PRIOR PRINTER'S NO. 162 PRINTER'S NO. 2913
No. 147 Session of 2003
INTRODUCED BY T. STEVENSON, BAKER, BISHOP, CAPPELLI, COSTA,
CREIGHTON, FEESE, FRANKEL, GEIST, GODSHALL, GOODMAN,
HENNESSEY, HERMAN, HERSHEY, HORSEY, HUTCHINSON, KELLER,
LAUGHLIN, LEACH, MANN, MARKOSEK, McCALL, NAILOR, PRESTON,
READSHAW, REICHLEY, ROEBUCK, SAINATO, SATHER, SEMMEL,
SOLOBAY, R. STEVENSON, THOMAS, TURZAI, WALKO, WATSON, WILT,
YOUNGBLOOD, ADOLPH, HARHAI, PICKETT, JAMES, PISTELLA, HARPER,
WASHINGTON, DAILEY AND LEWIS, FEBRUARY 6, 2003
AS RE-REPORTED FROM COMMITTEE ON APPROPRIATIONS, HOUSE OF
REPRESENTATIVES, AS AMENDED, NOVEMBER 17, 2003
AN ACT
1 Authorizing the film enhancement tax credit; and providing for <--
2 the powers and duties of the Department of Community and
3 Economic Development and the Department of Revenue.
4 AMENDING THE ACT OF MARCH 4, 1971 (P.L.6, NO.2), ENTITLED "AN <--
5 ACT RELATING TO TAX REFORM AND STATE TAXATION BY CODIFYING
6 AND ENUMERATING CERTAIN SUBJECTS OF TAXATION AND IMPOSING
7 TAXES THEREON; PROVIDING PROCEDURES FOR THE PAYMENT,
8 COLLECTION, ADMINISTRATION AND ENFORCEMENT THEREOF; PROVIDING
9 FOR TAX CREDITS IN CERTAIN CASES; CONFERRING POWERS AND
10 IMPOSING DUTIES UPON THE DEPARTMENT OF REVENUE, CERTAIN
11 EMPLOYERS, FIDUCIARIES, INDIVIDUALS, PERSONS, CORPORATIONS
12 AND OTHER ENTITIES; PRESCRIBING CRIMES, OFFENSES AND
13 PENALTIES," AUTHORIZING THE FILM ENHANCEMENT TAX CREDIT; AND
14 PROVIDING FOR THE POWERS AND DUTIES OF THE DEPARTMENT OF
15 COMMUNITY AND ECONOMIC DEVELOPMENT AND THE DEPARTMENT OF
16 REVENUE.
17 The General Assembly of the Commonwealth of Pennsylvania
18 hereby enacts as follows:
19 Section 1. Short title. <--
20 This act shall be known and may be cited as the Film
21 Enhancement Tax Credit Act.
1 Section 2. Definitions.
2 The following words and phrases when used in this act shall
3 have the meanings given to them in this section unless the
4 context clearly indicates otherwise:
5 "Credit." The film enhancement tax credit authorized by this
6 act.
7 "Department." The Department of Community and Economic
8 Development of the Commonwealth.
9 "Film." A single media or multimedia program which does not
10 violate any Federal or State law, including, but not limited to,
11 national advertising messages, fixed on film or digital video,
12 which can be viewed or reproduced and which is exhibited in
13 theaters, licensed for exhibition by individual television
14 stations, groups of stations, networks, cable television
15 stations or other means or licensed for home-viewing markets.
16 "Pennsylvania production expense." An expense incurred in
17 this Commonwealth directly related to the production of a long-
18 form narrative film in this Commonwealth, including, but not
19 limited to:
20 (1) Wages or salaries of persons who are residents of
21 this Commonwealth and who have earned income from working on
22 a film in this Commonwealth, including payments to personal
23 services corporations with respect to the services of
24 qualified performing artists, as determined under section
25 62(a)(A) of the Internal Revenue Code of 1986 (Public Law 99-
26 514, 26 U.S.C. § 1 et seq.).
27 (2) The cost of construction and operations, wardrobe,
28 accessories and related services.
29 (3) The cost of photography, sound synchronization,
30 lighting and related services.
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1 (4) The cost of editing and related services.
2 (5) Rental of facilities and equipment.
3 (6) Other direct costs of producing a film.
4 "Qualified tax liability." The liability for taxes imposed
5 under Article II, III, IV or VI of the act of March 4, 1971
6 (P.L.6, No.2), known as the Tax Reform Code of 1971.
7 "Taxpayer." An entity subject to tax under Article II, III,
8 IV or VI of the act of March 4, 1971 (P.L.6, No.2), known as the
9 Tax Reform Code of 1971, that incurs Pennsylvania production
10 expenses.
11 "Secretary." The Secretary of Community and Economic
12 Development of the Commonwealth.
13 Section 3. Film enhancement tax credit.
14 (a) Tax credit authorized.--A tax credit in the amount of
15 15% of documented Pennsylvania production expenses may be
16 awarded to a taxpayer.
17 (b) Administration.--The credit shall be administered by the
18 Department of Community and Economic Development and the
19 Department of Revenue, as provided in this act.
20 (c) Eligibility.--To be eligible for a credit, the taxpayer
21 incurring Pennsylvania production expenses must submit such
22 documentation, make such reports and meet such deadlines as the
23 secretary may require in the administration of this act.
24 (d) Approval.--The secretary shall approve or disapprove all
25 claims for the credit and shall notify the Department of Revenue
26 of the name of the recipient and the amount of all credits
27 approved.
28 (e) Limitations.--The total amount of credits approved by
29 the department shall not exceed $3,000,000 in any fiscal year.
30 If the amount of eligible claims exceeds the amount specified in
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1 this subsection in a fiscal year, the credit shall be prorated
2 among all eligible claims.
3 Section 4. Application of credits.
4 (a) Use of credit.--The credit may be applied against a
5 qualified tax liability of the taxpayer.
6 (b) Carryover of credit.--If the taxpayer cannot use the
7 entire amount of the credit for the taxable year in which the
8 credit is first approved, than the excess may be carried over to
9 succeeding taxable years and used as a credit against the
10 qualified tax liability of the taxpayer for those taxable years.
11 Each time that the credit is carried over to a succeeding
12 taxable year, it shall be reduced by the amount that was used as
13 a credit during the immediately preceding taxable year. The
14 credit provided by this act may be carried over and applied to
15 succeeding taxable years for no more than three taxable years
16 following the first taxable year for which the taxpayer was
17 entitled to claim the credit. A credit approved by the
18 department in a taxable year first shall be applied against the
19 taxpayer's qualified tax liability for the current taxable year
20 as of the date on which the credit was approved before the
21 credit is applied against any other tax liability.
22 (c) Limitation on unused credits.--A taxpayer may not carry
23 back, obtain a refund of or assign an unused credit.
24 Section 5. Pennsylvania S corporation shareholder pass-through.
25 (a) Pass-through of credit.--If a Pennsylvania S corporation
26 does not have an eligible tax liability against which the credit
27 may be applied, a shareholder of the Pennsylvania S corporation
28 may receive a credit equal to the credit determined for the
29 Pennsylvania S corporation for the taxable year multiplied by
30 the percentage of the Pennsylvania S corporation's distributive
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1 income to which the shareholder is entitled.
2 (b) Limitation.--The credit provided under subsection (a) is
3 in addition to any other credit to which a shareholder of
4 Pennsylvania S corporation is otherwise entitled under the act
5 of March 4, 1971 (P.L.6, No.2), known as the Tax Reform Code of
6 1971. However, a Pennsylvania S corporation and a shareholder of
7 a Pennsylvania S corporation may not claim a credit under this
8 act for the same Pennsylvania production expense.
9 Section 6. Time limitations.
10 A taxpayer may not receive a credit for Pennsylvania
11 production expenses incurred after December 31, 2012.
12 Section 7. Applicability.
13 This act shall apply to taxable years commencing on or after
14 January 1, 2003.
15 Section 8. Effective date.
16 This act shall take effect immediately.
17 SECTION 1. THE ACT OF MARCH 4, 1971 (P.L.6, NO.2), KNOWN AS <--
18 THE TAX REFORM CODE OF 1971, IS AMENDED BY ADDING AN ARTICLE TO
19 READ:
20 ARTICLE XVII-C
21 FILM ENHANCEMENT TAX CREDIT
22 SECTION 1701-C. DEFINITIONS.
23 THE FOLLOWING WORDS AND PHRASES WHEN USED IN THIS ARTICLE
24 SHALL HAVE THE MEANINGS GIVEN TO THEM IN THIS SECTION UNLESS THE
25 CONTEXT CLEARLY INDICATES OTHERWISE:
26 "DEPARTMENT." THE DEPARTMENT OF COMMUNITY AND ECONOMIC
27 DEVELOPMENT OF THE COMMONWEALTH.
28 "ELIGIBLE PRODUCTION." THE TERM INCLUDES A FEATURE FILM,
29 TELEVISION SERIES AND TELEVISION SHOW OF 15 MINUTES OR MORE IN
30 LENGTH, INTENDED FOR A NATIONAL AUDIENCE. THE TERM DOES NOT
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1 INCLUDE A PRODUCTION FEATURING NEWS, CURRENT EVENTS, WEATHER AND
2 MARKET REPORTS, OR PUBLIC PROGRAMMING, TALK SHOW, GAME SHOW,
3 SPORTS EVENT, AWARDS SHOW OR OTHER GALA EVENT, A PRODUCTION THAT
4 SOLICITS FUNDS, A PRODUCTION CONTAINING OBSCENE MATERIAL OR
5 PERFORMANCES AS DEFINED IN 18 PA.C.S. § 5903(B) (RELATING TO
6 OBSCENE AND OTHER SEXUAL MATERIALS AND PERFORMANCES), OR A
7 PRODUCTION PRIMARILY FOR PRIVATE, INDUSTRIAL, CORPORATE OR
8 INSTITUTIONAL PURPOSES.
9 "FILM ENHANCEMENT TAX CREDIT." THE FILM ENHANCEMENT TAX
10 CREDIT AUTHORIZED BY THIS ARTICLE.
11 "PENNSYLVANIA PRODUCTION EXPENSE." AN EXPENSE INCURRED IN
12 THIS COMMONWEALTH DIRECTLY RELATED TO THE MAKING OF AN ELIGIBLE
13 PRODUCTION IN THIS COMMONWEALTH, INCLUDING, BUT NOT LIMITED TO:
14 (1) WAGES OR SALARIES OF PERSONS WHO ARE RESIDENTS OF
15 THIS COMMONWEALTH AND WHO HAVE EARNED INCOME FROM WORKING ON
16 A FILM IN THIS COMMONWEALTH, INCLUDING PAYMENTS TO PERSONAL
17 SERVICES CORPORATIONS WITH RESPECT TO THE SERVICES OF
18 QUALIFIED PERFORMING ARTISTS, AS DETERMINED UNDER SECTION
19 62(A)(A) OF THE INTERNAL REVENUE CODE OF 1986 (PUBLIC LAW 99-
20 514, 26 U.S.C. § 1 ET SEQ.).
21 (2) THE COST OF CONSTRUCTION AND OPERATIONS, WARDROBE,
22 ACCESSORIES AND RELATED SERVICES.
23 (3) THE COST OF PHOTOGRAPHY, SOUND SYNCHRONIZATION,
24 LIGHTING AND RELATED SERVICES.
25 (4) THE COST OF EDITING AND RELATED SERVICES.
26 (5) RENTAL OF FACILITIES AND EQUIPMENT.
27 (6) OTHER DIRECT COSTS OF PRODUCING A FILM.
28 "QUALIFIED TAX LIABILITY." THE LIABILITY FOR TAXES IMPOSED
29 UNDER ARTICLE II, III, IV OR VI. THAT INCURS PENNSYLVANIA
30 PRODUCTION EXPENSES.
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1 "SECRETARY." THE SECRETARY OF COMMUNITY AND ECONOMIC
2 DEVELOPMENT OF THE COMMONWEALTH.
3 "TAXPAYER." AN ENTITY SUBJECT TO TAX UNDER ARTICLE II, III,
4 IV OR VI.
5 SECTION 1702-C. FILM ENHANCEMENT TAX CREDIT.
6 (A) TAX CREDIT AUTHORIZED.--A TAX CREDIT IN THE AMOUNT OF
7 15% OF THE FIRST $10,000,000 AND A TAX CREDIT OF 20% FOR
8 ELIGIBLE PRODUCTIONS WITH A TOTAL AGGREGATE PRODUCTION EXPENSE
9 THAT EXCEEDS $10,000,000 MAY BE AWARDED TO A TAXPAYER.
10 (B) ADMINISTRATION.--THE CREDIT SHALL BE ADMINISTERED BY THE
11 DEPARTMENT OF COMMUNITY AND ECONOMIC DEVELOPMENT AND THE
12 DEPARTMENT OF REVENUE, AS PROVIDED IN THIS ARTICLE.
13 (C) ELIGIBILITY.--TO BE ELIGIBLE FOR A CREDIT, THE TAXPAYER
14 INCURRING PENNSYLVANIA PRODUCTION EXPENSES MUST MEET THE
15 FOLLOWING REQUIREMENTS:
16 (1) SUBMIT A BUDGET FOR PRODUCING THE ELIGIBLE
17 PRODUCTION INDICATING THE TIME, MATERIALS, LABOR AND ANY
18 OTHER ASSOCIATED COSTS ASSOCIATED WITH THE MAKING OF THE
19 ELIGIBLE PRODUCTION IN PENNSYLVANIA.
20 (2) SUBMIT A BUDGET FOR PRODUCING THE SAME ELIGIBLE
21 PRODUCTION INDICATING THE TIME, MATERIALS, LABOR AND ANY
22 OTHER ASSOCIATED COSTS THAT WOULD HAVE BEEN INCURRED IF THE
23 PRODUCTION WAS CONDUCTED IN ANOTHER LOCATION.
24 (3) AT LEAST 50% OF THE BELOW-LINE HIRES ARE RESIDENTS
25 OF THIS COMMONWEALTH.
26 (4) AT LEAST 50% OF THE TOTAL PRODUCTION BUDGET IS SPENT
27 IN THIS COMMONWEALTH IN MAKING OF THE ELIGIBLE PRODUCTION OR
28 AT LEAST 50% OF THE DAYS DEDICATED TO THE FILMING OF THE
29 ELIGIBLE PRODUCTION BE HELD IN THIS COMMONWEALTH.
30 (D) APPROVAL.--THE SECRETARY SHALL APPROVE OR DISAPPROVE ALL
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1 CLAIMS FOR THE CREDIT AND SHALL NOTIFY THE DEPARTMENT OF REVENUE
2 OF THE NAME OF THE RECIPIENT AND THE AMOUNT OF ALL CREDITS
3 APPROVED.
4 (E) LIMITATIONS.--THE TOTAL AMOUNT OF CREDITS APPROVED BY
5 THE DEPARTMENT SHALL NOT EXCEED $10,000,000 IN ANY FISCAL YEAR.
6 IF THE AMOUNT OF ELIGIBLE CLAIMS EXCEEDS THE AMOUNT SPECIFIED IN
7 THIS SUBSECTION IN A FISCAL YEAR, THE CREDIT SHALL BE PRORATED
8 AMONG ALL ELIGIBLE CLAIMS.
9 SECTION 1703-C. APPLICATION OF CREDITS.
10 (A) USE OF CREDIT.--THE CREDIT MAY BE APPLIED AGAINST A
11 QUALIFIED TAX LIABILITY OF THE TAXPAYER.
12 (B) CARRYOVER OF CREDIT.--IF THE TAXPAYER CANNOT USE THE
13 ENTIRE AMOUNT OF THE CREDIT FOR THE TAXABLE YEAR IN WHICH THE
14 CREDIT IS FIRST APPROVED, THEN THE EXCESS MAY BE CARRIED OVER TO
15 SUCCEEDING TAXABLE YEARS AND USED AS A CREDIT AGAINST THE
16 QUALIFIED TAX LIABILITY OF THE TAXPAYER FOR THOSE TAXABLE YEARS.
17 EACH TIME THAT THE CREDIT IS CARRIED OVER TO A SUCCEEDING
18 TAXABLE YEAR, IT SHALL BE REDUCED BY THE AMOUNT THAT WAS USED AS
19 A CREDIT DURING THE IMMEDIATELY PRECEDING TAXABLE YEAR. THE
20 CREDIT PROVIDED BY THIS ARTICLE MAY BE CARRIED OVER AND APPLIED
21 TO SUCCEEDING TAXABLE YEARS FOR NO MORE THAN THREE TAXABLE YEARS
22 FOLLOWING THE FIRST TAXABLE YEAR FOR WHICH THE TAXPAYER WAS
23 ENTITLED TO CLAIM THE CREDIT. A CREDIT APPROVED BY THE
24 DEPARTMENT IN A TAXABLE YEAR FIRST SHALL BE APPLIED AGAINST THE
25 TAXPAYER'S QUALIFIED TAX LIABILITY FOR THE CURRENT TAXABLE YEAR
26 AS OF THE DATE ON WHICH THE CREDIT WAS APPROVED BEFORE THE
27 CREDIT IS APPLIED AGAINST ANY OTHER TAX LIABILITY.
28 (C) LIMITATION ON UNUSED CREDITS.--A TAXPAYER MAY NOT CARRY
29 BACK, OBTAIN A REFUND OF OR ASSIGN AN UNUSED CREDIT.
30 SECTION 1704-C. PENNSYLVANIA S CORPORATION SHAREHOLDER PASS-
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1 THROUGH.
2 (A) PASS-THROUGH OF CREDIT.--IF A PENNSYLVANIA S CORPORATION
3 DOES NOT HAVE AN ELIGIBLE TAX LIABILITY AGAINST WHICH THE CREDIT
4 MAY BE APPLIED, A SHAREHOLDER OF THE PENNSYLVANIA S CORPORATION
5 MAY RECEIVE A CREDIT EQUAL TO THE CREDIT DETERMINED FOR THE
6 PENNSYLVANIA S CORPORATION FOR THE TAXABLE YEAR MULTIPLIED BY
7 THE PERCENTAGE OF THE PENNSYLVANIA S CORPORATION'S DISTRIBUTIVE
8 INCOME TO WHICH THE SHAREHOLDER IS ENTITLED.
9 (B) LIMITATION.--THE CREDIT PROVIDED UNDER SUBSECTION (A) IS
10 IN ADDITION TO ANY OTHER CREDIT TO WHICH A SHAREHOLDER OF
11 PENNSYLVANIA S CORPORATION IS OTHERWISE ENTITLED UNDER THIS ACT.
12 HOWEVER, A PENNSYLVANIA S CORPORATION AND A SHAREHOLDER OF A
13 PENNSYLVANIA S CORPORATION MAY NOT CLAIM A CREDIT UNDER THIS
14 ARTICLE FOR THE SAME PENNSYLVANIA PRODUCTION EXPENSE.
15 SECTION 1705-C. TIME LIMITATIONS.
16 A TAXPAYER MAY NOT RECEIVE A CREDIT FOR PENNSYLVANIA
17 PRODUCTION EXPENSES INCURRED AFTER DECEMBER 31, 2012.
18 SECTION 2. THIS ACT SHALL APPLY TO PENNSYLVANIA PRODUCTION
19 EXPENSE INCURRED AFTER DECEMBER 31, 2003, AND TAXABLE YEARS
20 COMMENCING ON OR AFTER JANUARY 1, 2004.
21 SECTION 3. THIS ACT SHALL TAKE EFFECT IMMEDIATELY.
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