ch. 63, SLA 2008, [OF THIS ACT] takes effect on the                                 
07       earlier of the following:                                                                                         
08                 (1)  July 1, 2023 [2013]; or                                                                        
09                 (2)  the date of the commissioner of revenue's notification to the                                      
10       presiding officers of each house of the legislature and to the revisor of statutes under                          
11       sec. 6, ch. 63, SLA 2008 [OF THIS ACT].                                                                       
12    * Sec. 25. Section 8, ch. 63, SLA 2008, is amended to read:                                                        
13            Sec. 8. Section 4 of this Act takes effect on the earlier of the following:                                
14                 (1)  July 1, 2029 [2014]; or                                                                        
15                 (2)  six years [ONE YEAR] after the date of the commissioner of                                     
16       revenue's notification to the legislature and to the revisor of statutes under sec. 6, ch.                    
17       63, SLA 2008 [OF THIS ACT].