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ENROLLED
COMMITTEE SUBSTITUTE
FOR
H. B. 3145
(By Delegates Palumbo, Webster, Cann, Amores,
Doyle, DeLong and White)
[Passed March 10, 2007; in effect ninety days from passage.]
AN ACT
to amend the Code of West Virginia, 1931, as amended, by
adding thereto a new article, designated §11-13W-1, §11-13W-2,
§11-13W-3, §11-13W-4, §11-13W-5, §11-13W-6, §11-13W-7,
§11-13W-8, §11-13W-9, §11-13W-10, §11-13W-11, §11-13W-12 and
§11-13W-13, all relating to activities of the film industry in
West Virginia; creating a tax credit on direct production and
post production expenditures directly related to the
production of film or commercial audiovisual products;
requiring approval of the West Virginia development office;
and providing for reports of the cost effectiveness of the
credits and recommendations for the expansion of the film
industry in West Virginia.
Be it enacted by the Legislature of West Virginia:
That the Code of West Virginia, 1931, as amended, be amended
thereto a new article, designated §11-13W-1, §11-13W-2, §11-13W-3,
§11-13W-4, §11-13W-5, §11-13W-6, §11-13W-7, §11-13W-8, §11-13W-9,
§11-13W-10, §11-13W-11, §11-13W-12 and §11-13W-13, all to read as follows:
ARTICLE 13W. WEST VIRGINIA FILM INDUSTRY INVESTMENT ACT
§11-13W-1. Short title.
This article may be cited as the "West Virginia Film Industry
Investment Act."
§11-13W-2. Legislative findings and purpose.
The legislature finds that the encouragement of economic
growth through the production of motion pictures and other
commercial film or audiovisual projects in this state is in the
public interest and promotes the general welfare of the people of
this state. In order to encourage greater economic growth and
development in this state, there is hereby enacted the West
Virginia film industry investment act.
§11-13W-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 film or audiovisual project" means a "film,"
as defined by this subsection, or videogame intended for commercial
exploitation.
(2) "Direct production expenditure" means a transaction that
is subject to taxation in the state of West Virginia, including:
(A) Payment of wages, fringe benefits or fees for talent,
management, or labor to a person who is a resident of West
Virginia;
(B) Payment to a personal services corporation for the
services of a performing artist if:
(i) The personal services corporation pays West Virginia
income tax on those payments; and
(ii) The performing artist receiving payments from the
personal services corporation pays West Virginia income tax; and
(C) Any of the following provided by a vendor:
(i) The story and scenario to be used by a film;
(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 film in accordance with
generally accepted entertainment industry practices.
(3) "Eligible film production company" means a person or business entity that produces one or more "films" as defined by
this subsection.
(4) "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;
(5) "Film" means any single media or multimedia program,
excluding advertising messages other than national advertising
messages intended for exhibition, 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 a provision of
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; and
(E) Is intended for reasonable commercial exploitation for the
delivery medium used.
(6) "Postproduction expenditure" means an expenditure that
occurs after the completion of principal and ongoing photography,
including an expenditure for editing, Foley recording, automatic
dialogue replacement, sound editing, special effects, including
computer-generated imagery or other effects, scoring and music
editing, beginning and end credits, negative cutting, soundtrack
production, dubbing, subtitling or addition of sound or visual
effects; but not including an expenditure for advertising, marketing, distribution or expense payments.
(7) "Tax commissioner" means the state tax commissioner or a
designee of the state tax commissioner.
§11-13W-4. Creation of the tax credit.
An eligible film production company may apply for, and the tax
commissioner shall allow, a nonrefundable tax credit in an amount
equal to the percentage specified in section five of this article
of:
(1) Direct production expenditures made in West Virginia that
are directly attributable to the production in West Virginia of a
film or commercial audiovisual product and that are subject to
taxation by the state of West Virginia; and
(2) Postproduction expenditures made in West Virginia that
are:
(A) Directly attributable to the production of a commercial
film or audiovisual product;
(B) For services performed in West Virginia; and
(C) Subject to the taxation by the state of West Virginia.
§11-13W-5. Amount of credit allowed; limitation of the credits.
(a) Base allowance. - (1) The amount allowed to every eligible
film production company, except as provided in subsection (b) of
this section, shall be twenty-two percent; and
(2) For taxable years beginning prior to the first day of
January, two thousand ten, an additional five percent.
(b) Extra allowance for hiring of local workers. -- Any amount allowed in subsection (a) of this section shall be increased by:
(1) An additional two percent if the eligible film production
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.
(2) An additional two percent above the credit allowed under
paragraph (1) of this subsection if at least twenty-five percent
the full-time workforce of the eligible film production company, or
its authorized payroll service company, is comprised of residents
of West Virginia.
(c) Application of the credits. - The tax credit allowed under
this section shall be applied to the eligible production company's
state tax burden as provided in section seven of this article.
(d) Limitation of the credits. - No more than ten million
dollars of the tax credits shall be allocated by the tax
commissioner in any given taxable year. The tax commissioner shall
allocate the tax credits in the order the applications therefor are
received.
(e) The additional five percent tax credit amount pursuant to
subdivision (2), subsection (a) of this section shall not be
available with respect to expenditures attributable to a production
for which the film production company receives a tax credit
pursuant to the federal new markets tax credit program.
(f) The film production tax credit shall not be claimed with
respect to direct production expenditures or postproduction
expenditures for which the film production company has claimed an exemption from taxation pursuant to article fifteen or article
fifteen-a of this chapter.
§11-13W-6. Requirements for credit.
(a) In order for any eligible film production company to claim
a tax credit under this article, it shall comply with the following
requirements:
(1) If the commercial film or audiovisual project is a motion
picture, agree that the phrase "filmed in West Virginia" shall
appear in the closing credits of the motion picture;
(2) Apply to the tax commissioner on forms and in the manner
the commissioner may prescribe; and
(3) Submit to the West Virginia development office information
required by the development office to demonstrate conformity with
the requirements of this section and shall agree in writing:
(1) To pay all obligations the film production company has
incurred in West Virginia;
(2) 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 has taken place to notify the
public of the need to file creditor claims against the film
production company by a specified date;
(3) That outstanding obligations are not waived should a
creditor fail to file by the specified date; and
(4) To delay filing of a claim for the film production tax
credit until the development office delivers written notification
to the tax commissioner that the film production company has fulfilled all requirements for the credit.
The development office shall determine the eligibility of the
company and shall report this information to the tax commissioner
in a manner and at times the development office and the tax
commissioner shall agree upon.
(b) The application to the tax commissioner shall include a
certificate of the amount of direct production expenditures or post
production expenditures made in West Virginia for which the film
production company is seeking the film production tax credit.
(c) If the eligible film production company is claiming a film
tax credit under subsection (b), section five of this article, the
eligible film production company shall also provide to the tax
commissioner a list of the names and social security numbers of all
West Virginia residents employed full time or hired as apprentices
in the state on the commercial film or audiovisual project for
which the film tax credit is being sought.
(d) If the requirements of this section have been complied
with, the tax commissioner shall approve the film tax credit and
issue a document granting the appropriate tax credit.
§11-13W-7. Application of credit to state taxes.
(a) Credit allowed. -- Beginning in the taxable year that the
expenditures permitted under section four of this article are
incurred, eligible film production companies and owners of eligible
film production companies, as described in subsection (d) of this
section, are permitted a credit, as described in section five of
this article, against the taxes imposed by articles twenty-three, twenty-four and twenty-one of this chapter, in that order, as
specified in this section.
(b) Business franchise tax. -- The credit is first applied to
reduce the taxes imposed by article twenty-three of this chapter
for the taxable year, determined after application of the credits
against tax provided in section seventeen of said article, but
before application of any other allowable credits against tax.
(c) Corporation net income taxes. -- After application of
subsection (b) of this section, any unused credit is next applied
to reduce the taxes imposed by article twenty-four of this chapter
for the taxable year, determined before application of allowable
credits against tax.
(d) Personal income tax. -- (1) If the eligible taxpayer is an
electing small business corporation (as defined in section 1361 of
the United States Internal Revenue Code of 1986, as amended), a
partnership, a limited liability company that is treated as a
partnership for federal income tax purposes or a sole
proprietorship, then any unused credit, after application of
subsections (b) and (c) of this subsection, is allowed as a credit
against the taxes imposed by article twenty-one of this chapter on
the income from business or other activity subject to tax under
article twenty-three of this chapter or on income of a sole
proprietor attributable to the business.
(2) Electing small business corporations, limited liability
companies, partnerships and other unincorporated organizations
shall allocate the credit allowed by this article among its members in the same manner as profits and losses are allocated for the
taxable year.
§11-13W-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 subsections
(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; or
(2) The expiration of the second taxable year after the
taxable year in which the expenditures occurred. The tax credit
remaining thereafter is forfeited.
(c) No carryback to a prior taxable year is allowed for the
amount of any unused portion of any annual credit allowance.
§11-13W-9. Legislative rules.
The tax commissioner shall propose for promulgation rules
pursuant to the provisions of article three, chapter twenty-nine-a
of this code, as may be necessary to carry out the purposes of this
article.
§11-13W-10. Burden of proof.
The burden of proof is on the film production company claiming
the credit allowed by this article to establish by clear and
convincing evidence that the film production company is entitled to
the amount of credit asserted for the taxable year.
§11-13W-11. Tax credit review and accountability.
(a) Beginning on the first day of the third taxable year after
the passage of this article and every two years thereafter, the tax
commissioner shall submit to the governor, the president of the
Senate and the speaker of the House of Delegates a tax credit
review and accountability report evaluating the cost effectiveness
of the film industry investment act during the most recent two-year
period for which information is available. The criteria to be
evaluated shall include, but not limited to, for each year of the
two-year period:
(1) The number of eligible production companies claiming the
credit;
(2) The number of new jobs, if any, created by the tax credit;
and
(3) The cost of the credit.
(b) Eligible production companies claiming the credit shall
provide any information the tax commissioner may require to prepare
the report: Provided, That the information provided is subject to
the confidentiality and disclosure provisions of section five-d and
five-s, article ten of this chapter.
§11-13W-12. Economic Development.
The development office, in consultation and coordination with
the appropriate public and private entities, shall promote, foster,
encourage and monitor the development of the film industry in this
state as part of its comprehensive economic development strategy
for West Virginia and report recommendations for expanding the
industry in the state to the Governor and the Joint Committee on
Government and Finance annually on or before the first day of
December.
§11-13W-13. Effective date.
The credit allowed by this article shall be allowed upon
eligible expenditures occurring after the thirty-first day of
December, two thousand seven.