Legislature(2007 - 2008)SENATE FINANCE 532
02/22/2008 09:00 AM Senate FINANCE
| Audio | Topic |
|---|---|
| Start | |
| SB249 | |
| HB226 | |
| SB230 | |
| Adjourn |
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+ teleconferenced
= bill was previously heard/scheduled
| + | SB 230 | TELECONFERENCED | |
| + | SB 249 | TELECONFERENCED | |
| + | HB 61 | TELECONFERENCED | |
| + | HB 226 | TELECONFERENCED | |
| + | TELECONFERENCED |
SENATE BILL NO. 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."
SENATOR JOHNNY ELLIS, SPONSOR, gave an overview of SB 230.
He described the need to diversify Alaska's economy and
thought SB 230 would make Alaska competitive by creating the
Alaska Film Incentive Program and re-establishing the Alaska
Film Office. Forty-five other states have active film
offices. Senate Bill 230 proposes transferrable tax credits.
The plan is built on the successes of other states. For
example, New Mexico had $1.5 million in film spending in
2001, the year they enacted tax incentives. In 2007, the
film industry spent $476 million in the New Mexico economy.
Senator Ellis listed films Alaska has lost in recent years
that were set in Alaska but filmed in other countries and
states.
MAX HENSLEY, STAFF, SENATOR JOHNNY ELLIS, summarized the
sections of the bill.
· Sec. 1 authorizes the Department of Revenue and the
Department of Commerce, Community and Economic
Development to give tax credits to film producers for
qualified spending on qualified projects.
· Sec. 2 establishes an Alaskan Film Office and the
administration of a film production incentive
program. Subsections direct how the Department will
proceed with the film industry in relation to tax
credits.
10:44:35 AM
Senator Ellis has been encouraged by the amount of business
support the proposal has received.
Senator Elton referred to page 3, line 5, regarding
productions that are now eligible. He wondered what the bill
meant by "current events programming." Senator Ellis said he
would get a specific definition. Sports broadcasts would not
be covered for the incentive, but a show like "The Deadliest
Catch" would be.
Senator Elton wanted more information regarding another type
of non-eligible production, "sexually explicit conduct" as
defined in federal law (page 3, line 16). Senator Elton had
the impression that the federal definition was so broad that
it would disqualify many projects. Senator Ellis explained
that all states use the same standard and it has worked
well. Senator Elton said he was satisfied with that.
Co-Chair Stedman referred to page 3, line 11, regarding non-
eligible sports events or programs, and wondered if dog-
mushing races would be excluded. Mr. Hensley replied that
the definition is meant to exclude live broadcasts of
sporting events such as ESPN at the Great Alaska Shootout.
ESPN already has to come to Alaska to cover that event;
there is no reason to give them additional incentives to
come. Mr. Ellis added that the bill would allow a special
project relating to sled-dog racing, which would promote
Alaska, create jobs and bring money into the state.
10:51:00 AM
BOB CROCKETT, BOARD MEMBER, ALASKA FILM GROUP (AFG); DEBRA
SCHILDT, FOUNDING MEMBER, BOARD MEMBER, AFG; and KATE TESAR,
PRO BONO LOBBYIST, AFG, spoke in support of SB 230. They
gave a PowerPoint presentation (Copy on File). Mr. Crockett
pointed out that a film production can have broad economic
impact in Alaska. He explained how tax credit incentives
work:
· The production company applies for a credit.
· The film office approves production, issues a
preliminary certificate with estimated credit amount
which the company can use as collateral for loans,
financing, etc.
· The movie gets made.
· The production company submits a spending report
verified by Department of Commerce, Community and
Economic Development and an independent CPA.
· The film office issues a transferrable tax credit.
· The producer sells the credit to an Alaska corporate
tax payer, generally through a broker.
· The taxpayer redeems the transferrable credit to
offset tax liability any time in the future.
Ms. Schildt explained that Canada has been Alaska's biggest
competitor. From 2001-2005, 142 features were produced in
Canada. Canada built an infrastructure around the film
industry. She described films that were set in Alaska and
shot in other states because those states had incentive
programs. Mr. Crockett discussed a chart showing examples of
how much money can be spent on location by television shows
and films. These projects create high paying jobs that can
compare to North Slope jobs. Feature films pay high union
rates; commercials pay even higher. Ms. Tesar described the
film dynamic: Incentives attract films, which in turn affect
markets, which help build infrastructure, that employs a
larger labor force, and so on.
10:58:39 AM
Senator Thomas asked what the amount of tax credit would be
if there were $10 million spent in Alaska, of which $1
million was wages. Ms. Tesar answered the tax credit would
be approximately 30% of that.
10:59:45 AM
DAN STICKLE, ECONOMIST, DEPARTMENT OF REVENUE, stated that
the Department does not have an official position on SB 230.
He outlined the rates of the tax credit:
· 30% of eligible production expenditures;
· an additional 10% of Alaska wages;
· an additional 2% for off-season filming; and
· an additional 2% for rural spending.
Mr. Stickle explained that the tax credit would be available
to film production companies. He said that most production
companies are limited liability corporations which under
State law are not subject to corporate income taxation. The
Department sees that the tax credit will be a subsidy of the
film industry. If Alaska is able to attract dozens of
feature films, the impact could be quite large.
11:02:10 AM
Co-Chair Stedman wondered what a $100 credit, just as an
example, would go against. Mr. Stickler answered that the
credit would be applicable to the corporate income tax. The
company that incurs the production expenses, assuming it was
a limited liability corporation and did not have the
corporate income tax liability, would sell the credit to a
company that does have a corporate income tax liability in
the State. Co-Chair Stedman asked if there were limits on
the credits. Mr. Stickler said there are no limits on the
credits in SB 230.
11:03:11 AM
Senator Olson asked if there were any way to evaluate the
impact the investment would have on the State. Mr. Stickler
said he could not predict that. Senator Olson wondered if
tax credits in general have been successful in the state.
Mr. Stickler said he would look into any specific credits.
11:04:17 AM
Co-Chair Stedman asked Mr. Stickler to clarify the
difference between a credit and an expense, using $100 as an
example. Mr. Stickler explained that a credit is going to
have a much larger effect on revenues than an expense. A
$100 expense against an income tax would reduce net income
by $100. A credit applies directly to tax liability. A $100
credit will reduce state revenue collections on the
corporate income tax by $100, while an expense would reduce
net income that gets apportioned to Alaska by $100.
Co-Chair Stedman added that a credit is more powerful by
over ten times with a 9.4% corporate income tax. There is a
substantial difference between the ability to deduct an
amount or take it as a credit.
11:06:08 AM
SB 230 was HEARD and HELD in Committee for further
consideration.
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