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) <-July 9, 2013 (P.L. , No.52), are amended to
19read:

20Section 1702-D. Definitions.

21The 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(1) The term includes an expense incurred in the 
27development of interactive software that meets all of the 
28following:

29(i) Is produced at a digital interactive media
30facility.

1(ii) Is produced for distribution on or accessed via
2electronic media, including software accessed via or
3downloaded from the Internet or a mobile network and
4software distributed on optical media or embedded in or
5downloadable to an electronic device, including a mobile
6phone, game system, computer, tablet and personal digital
7assistant or any other handheld electronic device.

8(iii) Allows a user to interact with the interactive
9software via an electronic device, including a mobile
10phone, game system, computer, tablet and personal digital
11assistant or any other handheld electronic device.

12(iv) Includes an appreciable quantity of text,
13sound, fixed images, animated images or 3-D geometry.

14(2) The term does not include media that contains
15obscene material or performance as defined in 18 Pa.C.S. §
165903(b) (relating to obscene and other sexual materials and
17performances).

18"Digital interactive media equipment." Equipment that is
19required for the development or functioning of a digital
20interactive media product or service. The term includes:

21(1) Integrated video and audio equipment, networking
22routers, switches, network cabling and any other computer-
23related hardware necessary to create or operate a digital
24interactive media product or platform.

25(2) Software, notwithstanding the method of delivery,
26transfer or access.

27(3) Computer code.

28(4) Image files, music files, audio files, video files,
29scripts and plays.

30(5) Concept mock-ups.

1(6) Software tools.

2(7) Testing procedures.

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

7"Digital interactive media facility." A facility where
8digital interactive media or digital interactive media equipment
9is developed and which:

10(1) is located in this Commonwealth;

11(2) employs at least ten full-time employees who reside
12in this Commonwealth; and

13(3) has a capital investment of at least $500,000.

14"Film." A feature film, a television film, a television talk
15or game show series, a television commercial or a television
16pilot or each episode of a television series which is intended
17as programming for a national audience. The term does not
18include a production featuring news, current events, weather and
19market reports, public programming, sports events, awards shows
20or other gala events, a production that solicits funds, a
21production containing obscene material or performances as
22defined in 18 Pa.C.S. § 5903(b) (relating to obscene and other
23sexual materials and performances) or a production primarily for
24private, political, industrial, corporate or institutional
25purposes.

26"Minimum stage filming requirements." Include:

27(1) Taxpayers with a Pennsylvania production expense of
28less than $30,000,000 per production must:

29(i) build at least one set at a qualified production
30facility;

1(ii) shoot for a minimum of ten days at a qualified
2production facility; and

3(iii) spend or incur a minimum of $1,500,000 in
4direct expenditures relating to the use or rental of
5tangible property or for performance of services provided
6by a qualified production facility.

7(2) Taxpayers with a Pennsylvania production expense of
8at least $30,000,000 per production must:

9(i) build at least two sets at a qualified
10production facility;

11(ii) shoot for a minimum of 15 days at a qualified
12production facility; and

13(iii) spend or incur a minimum of $5,000,000 in
14direct expenditures relating to the use or rental of
15tangible property at or for performance of services
16provided by a qualified production facility.

17"Pass-through entity." A partnership as defined in section
18301(n.0) or a Pennsylvania S corporation as defined in section
19301(n.1).

<-20"Pennsylvania postproduction expense." A qualified
21postproduction expense incurred at a qualified postproduction
22facility.

<-23"Pennsylvania digital interactive media expense." A digital 
24interactive media expense incurred at a qualified digital 
25interactive media facility.

26"Pennsylvania postproduction expense." A postproduction
27expense incurred at a qualified postproduction facility.

28"Pennsylvania production expense." Production expense
29incurred in this Commonwealth. The term includes:

30(1) Compensation paid to an individual on which the tax

1imposed by Article III will be paid or accrued.

2(2) Payment to a personal service corporation
3representing individual talent if the tax imposed by Article
4IV will be paid or accrued on the net income of the
5corporation for the taxable year.

6(3) Payment to a pass-through entity representing
7individual talent if the tax imposed by Article III will be
8paid or accrued by all of the partners, members or
9shareholders of the pass-through entity for the taxable year
<-10for which the tax imposed under Article III has been withheld 
11and remitted under the requirements of Article III by the 
12production company <-for which the tax imposed under Article 
13III has been withheld and remitted under the requirements of 
14Article III by the production company.

15(4) The cost of transportation incurred while
16transporting to or from a train station, bus depot or
17airport, located in this Commonwealth.

18(5) The cost of insurance coverage purchased through an
19insurance agent based in this Commonwealth.

20(6) The purchase of music or story rights if any of the
21following subparagraphs apply:

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

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

27(7) The cost of rental of facilities and equipment
28rented from or through a resident of this Commonwealth or an
29entity subject to taxation in this Commonwealth.

30(8) A qualified postproduction expense.

1(9) The development and manufacture of digital
2interactive media equipment.

<-3"Postproduction expense." A postproduction expense of 
4original content for a film as follows:

5(1) The term includes traditional, emerging and new work
6flow techniques used in postproduction for any of the
7following:

8(i) Picture, sound and music editorial, rerecording 
9and mixing.

10(ii) Visual effects.

11(iii) Graphic design.

12(iv) Original scoring.

13(v) Animation.

14(vi) Musical composition.

15(vii) Mastering.

16(viii) Dubbing.

17(2) The term does not include any of the following:

18(i) Editing previously produced content for a film.

19(ii) News or current affairs.

20(iii) Talk shows.

21(iv) Instructional videos.

22(v) Content which contains obscene material or
23performance as defined in 18 Pa.C.S. § 5903(b).

24"Production expense." As follows:

25(1) The term includes all of the following:

26(i) Compensation paid to an individual employed in
27the production of the film.

28(ii) Payment to a personal service corporation
29representing individual talent.

30(iii) Payment to a pass-through entity representing

1individual talent.

2(iv) The costs of construction, operations, editing,
3photography, sound synchronization, lighting, wardrobe
4and accessories.

5(v) The cost of leasing vehicles.

6(vi) The cost of transportation to or from a train
7station, bus depot or airport.

8(vii) The cost of insurance coverage.

9(viii) The costs of food and lodging.

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

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

12(xi) Development and production costs relating to
13digital interactive media.

14(2) The term does not include any of the following:

15(i) Deferred, leveraged or profit participation paid
16or to be paid to individuals employed in the production
17of the film or paid to entities representing an
18individual for services provided in the production of the
19film.

20(ii) Development cost.

21(iii) Expense incurred in marketing or advertising a
22film.

23(iv) Cost related to the sale or assignment of a
24film production tax credit under section 1705-D(e).

<-25"Qualified digital interactive media expense." All 
26Pennsylvania digital interactive media expenses if the 
27Pennsylvania digital interactive media expenses comprise at 
28least 60% of the digital interactive media expenses of the 
29digital interactive media produced.

30"Qualified digital interactive media facility." A facility

1where digital interactive media or digital interactive media
2equipment is developed and which:

3(1) is located in this Commonwealth;

4(2) employs at least ten full-time employees who reside
5in this Commonwealth; and

6(3) has a capital investment of at least $500,000.

7"Qualified film production expense." All Pennsylvania
8production expenses if Pennsylvania production expenses comprise
9at least 60% of the film's total production expenses. The term
10shall not include more than $15,000,000 in the aggregate of
11compensation paid to individuals or payment made to entities
12representing an individual for services provided in the
13production of the film.

14"Qualified postproduction expense." A Pennsylvania
15postproduction expense.<- of original content for a qualified film
16produced at a qualified postproduction facility if at least 60%
17of all postproduction work related to the film is conducted at a
18qualified postproduction facility.

19(1) The term includes traditional, emerging and new work
20flow techniques used in postproduction for any of the
21following:

22(i) Picture, sound and music editorial, rerecording
23and mixing.

24(ii) Visual effects.

25(iii) Graphic design.

26(iv) Original scoring.

27(v) Animation.

28(vi) Musical composition.

29(vii) Mastering.

30(viii) Dubbing.

1(2) The term does not include:

2(i) Editing previously produced content for a
3qualified film.

4(ii) News or current affairs.

5(iii) Talk shows.

6(iv) Instructional videos.

7(v) Media which is obscene.

8"Qualified postproduction facility." A permanent facility
9where Pennsylvania postproduction activities are conducted and 
<-10expenses are incurred to which all of the following apply:

11(1) The facility is located in this Commonwealth.

12(2) The facility is approved by the department.

13(3) The facility employs at least ten full-time
14employees who reside in this Commonwealth.

15(4) There is at least $500,000 of capital investment in
16the facility.

17"Qualified production facility." A film production facility
18located within this Commonwealth that contains at least one
19sound stage with a column-free, unobstructed floor space and
20meets either of the following criteria:

21(1) Has had a minimum of $10,000,000 invested in the
22film production facility in land or a structure purchased or
23ground-up, purpose-built new construction or renovation of
24existing improvement.

25(2) Meets at least three of the following criteria:

26(i) A sound stage having an industry standard noise
27criteria rating of 25 or better.

28(ii) A permanent grid with a minimum point load
29capacity of no less than 1,000 pounds at a minimum of 25
30points.

1(iii) Built-in power supply available at a minimum
2of 4,000 amps per sound stage without the need for
3supplemental generators.

4(iv) A height from sound stage floor to permanent
5grid of a minimum of 20 feet.

6(v) A sound stage with a sliding or roll-up access
7door with a minimum height of 14 feet.

8(vi) A built-in HVAC capacity during shoot days with
9a minimum of 50 tons of cooling capacity available per
10sound stage.

11(vii) Perimeter security that includes a 24-hour,
12seven-days-a-week security presence and use of access
13control identification badges.

14(viii) On-site lighting and grip department with an
15available inventory stored at the film production
16facility with a minimum cost of investment of $500,000.

17(ix) A sound stage with contiguous production
18offices with a minimum of 5,000 square feet per sound
19stage.

20"Qualified tax liability." The liability for taxes imposed 
21under Article III, IV, VI, VII or IX. The term shall not include 
22any tax withheld by an employer from an employee under Article 
23III.

<-24"Start date." [The] Either:

25(1) the first day of principal photography in this
26Commonwealth; or

27(2) an earlier date approved in writing by the Director
28of the Pennsylvania Film Office.

<-29"Start date." As follows:

30(1) For a film:

1(i) the first day of principal photography in this
2Commonwealth; or

3(ii) an earlier date approved by the Pennsylvania
4Film Office.

5(2) [an earlier] For a postproduction project, a date
6[than the date under subparagraph (i),] approved by the
7Pennsylvania Film Office.

8(3) For digital interactive media, a date approved by
9the Pennsylvania Film Office.

10"Tax credit." The film production tax credit provided under
11this article.

12"Taxpayer." A film production <-or digital interactive media
13company subject to tax under Article III, IV or VI. The term
14does not include contractors or subcontractors of a film
15production company.

16Section 1703-D. Credit for qualified film production expenses.

17(a) Application.--A taxpayer may apply to the department for
18a tax credit under this section. If a film qualifies for a 
19qualified film production expense, any postproduction work done 
20in this Commonwealth shall qualify for a 30% credit. The
21application shall be on the form required by the department.

22(b) Review and approval.--The department shall establish 
23application periods not to exceed 90 days each. All applications 
24received during the application period shall be reviewed and 
25evaluated by the department based on the following criteria:

26(1) The anticipated number of production days in a
27qualified production facility.

28(2) The anticipated number of Pennsylvania employees.

29(3) The number of preproduction days through
30postproduction days in Pennsylvania.

1(4) The anticipated number of days spent in Pennsylvania
2hotels.

3(5) The Pennsylvania production expenses in comparison
4to the production budget.

5(6) The use of studio resources.

<-6(7) (6.1) If the application is for a qualified
7postproduction expense <-or a qualified digital interactive
8media expense, the following criteria shall be reviewed and
9evaluated:

10(i) The facility where the <-postproduction activity
11occurred.

12(ii) The type of postproduction <-or digital 
13interactive media activity conducted.

14(iii) The percentage of the total postproduction
15activity conducted for a film in this Commonwealth.

<-16(8) Other criteria that the Director of the Pennsylvania
17Film Office deems appropriate to ensure maximum employment
18and benefit within this Commonwealth.

<-19(7) Other criteria that the Director of the Pennsylvania
20Film Office deems appropriate to ensure maximum employment
21and benefit within this Commonwealth.

22Upon determining the taxpayer has incurred or will incur 
23qualified film production expenses<- or, qualified postproduction 
24expenses <-and qualified digital interactive media expenses, the 
25department may approve the taxpayer for a tax credit. 
26Applications not approved may be reviewed and considered in 
27subsequent application periods. The department may approve a 
28taxpayer for a tax credit based on its evaluation of the 
29criteria under this subsection.

30(c) Contract.--If the department approves the taxpayer's

1application under subsection (b), the department and the
2taxpayer shall enter into a contract containing the following:

3(1) An itemized list of <-qualified production or 
<-4postproduction development expenses incurred or to be
5incurred for the film <-and software.

6(2) An itemized list of Pennsylvania production <-or 
7postproduction,<- Pennsylvania postproduction and Pennsylvania 
8digital interactive media expenses incurred or to be incurred
9for the film <-or digital interactive media and software.

10(3) With respect to a contract entered into prior to
11completion of production, a commitment by the taxpayer to
12incur the qualified film or digital interactive media
13production or qualified postproduction expenses as itemized.

14(4) The start date.

15(5) Any other information the department deems
16appropriate.

17(d) Certificate.--Upon execution of the contract required by
18subsection (c), the department shall award the taxpayer a film
19production tax credit and issue the taxpayer a film production
20tax credit certificate.

21Section 2. Section 1707-D of the act, amended July 2, 2012
22(P.L.751, No.85), is amended to read:

23Section 1707-D. Limitations.

24(a) <-[Cap.--In no case shall the aggregate amount of tax
25credits awarded in any fiscal year under this article exceed
26$60,000,000. The department may, in its discretion,<-] Amount.--
27The department may award in one fiscal year up to:

28(1) Thirty percent of the dollar amount of film
29production tax credits available to be awarded in the next
30succeeding fiscal year.

1(2) Twenty percent of the dollar amount of film
2production tax credits available to be awarded in the second
3successive fiscal year.

4(3) Ten percent of the dollar amount of film production
5tax credits available to be awarded in the third successive
6fiscal year.

7(a.1) Advance award of credits.--The advance award of film
8tax credits under subsection (a) shall:

9(1) count against the total dollar amount of credits
10that the department may award in that next succeeding fiscal
11year; and

12(2) reduce the dollar amount of credits that the
13department may award in that next succeeding fiscal year.

14The individual limitations on the awarding of film production
15tax credits apply to an advance award of film production tax
16credits under subsection (a) and to a combination of film
17production tax credits awarded against the current fiscal year
18cap and against the next succeeding fiscal year's cap.

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

20(1) Except as set forth in paragraph (1.1), the 
21aggregate amount of film production<-, postproduction or 
22digital interactive media tax credits awarded by the
23department under section 1703-D(d) to a taxpayer for a film
24may not exceed 25% of the qualified [film production<-]
25expenses to be incurred.

26(1.1) In addition to the tax credit under paragraph (1),
27a taxpayer is eligible for a credit in the amount of 5% of
28the qualified film production expenses or qualified 
29postproduction expenses incurred by the taxpayer if the
30taxpayer:

1(i) films a feature film, television film or
2television series, which is intended as programming for a
3national audience; and

4(ii) <-Either either:

5(A) films in a qualified production facility
6which meets the minimum stage filming requirements; 
7or

8(B) conducts at least <-$500,000 of postproduction 
9activities <-50% of all qualified postproduction 
10expenses at a qualified postproduction facility.

11(2) A taxpayer that has received a grant under 12
12Pa.C.S. § 4106 (relating to approval) shall not be eligible
13for a film production tax credit under this act for the same
14film.

15(c) Qualified production facility.--To be considered a
16qualified production facility <-or qualified postproduction 
17facility [under subsection (b)(1.1)<-], qualified postproduction 
18facility or qualified digital interactive media facility, the
19owner of a facility shall provide evidence to the department to
20verify the development or facility specifications and capital
21[improvement] investment costs incurred for the facility so that
22the threshold amounts set in the definition of "qualified
23production facility" facility," <-or "qualified postproduction 
24facility" [under section 1702-D<-] "qualified production facility" 
25or "qualified digital interactive media facility" are satisfied,
26and upon verification, the facility shall be registered by the
27department officially as a qualified production facility or, 
28qualified postproduction facility <-or qualified digital 
29interactive media facility.

30(d) Waiver.--The department may make a determination that

1the financial benefit to this Commonwealth resulting from the
2direct investment in or payments made to Pennsylvania facilities
3outweighs the benefit of maintaining the 60% requirement
4contained in the definition of "qualified film production 
<-5expense" or "qualified postproduction expense." If such
6determination is made, the department may waive the requirement
7that 60% of a film's total production <-expenses be comprised of 
8Pennsylvania production expenses for a feature film, television 
9film or television series that is intended as programming for a 
10national audience and is filmed in a qualified production 
11facility if the taxpayer who has Pennsylvania production 
12expenses of at least $30,000,000 per production meets the 
13minimum stage filming requirements. <-or postproduction expenses 
14be comprised of Pennsylvania production or Pennsylvania 
15postproduction expenses for a [feature] film, television film or 
16television series that is intended as programming for a national 
17audience and is filmed or produced in a qualified production 
18facility or qualified postproduction facility if the taxpayer 
19who has Pennsylvania production expenses of at least $30,000,000 
20per production meets the minimum stage filming requirements.

21Section 3. The amendment of sections 1702-D, 1703-D and
221707-D(a) of the act shall apply to taxable years beginning
23after December 31, 2012.

24Section 4. This act shall take effect immediately.