PRINTER'S NO. 1242
No. 1008 Session of 2007
INTRODUCED BY FERLO, COSTA, ORIE, LAVALLE, FONTANA, RAFFERTY, MUSTO, TARTAGLIONE, STACK, KITCHEN, WASHINGTON, LOGAN, WONDERLING, O'PAKE, BROWNE AND PIPPY, JUNE 26, 2007
REFERRED TO FINANCE, JUNE 26, 2007
AN ACT 1 Amending the act of March 4, 1971 (P.L.6, No.2), entitled "An 2 act relating to tax reform and State taxation by codifying 3 and enumerating certain subjects of taxation and imposing 4 taxes thereon; providing procedures for the payment, 5 collection, administration and enforcement thereof; providing 6 for tax credits in certain cases; conferring powers and 7 imposing duties upon the Department of Revenue, certain 8 employers, fiduciaries, individuals, persons, corporations 9 and other entities; prescribing crimes, offenses and 10 penalties," providing for a film production tax credit and 11 conferring powers and imposing duties upon the Department of 12 Community and Economic Development. 13 The General Assembly of the Commonwealth of Pennsylvania 14 hereby enacts as follows: 15 Section 1. The act of March 4, 1971 (P.L.6, No.2), known as 16 the Tax Reform Code of 1971, is amended by adding an article to 17 read: 18 ARTICLE XVII-D 19 FILM PRODUCTION TAX CREDIT 20 Section 1701-D. Scope of article. 21 This article relates to film production tax credits. 22 Section 1702-D. Definitions.
1 The following words and phrases when used in this article 2 shall have the meanings given to them in this section unless the 3 context clearly indicates otherwise: 4 "Department." The Department of Community and Economic 5 Development of the Commonwealth. 6 "Film." A feature film, a television film, a television talk 7 or game show series, a television commercial or a television 8 pilot or each episode of a television series which is intended 9 as programming for a national or regional audience. The term 10 does not include a production featuring news, current events, 11 weather and market reports, or public programming, sports event, 12 awards show or other gala event, a production that solicits 13 funds, a production containing obscene material or performances 14 as defined in 18 Pa.C.S. § 5903(b) (relating to obscene and 15 other sexual materials and performances) or a production 16 primarily for private, political, industrial, corporate or 17 institutional purposes. 18 "Film production tax credit." The credit provided under this 19 article. 20 "Pass-through entity." A partnership as defined in section 21 301(n.0) or a Pennsylvania S corporation as defined in section 22 301(n.1). 23 "Pennsylvania production expense." A production expense 24 incurred in this Commonwealth. The term includes only wages and 25 salaries on which the taxes imposed by Article III or IV will be 26 paid or accrued. 27 "Production expense." An expense incurred in the production 28 of a film. The term includes the amount of wages and salaries of 29 individuals employed in the production of the film; the costs of 30 construction, operations, editing, photography, sound 20070S1008B1242 - 2 -
1 synchronization, lighting, wardrobe and accessories; the cost of 2 leasing vehicles; the cost of transportation to or from a 3 Pennsylvania train station, bus depot or airport; the cost of 4 insurance coverage if the insurance is purchased through a 5 Pennsylvania-based insurance agent; the costs of food and 6 lodging; the purchase of music or story rights if the purchase 7 price is under $1,000,000, the rights are purchased from a 8 Pennsylvania resident or an entity subject to taxation in this 9 Commonwealth and the transaction is subject to taxation under 10 Article III, IV or VI; and the cost of rental of facilities and 11 equipment, if rented from or through a Pennsylvania resident or 12 an entity subject to taxation in this Commonwealth. The term 13 does not include: 14 (1) deferred, leveraged or profit participation paid or 15 to be paid to individuals employed in the production of the 16 film; 17 (2) development costs; or 18 (3) expenses incurred in marketing or advertising a 19 film. 20 "Qualified film production expense." A Pennsylvania 21 production expense if at least 60% of the total expenses are 22 Pennsylvania production expenses. 23 "Qualified tax liability." The liability for taxes imposed 24 under Article III, IV or VI. The term shall not include any tax 25 withheld by an employer from an employee under Article III. 26 "Start date." The first day of principal photography in this 27 Commonwealth. 28 "Taxpayer." A film production company subject to tax under 29 Article III, IV or VI. The term does not include contractors or 30 subcontractors of a film production company. 20070S1008B1242 - 3 -
1 Section 1703-D. Credit for qualified film production expenses. 2 (a) Application.--A taxpayer may apply to the department for 3 a film production tax credit under this section. The application 4 shall be on the form required by the department. 5 (b) Review and approval.--The department shall review the 6 application. Upon determining the qualified film production 7 expense amount for the taxpayer, the department may approve the 8 taxpayer for a film production tax credit. 9 (c) Contract.--If the department approves the taxpayer's 10 application under subsection (b), the department and the 11 taxpayer shall enter into a contract containing the following: 12 (1) An itemized list of production expenses incurred or 13 to be incurred. 14 (2) An itemized list of Pennsylvania production expenses 15 incurred or to be incurred. 16 (3) With respect to a contract entered into prior to 17 completion of production, a commitment by the taxpayer to 18 incur the qualified film production expenses as itemized. 19 (4) The start date. 20 (5) Any other information the department deems 21 appropriate. 22 (d) Certificate.--Upon execution of the contract required by 23 subsection (c), the department shall award the taxpayer a film 24 production tax credit and issue the taxpayer a film production 25 tax credit certificate. 26 (e) Limitations.--The following limitations shall apply: 27 (1) The aggregate amount of film production tax credits 28 awarded by the department under subsection (d) to a taxpayer 29 for a film may not exceed 25% of the qualified film 30 production expenses to be incurred. 20070S1008B1242 - 4 -
1 (2) A taxpayer with a budget for a film that is less 2 than $2,000,000 shall not be eligible to apply for a film 3 production tax credit under this article for that film, 4 unless the taxpayer receives a written waiver of this 5 requirement from the department. 6 (3) A taxpayer has received a grant under 12 Pa.C.S. § 7 4106 (relating to approval) shall not be eligible for a film 8 production tax credit under this act for the same film. 9 (4) The aggregate amount of film production tax credits 10 claimed by a taxpayer under section 1704-D may not exceed the 11 amount awarded for the department under this section for the 12 taxpayer for that taxable year. 13 Section 1704-D. Film production tax credits. 14 A taxpayer may claim a film production tax credit against the 15 qualified tax liability of the taxpayer. 16 Section 1705-D. Carryover, carryback, refund and assignment of 17 credit. 18 (a) General rule.--If the taxpayer cannot use the entire 19 amount of the film production tax credit for the taxable year in 20 which the film production tax credit is first approved, then the 21 excess may be carried over to succeeding taxable years and used 22 as a credit against the qualified tax liability of the taxpayer 23 for those taxable years. Each time the film production tax 24 credit is carried over to a succeeding taxable year, it shall be 25 reduced by the amount that was used as a credit during the 26 immediately preceding taxable year. The film production tax 27 credit provided by this article may be carried over and applied 28 to succeeding taxable years for no more than three taxable years 29 following the first taxable year for which the taxpayer was 30 entitled to claim the credit. 20070S1008B1242 - 5 -
1 (b) Application.--A film production tax credit approved by 2 the department in a taxable year first shall be applied against 3 the taxpayer's qualified tax liability for the current taxable 4 year as of the date on which the credit was approved before the 5 film production tax credit can be applied against any tax 6 liability under subsection (a). 7 (c) No carryback.--A taxpayer is not entitled to carry back 8 all or any portion of an unused film production tax credit 9 granted to the taxpayer under this article. 10 (d) Refund.--If the amount of the film production tax credit 11 granted to a taxpayer under this article exceeds the taxpayer's 12 qualified tax liability for the taxable year in which the credit 13 is being claimed and if the taxpayer has not sold or assigned 14 all or any portion of the film production tax credit pursuant to 15 subsection (e), the excess shall be refunded to the taxpayer 16 provided that the Department of Revenue has made a finding that 17 the taxpayer has filed all required State tax reports and 18 returns for all applicable taxable years and paid any balance of 19 State tax due as determined at settlement, assessment or 20 determination by the Department of Revenue. 21 (e) Sale or assignment.--The following shall apply: 22 (1) A taxpayer, upon application to and approval by the 23 department, may sell or assign, in whole or in part, a film 24 production tax credit granted to the taxpayer under this 25 article. 26 (2) The department and the Department of Revenue shall 27 jointly promulgate regulations for the approval of 28 applications under this subsection. 29 (3) Before an application is approved, the Department of 30 Revenue must make a finding that the applicant has filed all 20070S1008B1242 - 6 -
1 required State tax reports and returns for all applicable 2 taxable years and paid any balance of State tax due as 3 determined at settlement, assessment or determination by the 4 Department of Revenue. 5 (4) Notwithstanding any other provision of law, the 6 Department of Revenue shall settle, assess or determine the 7 tax of an applicant under this subsection within 90 days of 8 the filing of all required final returns or reports in 9 accordance with section 806.1(a)(5) of the act of April 9, 10 1929 (P.L.343, No.176), known as The Fiscal Code. 11 (f) Purchasers and assignees.--The purchaser or assignee of 12 all or a portion of a film production tax credit under 13 subsection (e) shall immediately claim the credit in the taxable 14 year in which the purchase or assignment is made. The amount of 15 the film production credit that a purchaser or assignee may use 16 against any one qualified tax liability may not exceed 50% of 17 such qualified tax liability for the taxable year. The purchaser 18 or assignee may not carry back or obtain a refund of the film 19 production tax credit. The purchaser or assignee shall notify 20 the Department of Revenue of the seller or assignor of the film 21 production tax credit in compliance with procedures specified by 22 the Department of Revenue. 23 Section 1706-D. Determination of qualified film production 24 expenses. 25 In prescribing standards for determining which production 26 expenses are considered qualified film production expenses for 27 purposes of computing the credit provided by this article, the 28 department shall consider: 29 (1) The location where services are performed. 30 (2) The residence or business location of the person or 20070S1008B1242 - 7 -
1 persons performing the service. 2 (3) The location where supplies are consumed. 3 (4) Other factors the department determines are 4 relevant. 5 Section 1707-D. Penalty. 6 A taxpayer which claims a film production tax credit and 7 fails to incur the amount of qualified film production expenses 8 agreed to in section 1703-D(c)(3) for a film in that taxable 9 year shall repay to the Commonwealth the amount of the film 10 production tax credit claimed under this article for the film, 11 including any sums refunded to the taxpayer under section 1705- 12 D(d). 13 Section 1708-D. Pass-through entity. 14 (a) General rule.--If a pass-through entity has any unused 15 tax credit under section 1705-D, it may elect in writing, 16 according to procedures established by the Department of 17 Revenue, to transfer all or a portion of the credit to 18 shareholders, members or partners in proportion to the share of 19 distributive income to which the shareholder, member or partner 20 is entitled. 21 (b) Limitation.--The credit provided under subsection (a) 22 cannot be claimed under this article for the same qualified film 23 production expense by pass-through entity and a shareholder, 24 member or partner of a pass-through entity. 25 (c) Application.--A shareholder, member or partner of a 26 pass-through entity to whom a credit is transferred under 27 subsection (a) shall immediately claim the credit in the taxable 28 year in which the transfer is made. The shareholder, member or 29 partner may not carry forward, carry back, obtain a refund of or 30 sell or assign the credit. 20070S1008B1242 - 8 -
1 Section 1709-D. Department guidelines. 2 The department shall develop written guidelines for the 3 implementation of the provisions of this article. 4 Section 2. The addition of Article XVII-D of the act shall 5 apply to: 6 (1) qualified film production expenses incurred after 7 December 31, 2006; and 8 (2) taxable years commencing after December 31, 2006. 9 Section 3. This act shall take effect immediately. E24L72RLE/20070S1008B1242 - 9 -