H. B. 3145
(By Delegates Palumbo, Webster, Cann, Amores, Doyle, DeLong and
White)
[Introduced February 21, 2007; referred to the
Committee on Finance.]
A BILL 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, 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 a report of the cost effectiveness of the
credits.
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, 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 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 or regional
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 tax credit in an amount equal to the percentage specified in subsection five of this section 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 January 1, 2010, 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 (b) 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 subsections
(d) and (f) 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. Unused credit; credit sale; carry forward; expiration
of credit.
If any credit remains after application of the credit against tax for any taxable year under this article, the excess
shall be refunded to the eligible film production company.
§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. Effective date.
The credit allowed by this article shall be allowed upon
eligible expenditures occurring on or after the thirty-first day
of December, two thousand seven.
Note: The purpose of the bill is to create a tax credit on
expenditures directly related to the production of film or
commercials upon approval of the West Virginia Development
Office.
Strike-throughs indicate language that would be stricken
from the present law, and underscoring indicates new language
that would be added.