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Introduced Version House Bill 3145 History

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Key: Green = existing Code. Red = new code to be enacted
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.
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