Regular Session 2015-2016 Senate Bill 1050 P.N. 1396

PRINTER'S NO. 1396

THE GENERAL ASSEMBLY OF PENNSYLVANIA

SENATE BILL

No.

1050

Session of

2015

INTRODUCED BY WARD, COSTA, PILEGGI, FONTANA, BARTOLOTTA,

SABATINA, GREENLEAF, TARTAGLIONE, FARNESE, RAFFERTY,

TOMLINSON, BLAKE, STEFANO, LEACH, HUGHES, WILEY, McGARRIGLE,

BROWNE, WILLIAMS, BOSCOLA, YUDICHAK AND BREWSTER,

NOVEMBER 13, 2015

REFERRED TO FINANCE, NOVEMBER 13, 2015

AN ACT

Amending the act of March 4, 1971 (P.L.6, No.2), entitled "An

act relating to tax reform and State taxation by codifying

and enumerating certain subjects of taxation and imposing

taxes thereon; providing procedures for the payment,

collection, administration and enforcement thereof; providing

for tax credits in certain cases; conferring powers and

imposing duties upon the Department of Revenue, certain

employers, fiduciaries, individuals, persons, corporations

and other entities; prescribing crimes, offenses and

penalties," in film production tax credit, further providing

for definitions and for credit for qualified film production

expenses, providing for reissuance of film production tax

credits and further providing for limitations.

The General Assembly of the Commonwealth of Pennsylvania

hereby enacts as follows:

Section 1. The definitions of "Pennsylvania production

expense" and "start date" in section 1702-D of the act of March

4, 1971 (P.L.6, No.2), known as the Tax Reform Code of 1971,

amended July 9, 2013 (P.L.270, No.52), are amended and the

section is amended by adding definitions to read:

Section 1702-D. Definitions.

The following words and phrases when used in this article

shall have the meanings given to them in this section unless the

context clearly indicates otherwise:

* * *

"Pennsylvania postproduction expense." A postproduction

expense incurred at a qualified postproduction facility.

"Pennsylvania production expense." Production expense

incurred in this Commonwealth. The term includes:

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

imposed by Article III will be paid or accrued.

(2) Payment to a personal service corporation

representing individual talent if the tax imposed by Article

IV will be paid or accrued on the net income of the

corporation for the taxable year.

(3) Payment to a pass-through entity representing

individual talent if the tax imposed by Article III will be

paid or accrued by all of the partners, members or

shareholders of the pass-through entity for the taxable year

for which the tax imposed under Article III has been withheld

and remitted under the requirements of Article III by the

production company.

(4) The cost of transportation incurred while

transporting to or from a train station, bus depot or

airport, located in this Commonwealth.

(5) The cost of insurance coverage purchased through an

insurance agent based in this Commonwealth.

(6) The purchase of music or story rights if any of the

following subparagraphs apply:

(i) The purchase is from a resident of this

Commonwealth.

(ii) The purchase is from an entity subject to

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taxation in this Commonwealth, and the transaction is

subject to taxation under Article III, IV or VI.

(7) The cost of rental of facilities and equipment

rented from or through a resident of this Commonwealth or an

entity subject to taxation in this Commonwealth.

(8) A qualified postproduction expense.

"P ostproduction expense." A postproduction expense of

original content for a film as follows:

(1) The term includes traditional, emerging and new work

flow techniques used in postproduction for any of the

following:

(i) Picture, sound and music editorial, rerecording

and mixing.

(ii) Visual effects.

(iii) Graphic design.

(iv) Original scoring.

(v) Animation.

(vi) Musical composition.

(vii) M astering.

(viii) D ubbing.

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

(i) Editing previously produced content for a film.

(ii) News or current affairs.

(iii) Talk shows.

(iv) Instructional videos.

(v) Content which contains obscene material or

performance as defined in 18 Pa.C.S. § 5903(b).

* * *

"Qualified postproduction expense." A Pennsylvania

postproduction expense.

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"Qualified postproduction facility." A permanent facility

where Pennsylvania postproduction activities are conducted and

expenses are incurred to which all of the following apply:

(1) The facility is located in this Commonwealth.

(2) The facility is approved by the department.

(3) The facility employs at least ten full-time

employees who reside in this Commonwealth.

(4) There is at least $500,000 of capital investment in

the facility.

* * *

"Start date." As follows:

(1) For a film:

(i) the first day of principal photography in this

Commonwealth; or

(ii) an earlier date approved by the Pennsylvania

Film Office.

(2) [an earlier] For a postproduction project, a date

[than the date under subparagraph (i),] approved by the

Pennsylvania Film Office.

* * *

Section 2. Section 1703-D of the act, amended July 9, 2013

(P.L.270, No.52), is amended to read:

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

(a) Application.--A taxpayer may apply to the department for

a tax credit under this section. If a film qualifies for a

qualified film production expense, any postproduction work done

in this Commonwealth shall qualify for a 30% credit. The

application shall be on the form required by the department.

(b) Review and approval.--The department shall establish

application periods not to exceed 90 days each. All applications

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received during the application period shall be reviewed and

evaluated by the department based on the following criteria:

(1) The anticipated number of production days in a

qualified production facility.

(2) The anticipated number of Pennsylvania employees.

(3) The number of preproduction days through

postproduction days in Pennsylvania.

(4) The anticipated number of days spent in Pennsylvania

hotels.

(5) The Pennsylvania production expenses in comparison

to the production budget.

(6) The use of studio resources.

(7) If the application is for a qualified postproduction

expense, the following criteria shall be reviewed and

evaluated:

(i) The facility where the activity occurred.

(ii) The type of postproduction activity conducted.

(iii) The percentage of the total postproduction

activity conducted for a film in this Commonwealth.

[(7)] (8) Other criteria that the Director of the

Pennsylvania Film Office deems appropriate to ensure maximum

employment and benefit within this Commonwealth.

Upon determining the taxpayer has incurred or will incur

qualified film production expenses and qualified postproduction

expenses, the department may approve the taxpayer for a tax

credit. Applications not approved may be reviewed and considered

in subsequent application periods. The department may approve a

taxpayer for a tax credit based on its evaluation of the

criteria under this subsection.

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application under subsection (b), the department and the

taxpayer shall enter into a contract containing the following:

(1) An itemized list of production expenses incurred or

to be incurred for the film.

(2) An itemized list of Pennsylvania production and

Pennsylvania postproduction expenses incurred or to be

incurred for the film.

(3) With respect to a contract entered into prior to

completion of production, a commitment by the taxpayer to

incur the qualified film production or qualified

postproduction expenses as itemized.

(4) The start date.

(5) Any other information the department deems

appropriate.

(d) Certificate.--Upon execution of the contract required by

subsection (c), the department shall award the taxpayer a film

production tax credit and issue the taxpayer a film production

tax credit certificate.

Section 3. The act is amended by adding a section to read:

Section 1704.1-D. Reissuance of film production tax credits.

(a) Reissuance.--In any fiscal year, the department may

reissue a tax credit which meets all of the following:

(1) The tax credit was approved under section 1703-D(b).

(2) The contract was signed under section 1703-D(c).

(3) The tax credit was awarded and a certificate was

issued under section 1703-D(d).

(b) Amount.--The amount of a tax credit to be reissued shall

be calculated as the difference between the amounts in

subsection (a)(1) and (3). A tax credit reissued under this

section shall be subject to each provision of this article,

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except for the limitation under section 1707-D(a).

Section 4. Section 1707-D of the act, amended July 2, 2012

(P.L.751, No.85), is amended to read:

Section 1707-D. Limitations.

(a) Cap.--In no case shall the aggregate amount of tax

credits awarded in any fiscal year under this article exceed

[$60,000,000] $75,000,000. The department may, in its

discretion, award in one fiscal year up to:

(1) Thirty percent of the dollar amount of film

production tax credits available to be awarded in the next

succeeding fiscal year.

(2) Twenty percent of the dollar amount of film

production tax credits available to be awarded in the second

successive fiscal year.

(3) Ten percent of the dollar amount of film production

tax credits available to be awarded in the third successive

fiscal year.

(a.1) Advance award of credits.--The advance award of film

tax credits under subsection (a) shall:

(1) count against the total dollar amount of credits

that the department may award in that next succeeding fiscal

year; and

(2) reduce the dollar amount of credits that the

department may award in that next succeeding fiscal year.

The individual limitations on the awarding of film production

tax credits apply to an advance award of film production tax

credits under subsection (a) and to a combination of film

production tax credits awarded against the current fiscal year

cap and against the next succeeding fiscal year's cap.

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

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(1) Except as set forth in paragraph (1.1), the

aggregate amount of film production or postproduction tax

credits awarded by the department under section 1703-D(d) to

a taxpayer for a film may not exceed 25% of the qualified

[film production] expenses to be incurred.

(1.1) In addition to the tax credit under paragraph (1),

a taxpayer is eligible for a credit in the amount of 5% of

the qualified film production expenses or qualified

postproduction expenses incurred by the taxpayer if the

taxpayer:

(i) films a feature film, television film or

television series, which is intended as programming for a

national audience; and

(ii) either :

(A) films in a qualified production facility

which meets the minimum stage filming requirements;

(B) conducts at least 50% of all qualified

postproduction expenses at a qualified postproduction

facility.

(2) A taxpayer that has received a grant under 12

Pa.C.S. § 4106 (relating to approval) shall not be eligible

for a film production tax credit under this act for the same

film.

qualified production facility [under subsection (b)(1.1)] or

qualified postproduction facility, the owner of a facility shall

provide evidence to the department to verify the development or

facility specifications and capital [improvement] investment

costs incurred for the facility so that the threshold amounts

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set in the [definition] definitions of "qualified production

facility," [under section 1702-D] and "qualified postproduction

facility" are satisfied, and upon verification, the facility

shall be registered by the department officially as a qualified

production facility or qualified postproduction facility.

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

the financial benefit to this Commonwealth resulting from the

direct investment in or payments made to Pennsylvania facilities

outweighs the benefit of maintaining the 60% requirement

contained in the definition of "qualified film production

expense" or "qualified postproduction expense." If such

determination is made, the department may waive the requirement

that 60% of a film's total production or postproduction expenses

be comprised of Pennsylvania production or Pennsylvania

postproduction expenses for a [feature] film, television film or

television series that is intended as programming for a national

audience and is filmed or produced in a qualified production

facility or qualified postproduction facility if the taxpayer

who has Pennsylvania production expenses of at least $30,000,000

per production meets the minimum stage filming requirements.

Section 5. This act shall apply as follows:

(1) The amendment of sections 1702-D, 1703-D and 1707-

D(a) of the act shall apply to taxable years beginning after

December 31, 2015.

(2) The amendment of section 1707-D(a) of the act shall

apply to fiscal years beginning on or after July 1, 2016.

Section 6. This act shall take effect immediately.

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