1Amending the act of March 4, 1971 (P.L.6, No.2), entitled "An
2act relating to tax reform and State taxation by codifying
3and enumerating certain subjects of taxation and imposing
4taxes thereon; providing procedures for the payment,
5collection, administration and enforcement thereof; providing
6for tax credits in certain cases; conferring powers and
7imposing duties upon the Department of Revenue, certain
8employers, fiduciaries, individuals, persons, corporations
9and other entities; prescribing crimes, offenses and
10penalties," in film production tax credit, further providing
11for definitions, for credit for qualified film production
12expenses and for limitations.

13The General Assembly of the Commonwealth of Pennsylvania
14hereby enacts as follows:

15Section 1. Sections 1702-D and 1703-D of the act of March 4,
161971 (P.L.6, No.2), known as the Tax Reform Code of 1971,
17amended or added July 25, 2007 (P.L.373, No.55) and July 2, 2012
18(P.L.751, No.85), are amended to read:

19Section 1702-D. Definitions.

20The following words and phrases when used in this article

1shall have the meanings given to them in this section unless the
2context clearly indicates otherwise:

3"Department." The Department of Community and Economic
4Development of the Commonwealth.

5"Digital interactive media." As follows:

6(1) Interactive software that meets all of the
7following:

8(i) Is produced at a digital interactive media
9facility.

10(ii) Is produced for distribution on or accessed via
11electronic media, including software accessed via or
12downloaded from the Internet or a mobile network and
13software distributed on optical media or embedded in or
14downloadable to an electronic device, including a mobile
15phone, game system, computer, tablet and personal digital
16assistant or other handheld electronic device.

17(iii) Allows a user to interact with the interactive
18software via an electronic device, including a computer,
19a game system, a mobile phone, a personal digital
20assistant or other handheld electronic device.

21(iv) Includes an appreciable quantity of text,
22sound, fixed images, animated images or 3-D geometry.

23(2) The term includes digital interactive media
24equipment.

25(3) The term does not include media that is obscene.

26"Digital interactive media equipment." Equipment that is
27required for the development or functioning of a digital
28interactive media product or service. The term includes:

29(1) Integrated video and audio equipment, networking
30routers, switches, network cabling and any other computer-

1related hardware necessary to create or operate a digital
2interactive media product or platform.

3(2) Software, notwithstanding the method of delivery,
4transfer or access.

5(3) Computer code.

6(4) Image files, music files, audio files, video files,
7scripts and plays.

8(5) Concept mock-ups.

9(6) Software tools.

10(7) Testing procedures.

11(8) A component part of an item listed under paragraph
12(2), (3), (4), (5), (6) or (7) necessary and integral to
13create, develop or produce a digital interactive media
14product or service.

15"Digital interactive media facility." A facility where
16digital interactive media or digital interactive media equipment
17is developed and which:

18(1) is located in this Commonwealth;

19(2) employs at least ten full-time employees who reside
20in this Commonwealth; and

21(3) has a capital investment of at least $500,000.

22"Film." A feature film, a television film, a television talk
23or game show series, a television commercial or a television
24pilot or each episode of a television series which is intended
25as programming for a national audience. The term does not
26include a production featuring news, current events, weather and
27market reports, public programming, sports events, awards shows
28or other gala events, a production that solicits funds, a
29production containing obscene material or performances as
30defined in 18 Pa.C.S. § 5903(b) (relating to obscene and other

1sexual materials and performances) or a production primarily for
2private, political, industrial, corporate or institutional
3purposes.

4"Minimum stage filming requirements." Include:

5(1) Taxpayers with a Pennsylvania production expense of
6less than $30,000,000 per production must:

7(i) build at least one set at a qualified production
8facility;

9(ii) shoot for a minimum of ten days at a qualified
10production facility; and

11(iii) spend or incur a minimum of $1,500,000 in
12direct expenditures relating to the use or rental of
13tangible property or for performance of services provided
14by a qualified production facility.

15(2) Taxpayers with a Pennsylvania production expense of
16at least $30,000,000 per production must:

17(i) build at least two sets at a qualified
18production facility;

19(ii) shoot for a minimum of 15 days at a qualified
20production facility; and

21(iii) spend or incur a minimum of $5,000,000 in
22direct expenditures relating to the use or rental of
23tangible property at or for performance of services
24provided by a qualified production facility.

25"Pass-through entity." A partnership as defined in section
26301(n.0) or a Pennsylvania S corporation as defined in section
27301(n.1).

28"Pennsylvania postproduction expense." A qualified
29postproduction expense incurred at a qualified postproduction
30facility.

1"Pennsylvania production expense." Production expense
2incurred in this Commonwealth. The term includes:

3(1) Compensation paid to an individual on which the tax
4imposed by Article III will be paid or accrued.

5(2) Payment to a personal service corporation
6representing individual talent if the tax imposed by Article
7IV will be paid or accrued on the net income of the
8corporation for the taxable year.

9(3) Payment to a pass-through entity representing
10individual talent if the tax imposed by Article III will be
11paid or accrued by all of the partners, members or
12shareholders of the pass-through entity for the taxable year
13for which the tax imposed under Article III has been withheld 
14and remitted under the requirements of Article III by the 
15production company.

16(4) The cost of transportation incurred while
17transporting to or from a train station, bus depot or
18airport, located in this Commonwealth.

19(5) The cost of insurance coverage purchased through an
20insurance agent based in this Commonwealth.

21(6) The purchase of music or story rights if any of the
22following subparagraphs apply:

23(i) The purchase is from a resident of this
24Commonwealth.

25(ii) The purchase is from an entity subject to
26taxation in this Commonwealth, and the transaction is
27subject to taxation under Article III, IV or VI.

28(7) The cost of rental of facilities and equipment
29rented from or through a resident of this Commonwealth or an
30entity subject to taxation in this Commonwealth.

1(8) A qualified postproduction expense.

2(9) The development and manufacture of digital
3interactive media equipment.

4"Production expense." As follows:

5(1) The term includes all of the following:

6(i) Compensation paid to an individual employed in
7the production of the film.

8(ii) Payment to a personal service corporation
9representing individual talent.

10(iii) Payment to a pass-through entity representing
11individual talent.

12(iv) The costs of construction, operations, editing,
13photography, sound synchronization, lighting, wardrobe
14and accessories.

15(v) The cost of leasing vehicles.

16(vi) The cost of transportation to or from a train
17station, bus depot or airport.

18(vii) The cost of insurance coverage.

19(viii) The costs of food and lodging.

20(ix) The purchase of music or story rights.

21(x) The cost of rental of facilities and equipment.

22(xi) Development and production costs relating to
23digital interactive media.

24(2) The term does not include any of the following:

25(i) Deferred, leveraged or profit participation paid
26or to be paid to individuals employed in the production
27of the film or paid to entities representing an
28individual for services provided in the production of the
29film.

30(ii) Development cost.

1(iii) Expense incurred in marketing or advertising a
2film.

3(iv) Cost related to the sale or assignment of a
4film production tax credit under section 1705-D(e).

5"Qualified film production expense." All Pennsylvania
6production expenses if Pennsylvania production expenses comprise
7at least 60% of the film's total production expenses. The term
8shall not include more than $15,000,000 in the aggregate of
9compensation paid to individuals or payment made to entities
10representing an individual for services provided in the
11production of the film.

12"Qualified postproduction expense." A Pennsylvania
13postproduction expense of original content for a qualified film
14produced at a qualified postproduction facility if at least 60%
15of all postproduction work related to the film is conducted at a
16qualified postproduction facility.

17(1) The term includes traditional, emerging and new work
18flow techniques used in postproduction for any of the
19following:

20(i) Picture, sound and music editorial, rerecording
21and mixing.

22(ii) Visual effects.

23(iii) Graphic design.

24(iv) Original scoring.

25(v) Animation.

26(vi) Musical composition.

27(vii) Mastering.

28(viii) Dubbing.

29(2) The term does not include:

30(i) Editing previously produced content for a

1qualified film.

2(ii) News or current affairs.

3(iii) Talk shows.

4(iv) Instructional videos.

5(v) Media which is obscene.

6"Qualified postproduction facility." A permanent facility
7where Pennsylvania postproduction activities are conducted and
8to which all of the following apply:

9(1) The facility is located in this Commonwealth.

10(2) The facility is approved by the department.

11(3) The facility employs at least ten full-time
12employees who reside in this Commonwealth.

13(4) There is at least $500,000 of capital investment in
14the facility.

15"Qualified production facility." A film production facility
16located within this Commonwealth that contains at least one
17sound stage with a column-free, unobstructed floor space and
18meets either of the following criteria:

19(1) Has had a minimum of $10,000,000 invested in the
20film production facility in land or a structure purchased or
21ground-up, purpose-built new construction or renovation of
22existing improvement.

23(2) Meets at least three of the following criteria:

24(i) A sound stage having an industry standard noise
25criteria rating of 25 or better.

26(ii) A permanent grid with a minimum point load
27capacity of no less than 1,000 pounds at a minimum of 25
28points.

29(iii) Built-in power supply available at a minimum
30of 4,000 amps per sound stage without the need for

1supplemental generators.

2(iv) A height from sound stage floor to permanent
3grid of a minimum of 20 feet.

4(v) A sound stage with a sliding or roll-up access
5door with a minimum height of 14 feet.

6(vi) A built-in HVAC capacity during shoot days with
7a minimum of 50 tons of cooling capacity available per
8sound stage.

9(vii) Perimeter security that includes a 24-hour,
10seven-days-a-week security presence and use of access
11control identification badges.

12(viii) On-site lighting and grip department with an
13available inventory stored at the film production
14facility with a minimum cost of investment of $500,000.

15(ix) A sound stage with contiguous production
16offices with a minimum of 5,000 square feet per sound
17stage.

18"Qualified tax liability." The liability for taxes imposed 
19under Article III, IV, VI, VII or IX. The term shall not include 
20any tax withheld by an employer from an employee under Article 
21III.

22"Start date." [The] Either:

23(1) the first day of principal photography in this
24Commonwealth; or

25(2) an earlier date approved in writing by the Director 
26of the Pennsylvania Film Office.

27"Tax credit." The film production tax credit provided under
28this article.

29"Taxpayer." A film production company subject to tax under
30Article III, IV or VI. The term does not include contractors or

1subcontractors of a film production company.

2Section 1703-D. Credit for qualified film production expenses.

3(a) Application.--A taxpayer may apply to the department for
4a tax credit under this section. If a film qualifies for a 
5qualified film production expense, any postproduction work done 
6in this Commonwealth shall qualify for a 30% credit. The
7application shall be on the form required by the department.

8(b) Review and approval.--The department shall establish 
9application periods not to exceed 90 days each. All applications 
10received during the application period shall be reviewed and 
11evaluated by the department based on the following criteria:

12(1) The anticipated number of production days in a
13qualified production facility.

14(2) The anticipated number of Pennsylvania employees.

15(3) The number of preproduction days through
16postproduction days in Pennsylvania.

17(4) The anticipated number of days spent in Pennsylvania
18hotels.

19(5) The Pennsylvania production expenses in comparison
20to the production budget.

21(6) The use of studio resources.

22(7) If the application is for a qualified postproduction
23expense, the following criteria shall be reviewed and
24evaluated:

25(i) The facility where the postproduction occurred.

26(ii) The type of postproduction activity conducted.

27(iii) The percentage of the total postproduction
28activity conducted for a film in this Commonwealth.

29(8) Other criteria that the Director of the Pennsylvania
30Film Office deems appropriate to ensure maximum employment

1and benefit within this Commonwealth.

2Upon determining the taxpayer has incurred or will incur 
3qualified film production expenses or qualified postproduction 
4expenses, the department may approve the taxpayer for a tax 
5credit. Applications not approved may be reviewed and considered 
6in subsequent application periods. The department may approve a 
7taxpayer for a tax credit based on its evaluation of the 
8criteria under this subsection.

9(c) Contract.--If the department approves the taxpayer's
10application under subsection (b), the department and the
11taxpayer shall enter into a contract containing the following:

12(1) An itemized list of qualified production or 
13postproduction expenses incurred or to be incurred for the
14film.

15(2) An itemized list of Pennsylvania production or 
16postproduction expenses incurred or to be incurred for the
17film or digital interactive media.

18(3) With respect to a contract entered into prior to
19completion of production, a commitment by the taxpayer to
20incur the qualified film or digital interactive media
21production or qualified postproduction expenses as itemized.

22(4) The start date.

23(5) Any other information the department deems
24appropriate.

25(d) Certificate.--Upon execution of the contract required by
26subsection (c), the department shall award the taxpayer a film
27production tax credit and issue the taxpayer a film production
28tax credit certificate.

29Section 2. Section 1707-D of the act, amended July 2, 2012
30(P.L.751, No.85), is amended to read:

1Section 1707-D. Limitations.

2(a) [Cap.--In no case shall the aggregate amount of tax
3credits awarded in any fiscal year under this article exceed
4$60,000,000. The department may, in its discretion,] Amount.--
5The department may award in one fiscal year up to:

6(1) Thirty percent of the dollar amount of film
7production tax credits available to be awarded in the next
8succeeding fiscal year.

9(2) Twenty percent of the dollar amount of film
10production tax credits available to be awarded in the second
11successive fiscal year.

12(3) Ten percent of the dollar amount of film production
13tax credits available to be awarded in the third successive
14fiscal year.

15(a.1) Advance award of credits.--The advance award of film
16tax credits under subsection (a) shall:

17(1) count against the total dollar amount of credits
18that the department may award in that next succeeding fiscal
19year; and

20(2) reduce the dollar amount of credits that the
21department may award in that next succeeding fiscal year.

22The individual limitations on the awarding of film production
23tax credits apply to an advance award of film production tax
24credits under subsection (a) and to a combination of film
25production tax credits awarded against the current fiscal year
26cap and against the next succeeding fiscal year's cap.

27(b) Individual limitations.--The following shall apply:

28(1) Except as set forth in paragraph (1.1), the 
29aggregate amount of film production tax credits awarded by
30the department under section 1703-D(d) to a taxpayer for a

1film may not exceed 25% of the qualified film production
2expenses to be incurred.

3(1.1) In addition to the tax credit under paragraph (1),
4a taxpayer is eligible for a credit in the amount of 5% of
5the qualified film production expenses or qualified 
6postproduction expenses incurred by the taxpayer if the
7taxpayer:

8(i) films a feature film, television film or
9television series, which is intended as programming for a
10national audience; and

11(ii) Either:

12(A) films in a qualified production facility
13which meets the minimum stage filming requirements; 
14or

15(B) conducts at least $500,000 of postproduction 
16activities at a qualified postproduction facility.

17(2) A taxpayer that has received a grant under 12
18Pa.C.S. § 4106 (relating to approval) shall not be eligible
19for a film production tax credit under this act for the same
20film.

21(c) Qualified production facility.--To be considered a
22qualified production facility or qualified postproduction 
23facility under subsection (b)(1.1), the owner of a facility
24shall provide evidence to the department to verify the
25development or facility specifications and capital [improvement]
26investment costs incurred for the facility so that the threshold
27amounts set in the definition of "qualified production facility"
28or "qualified postproduction facility" under section 1702-D are
29satisfied, and upon verification, the facility shall be
30registered by the department officially as a qualified

1production facility or qualified postproduction facility.

2(d) Waiver.--The department may make a determination that
3the financial benefit to this Commonwealth resulting from the
4direct investment in or payments made to Pennsylvania facilities
5outweighs the benefit of maintaining the 60% requirement
6contained in the definition of "qualified film production
7expense." If such determination is made, the department may
8waive the requirement that 60% of a film's total production
9expenses be comprised of Pennsylvania production expenses for a
10feature film, television film or television series that is
11intended as programming for a national audience and is filmed in
12a qualified production facility if the taxpayer who has
13Pennsylvania production expenses of at least $30,000,000 per
14production meets the minimum stage filming requirements.

15Section 3. The amendment of sections 1702-D, 1703-D and
161707-D(a) of the act shall apply to taxable years beginning
17after December 31, 2012.

18Section 4. This act shall take effect immediately.