SENATE BILL NO. 23 "An Act relating to transferable film production tax credits; and providing for an effective date by amending the effective dates of secs. 3 and 4, ch. 63, SLA 2008." 9:22:07 AM Co-Chair Hoffman proposed committee substitute, work draft #27-LS0252\S. Co-Chair Stedman OBJECTED for purpose of discussion. MATT MOSER, STAFF, SENATOR ELLIS, discussed the changes in the committee substitute work draft, version S from previous version M. He stated that the changes included the sponsor's efforts to address the concerns of the public, as well as the concerns of the Senate Finance Committee (SFC). Mr. Moser stated that section 1 was a new section, and pointed out page lines 27 through 30. This was an update to the powers and duties section of the statutes related to the Legislative Audit Division (LAD). It would require LAD to conduct a series of three audits of the film and television production incentive program. He stated that the first audit would be completed in 2013, to assess the program at the end of the initial five years of the program. He stressed that a second audit would be completed with data from the first five years of the ten year extension, to be available in 2018. He remarked that the section would provide for a third and final audit at the end of the final five years of the ten year extension. Mr. Moser stated that section 2 amended the existing film production incentives statutes to require the Department of Revenue (DOR) to provide a certificate for a film production incentive. He stated that section 3 and 4 also added references to the film production incentive certificates. Mr. Moser looked at section 5, page 3, on line 17. He stated that the period that the tax credit could be used was changed from 3 years to 6 years. He remarked that the change was made to allow for more flexibility and value for Alaska corporate income tax payers to use the credits over additional tax years. Mr. Moser addressed section 6, and stated that it was the same as section 1 of version M. This section created $200 million in additional film and television production credits in the ten year extension. This would allow for $100 million incentives for the first five years, and allowed for $100 million in incentives for the second five years of the extension. Mr. Moser stated that section 7, page 3, lines 24 and 25 created two new subsections. He remarked that subsection G created a cap of 44 percent on the total amount of tax credits available for a single production. He stated that subsection H would authorize the pooling of film production incentive credits, which would clarify in statute that a person or entity may buy and pool multiple credits. Mr. Moser remarked that section 8 would add to the duties of the film office additional reporting requirements. He stated that the film office would be required to report the total amount paid by productions qualifying for incentives to Alaskan businesses and Alaskan residents. Mr. Moser stated that section 9, lines 22 through 24 would add to the duties of the film officer requirement to design a logo that would represent the film office. He stated that the logo would be included in films that qualify for the incentives. Mr. Moser reported that section 10 was the same as section 2 of version M. It would change the qualified expenditure period from 24 to 36 months. 9:27:04 AM Mr. Moser looked at section 11, page 5, line 11, and stated that it would add a subsection to include Natural Resource Development in the state, as one of the considerations when determining whether a production was in the best interest of the state. Mr. Moser stated that section 12 was the same as section 3 from previous version M. Mr. Moser remarked that section 13 was a conforming statute that would deal with subsection I, that was added by section 17. He stated that subsection I was a requirement that a thank you to the state of Alaska and Department of Commerce be included to qualify for the film production incentive. Mr. Moser stated that section 14 changed the base production incentive for non-fiction television programs from 30 to 20 percent. Mr. Moser remarked that section 15, page 6, line 2, increased the credits available for qualified production expenditures made in a rural area from 2 to 6 percent. Mr. Moser stated that section 16, page 6, lines 10 and 12 added a requirement for verification by an Alaskan independent certified public accountant include verification that there were no outstanding balances for qualified expenditures due to a person in Alaska. Mr. Moser addressed section 17, page 6, lines 14 through 22, and stated that it was the aforementioned subsection I. Mr. Moser stated that section 18 was the same as section 4 of version M. Mr. Moser explained that section 19 updated the definition of "rural" to include communities of a population of up to 10,000 that were not connected by road or rail to Anchorage or Fairbanks. Mr. Moser stated that sections 20 through 23 were the same as sections 5 though 8 from version M. It updated statutory references to match the program extension. Senator Thomas wondered if there was any attempt to gather information about indirect economic impacts and activity, outside of traditional state audits. Mr. Moser responded that some film companies had performed independent audits. Senator Olson wondered the stance of DOR related to section 7 of the bill. Mr. Moser replied that DOR had contributed to the formulation of the language. Senator Ellis supported the upgrades in the committee substitute, specifically related to rural definitions. 9:33:11 AM Co-Chair Stedman WITHDREW his OBJECTION. There being NO OBJECTION, it was so ordered. Co-Chair Stedman noted the two fiscal notes. Senator Ellis MOVED to report CSSB 23 (FIN) out of Committee with individual recommendations and the two accompanying fiscal notes. There being NO OBJECTION, it was so ordered. CSSB (FIN) 23 was REPORTED out of Committee with a "do pass" recommendation and with two zero fiscal notes from the Department of Revenue Tax Division and the Department of Commerce Community and Economic Development.