Senate Bill No. 610
(By Senators Palumbo, Stollings and Plymale)
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[Introduced March 17, 2009; referred to the Committee on Economic
Development; and then to the Committee on Finance.]
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A BILL to amend and reenact §11-13X-3, §11-13X-5, §11-13X-6, §11-
13X-8, §11-13X-9 and §11-13X-13 of the Code of West
Virginia, 1931, as amended, all relating generally to the
West Virginia Film Industry Investment Act; clarifying
definitions; stating the amount of credit allowed in
specified percentages; clarifying contradictory requirements
to claim credit; clarifying language relating to use of
credit and transfer process; clarifying language to protect
transferees; authorizing issuance of rules by the Secretary
of Commerce for administration of the film credit; and
making amendments retroactively applicable to taxable years
beginning after December 31, 2007.
Be it enacted by the Legislature of West Virginia:
That §11-13X-3, §11-13X-5, §11-13X-6, §11-13X-8, §11-13X-9
and §11-13X-13 of the Code of West Virginia, 1931, as amended, be
amended and reenacted, all to read as follows:
Article 13X. West Virginia Film Industry Investment Act.
§11-13X-3. Definitions.
(a)
General. -- When used in this article, or in the
administration of this article, terms defined in subsection (b)
of this section have the meanings ascribed to them by this
section, unless a different meaning is clearly required by the
context in which the term is used.
(b)
Terms defined. --
(1) "Commercial exploitation" means reasonable intent for
public viewing for the delivery medium used.
(2) "Direct production expenditure" means a transaction that
occurs in the State of West Virginia or with a West Virginia
vendor and includes:
(A) Payment of wages,
fringe benefits or fees and costs for
related fringe benefits provided for talent, management or labor
to a person who is a resident of that are subject to West
Virginia income tax;
(B) Payment to a personal services corporation for the
services of a performing artist if:
(i) The personal services corporation is subject to West
Virginia income tax on those payments; and
(ii) The performing artist receiving payments from the
personal services corporation is subject to West Virginia income
tax; and
(C) Any of the following provided by a vendor:
(i) The story and scenario to be used by a qualified
project;
(ii) Set construction and operations, wardrobe, accessories
and related services;
(iii) Photography, sound synchronization, lighting and
related services;
(iv) Editing and related services;
(v) Rental of facilities and equipment;
(vi) Leasing of vehicles;
(vii) Food or lodging;
(viii) Airfare if purchased through a West Virginia-based
travel agency or travel company;
(ix) Insurance coverage and bonding if purchased through a
West Virginia-based insurance agent; and
(x) Other direct costs of producing a qualified project in
accordance with generally accepted entertainment industry
practices.
(3) "Eligible company" means a person or business entity
engaged in the business of producing film industry productions.
(4) "Feature length" means in excess of forty minutes.
(5)"Federal new markets tax credit program" means the tax
credit program codified as Section 45D of the United States
Internal Revenue Code of 1986, as amended;
(
6)(5) "Film industry production" means a qualified project
intended for reasonable national or international commercial
exploitation.
(
7)(6) "Film office" means the West Virginia Film Office,
which is a division of the West Virginia Department of Commerce.
(
8)(7) "Postproduction expenditure" means a transaction that
occurs in West Virginia or with a West Virginia vendor after the
completion of principal photography, including editing and
negative cutting, Foley recording and sound effects, automatic
dialogue replacement (also known as ADR or dubbing), special
effects or visual effects, including computer-generated imagery
or other effects, scoring and music editing, sound editing,
beginning and end credits, soundtrack production, subtitling or addition of sound or visual effects; but not including an
expenditure for advertising, marketing, distribution or expense
payments.
(
9)(8) "Qualified project" means a feature length theatrical
or direct-to-video motion picture, a made-for-television motion
picture, a commercial, a music video, commercial still
photography, a television pilot program, a television series and
a television mini-series that incurs a minimum of $25,000 in
direct production expenditures and post-production expenditures,
as defined by this subsection, in West Virginia. The term
excludes news or current affairs programming, a weather or market
program, an interview or talk show, a sporting event or show, an
awards show, a gala, a production that solicits funds, a home
shopping program, a program that primarily markets a product or
service, political advertising or a concert production.
A qualified project may be produced on any single media or
multimedia program that:
(A) Is fixed on film, digital medium, videotape, computer
disk, laser disc or other similar delivery medium;
(B) Can be viewed or reproduced;
(C) Is not intended to and does not violate article eight-c,
chapter sixty-one of this code;
(D) Does not contain obscene matter or sexually explicit
conduct, as defined by article eight-a, chapter sixty-one of this
code;
(E) Is intended for reasonable commercial exploitation for
the delivery medium used; and
(F) Does not contain content that portrays the State of West
Virginia in a significantly derogatory manner.
(
10) (9) "Tax Commissioner" means the West Virginia State
Tax Commissioner or his or her designee.
§11-13X-5. Amount of credit allowed; limitation of the credits.
(a)
Base allowance. --
(1) The amount of credit allowed to every eligible company,
except as provided in subsection (b) of this section, shall be
twenty-two twenty-seven percent.
and.
(2) For taxable years beginning prior to the first day of
January, two thousand ten, there shall be an additional credit of
five percent.
(b)
Extra allowance for hiring of local workers. -- Any
amount allowed in subsection (a) of this section shall be
increased by an additional four percent if the eligible company,
or its authorized payroll service company, employs ten or more West Virginia residents as part of its full-time employees
working in the state or as apprentices working in the state.
(c) Application of the credits. -- The tax credit allowed
under this section shall be applied to the eligible company's
state tax liability as provided in section seven of this article.
(d) Limitation of the credits. -- No more than $10 million
of the tax credits shall be allocated by the film office in any
given West Virginia state fiscal year. The film office shall
allocate the tax credits in the order the applications therefor
are received.
(e) The additional five percent tax credit amount authorized
pursuant to subdivision (2), subsection (a) of this section shall
not be available with respect to expenditures attributable to a
production for which the eligible company receives a tax credit
pursuant to the federal new markets tax credit program.
§11-13X-6. Requirements for credit.
(a) In order for any eligible company to claim a tax credit
under this article, it shall comply with the following
requirements:
(1) If the qualified project contains production credits,
the eligible company shall agree, upon request by the film
office, to recognize the State of West Virginia with the following acknowledgment in the end credit roll: "Filmed in West
Virginia with assistance of the West Virginia Film Industry
Investment Act";
(2) Apply to the film office on forms and in the manner the
film office may prescribe; and
(3) Submit to the film office information required by the
film office to demonstrate conformity with the requirements of
this section and shall agree in writing:
(A) To pay all obligations the eligible company has incurred
in West Virginia; and
(B) To publish, at completion of principal photography, a
notice at least once a week for three consecutive weeks in local
newspapers in regions where filming or production has taken place
to notify the public of the need to file creditor claims against
the eligible company by a specified date;
(C) That outstanding obligations are not waived should a
creditor fail to file by the specified date; and
(
D)(B) To delay filing of a claim for the tax credit
authorized by this article until the film office delivers written
notification to the Tax Commissioner that the eligible company
has fulfilled all requirements for the credit.
The film office shall determine the eligibility of the
company and the qualification of each project, and shall report
this information to the Tax Commissioner in a manner and at times
the film office and the Tax Commissioner shall agree upon.
(b) Upon completion of a qualified project:
the eligible
company shall:
(1)
File all required West Virginia tax reports and returns
for all applicable tax years and pay any balance of West Virginia
tax due; An eligible company shall have filed all required West
Virginia tax reports and returns and paid any balance of West
Virginia tax due on those returns;
(2) All claims for the tax credit shall be filed with an
expense verification report prepared by an independent certified
public accountant, utilizing "agreed upon procedures" which are
prescribed by the film office in accordance with generally
accepted auditing standards in the United States. The certified
public accountant will render a report as to the qualification of
the credits, consistent with guidelines to be determined by the
film office and approved by the Tax Commissioner; and
(3) An eligible company claiming an extra allowance for
employing local workers shall submit to the film office
documentation verifying West Virginia residency for all individuals claimed to qualify for the extra allowance. The
documentation shall include the name, home address and telephone
number for all individuals used to qualify for the extra
allowance.
(c) If the requirements of this section have been complied
with, the film office shall approve the film tax credit and issue
to the Tax Commissioner a document granting the appropriate tax
credit to the eligible company
and shall report this information
to the Tax Commissioner.
§11-13X-8. Uses of credit; unused credit; carry forward; carry
back prohibited; expiration and forfeiture of
credit.
(a) No credit is allowed under this section against any
employer withholding taxes imposed by article twenty-one of this
chapter.
(b) If the tax credit allowed under this article in any
taxable year exceeds the sum of the taxes enumerated in
subsection (b), (c) or (d), section seven of this article for
that taxable year, the excess may be applied against those taxes,
in the order and manner stated in section seven of this article,
for succeeding taxable years until the earlier of the following:
(1) The full amount of the excess tax credit is used;
(2) The expiration of the second taxable year after the
taxable year in which the expenditures occurred. The tax credit
remaining thereafter is forfeited; or
(3) The excess tax credit is transferred or sold.
(c) No carryback
is allowed to a prior taxable year
is
allowed that does not have qualified expenditures for the amount
of any unused portion of any annual credit allowance.
(d) The transfer or sale of this credit does not extend the
time in which the credit can be used. The carry forward period
for credit that is transferred or sold begins on the date on
which the credit was originally
granted issued by the film
office.
(e) Any tax credit certificate issued in accordance with
this article, which has been issued to an eligible company, and
to the extent not previously claimed against the tax of the
eligible company or the owner of the certificate, may be
transferred or sold by such eligible company to another West
Virginia taxpayer, subject to the following conditions:
(1) A single transfer or sale may involve one or more
transferees, assignees or purchasers. A transfer or sale of the
credits may involve multiple transfers to one or more
transferees, assignees or purchasers;
(2) Transferors and sellers shall apply to the film office
for approval of any transfer, sale or assignment of the tax
credit. Any amount of the tax credit that has been transferred
or assigned shall be subject to the same limitations and
conditions that apply to the eligible company's or seller's
entitlement, use and application of the credit. The application
for sale, transfer or assignment of the credit shall include the
transferor's tax credit balance prior to transfer, the credit
certificate number, the name of the seller, the transferor's
remaining tax credit balance after transfer, if any, all tax
identification numbers for both transferor and transferee, the
date of transfer, the amount transferred, a copy of the credit
certificate and any other information required by the film office
or the Tax Commissioner.
(3) The
Tax Commissioner film office shall not approve the
transfer or assignment of a tax credit
to a taxpayer if the
seller or transferor has an outstanding tax obligation with the
State of West Virginia
in connection with any qualified project
for any prior taxable year.
(f) The transferee, assignee or purchaser shall apply such
credits in the same manner and against the same taxes as
the taxpayer eligible company originally awarded the credit specified
in this article.
(g) For purposes of this chapter, any proceeds received by
the eligible company or transferor for its assignment or sale of
the tax credits allowed pursuant to this section are exempt from
the West Virginia consumers sales and service tax and use tax and
from the corporate net income tax and personal income tax.
(h)
Tax credits will be subject to recapture, elimination or
reduction if it is determined by the Tax Commissioner that a
taxpayer was not entitled to the credit, in whole or in part, in
the tax year in which it was claimed by the taxpayer.
Transferors, and transferees of sold, transferred or assigned tax
credits bear joint and several liability for any tax, interest or
penalty resulting from recapture, elimination or reduction of a
credit claimed pursuant to this article. The Tax Commissioner
shall not seek recourse against the transferee for any portion of
the credit that may be subsequently disqualified.
(i) Failure to comply with this section will result in the
disallowance of the tax credit until the
taxpayers seller or
transferor
are is in full compliance.
§11-13X-9. Legislative rules.
(a) The Tax Commissioner shall propose for promulgation
rules pursuant to article three, chapter twenty-nine-a of this
code as may be necessary to carry out the purposes of this
article.
(b) The Secretary of the West Virginia Department of
Commerce may propose for promulgation rules pursuant to article
three, chapter twenty-nine-a of this code as may be necessary to
carry out the purposes of this article.
§11-13X-13. Effective date.
(a) The credit allowed by this article shall be allowed upon
eligible expenditures occurring after December 31, 2007.
(b) The amendments to this article enacted in the year
two
thousand eight 2009 shall apply to all taxable years beginning
after December 31, 2007, and shall apply with retroactive effect
with relation to taxable years beginning prior to the date of
passage of such amendments.
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(NOTE: The purpose of this bill is to amend the West
Virginia Film Industry Investment Act through clarifying
definitions; stating the amount of credit allowed in specified
percentages; clarifying contradictory requirements to claim
credit; clarifying language relating to use of credit and
transfer process; clarifying language to protect transferees;
authorizing issuance of rules by the Secretary of Commerce for
administration of the film credit; and making amendments retroactively applicable to taxable years beginning after
December 31, 2007.
Strike-throughs indicate language that would be stricken
from the present law, and underscoring indicates new language
that would be added.)