H. B. 4684
(By Delegate Palumbo)
[Introduced February 18, 2008; referred to the
Committee on Finance.]
A BILL to amend and reenact §11-13X-3, §11-13X-4, §11-13X-5,
§11-13X-6, §11-13X-7, §11-13X-8, §11-13X-10, §11-13X-11,
§11-13X-12 and §11-13X-13 of the Code of West Virginia, 1931,
as amended, all relating to the West Virginia Film Industry
Investment Act; specifying definitions; restricting
qualification of expenditures to prevent qualification for
more than one credit program; stating the amount of credit
allowed in specified percentages; specifying review and
certification of projects by the film office; specifying
credit limitation and allocation of credit by the film office;
specifying terms to be agreed by an eligible company;
specifying duties of an eligible company upon completion of a
qualified project; specifying forms and information to be
filed by an eligible company with the film office; authorizing
the transfer or sale of excess credits; specifying criteria for recapture, elimination or reduction of credit; specifying
liability of credit transferor and transferee; specifying tax
credit review information to be provided to the Legislature;
specifying disclosure of certain information by the Tax
Commissioner; and making amendments retroactively applicable
to taxable years beginning after the thirty-first day of
December, two thousand seven.
Be it enacted by the Legislature of West Virginia:
That §11-13X-3, §11-13X-4, §11-13X-5, §11-13X-6, §11-13X-7,
§11-13X-8, §11-13X-10, §11-13X-11, §11-13X-12 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
film or audiovisual project" means a "film,"
as defined by this subsection, or videogame intended for commercial
exploitation"
means reasonable intent for public viewing for the
delivery medium used.
(2) "Direct production expenditure" means a transaction that
is subject to taxation occurs in the State of West Virginia
or with
a West Virginia vendor, including and includes:
(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 is subject to West
Virginia income tax on those payments; and
(ii) The performing artist receiving payments from the
personal services corporation
pays 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
film 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
film qualified project
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 engaged in the business of producing film industry
productions.
(4) "Feature length" means in excess of forty minutes.
(4) (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;
(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) "Film industry production" means a qualified project
intended for reasonable national or international commercial
exploitation.
(7) "Film office" means the West Virginia Film Office, which
is a division of the West Virginia Department of Commerce.
(6) (8)
"Postproduction expenditure" means an expenditure a
transaction that occurs in West Virginia or with a West Virginia
vendor after the completion of principal and ongoing photography,
including an expenditure for editing and negative cutting, Foley
recording and sound effects, automatic dialogue replacement (also
known as ADR or dubbing), sound editing, special effects or visual
effects, including computer-generated imagery or other effects,
scoring and music editing, sound 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.
(9) "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 twenty-five thousand dollars
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 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;
(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.
(7) (10)
"Tax Commissioner" means the West Virginia State Tax Commissioner or a
of the State Tax
Commissioner
§11-13X-4. Creation of the tax credit.
(a) 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 incurred in West
Virginia that are directly attributable to the production in West
Virginia of a film or commercial audiovisual product qualified
project and that are subject to taxation by the state of occur in
West Virginia or with a West Virginia vendor; and
(2) Postproduction expenditures made incurred in West Virginia
that are:
(A) Directly attributable to the production of a commercial
film or audiovisual product qualified project;
(B) For services performed in West Virginia. and
(C) Subject to the taxation by the State of West Virginia
(b) Expenditures utilized by an eligible company for purposes
of calculating the tax credit authorized by this article shall in
no event be utilized by the eligible company for the purpose
calculating or qualifying investment for claiming the economic
opportunity tax credit authorized by article thirteen-q of this
chapter or the manufacturing investment tax credit authorized by article thirteen-s of this chapter.
§11-13X-5. Amount of credit allowed; limitation of the credits.
(a) Base allowance. --
(1) The amount of credit 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, 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 two four 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 liability 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 film office in any given taxable West Virginia State
fiscal year. The Tax Commissioner 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 film production eligible 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.
§11-13X-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 qualified project is
a motion picture, contains production credits, the eligible company
shall agree, that the phrase 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
shall appear in the closing credits of the motion picture with
assistance of the West Virginia Film Industry Investment Act";
(2) Apply to the Tax Commissioner film office on forms and in
the manner the commissioner film office may prescribe; and
(3) Submit to the West Virginia development film office
information required by the development film office to demonstrate
conformity with the requirements of this section and shall agree in
writing:
(1) (A) To pay all obligations the film production eligible
company has incurred in West Virginia;
(2) (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 film production eligible company by a specified date;
(3) (C) That outstanding obligations are not waived should a
creditor fail to file by the specified date; and
(4) (D) To delay filing of a claim for the film production tax
credit authorized by this article until the development film office
delivers written notification to the Tax Commissioner that the film
production eligible company has fulfilled all requirements for the
credit.
The development 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 development film 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.
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;
(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 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) (c) If the requirements of this section have been complied
with, the Tax Commissioner 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.
§11-13X-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.
§11-13X-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 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; or
(3) The excess tax credit is transferred or sold.
(c) No carryback to a prior taxable year is allowed 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 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.
(3) The Tax Commissioner 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.
(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.
(i) Failure to comply with this section will result in the disallowance of the tax credit until the taxpayers are in full
compliance.
§11-13X-10. Burden of proof.
The burden of proof is on the film production eligible company
claiming the credit allowed by this article to establish by clear
and convincing evidence that the film production eligible company
or credit transferee is entitled to the amount of credit asserted
for the taxable year.
§11-13X-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 film office 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 dollar amount of tax credit certificates issued to
taxpayers;
(3) The number of new businesses created by the tax credit;
(2) (4)
The number of new jobs, if any, created by the tax credit;
(5) The amount of direct expenditures made on qualified
projects; and
(3) (6)
The cost of the credit.
(b) Eligible production companies claiming the credit shall
provide any information the Tax Commissioner and the film office
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. However, notwithstanding the provisions of section five-d
and five-s, article ten of this chapter, the Tax Department is
hereby authorized to disclose to the film office and to the
Development Office such tax information as may be necessary to
compile the report required by this section and the report required
by section twelve of this article.
§11-13X-12. Economic development.
The West Virginia 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.
§11-13X-13. Effective date.
(a) The credit allowed by this article shall be allowed upon
eligible expenditures occurring after the thirty-first day of
December, two thousand seven.
(b) The amendments to this article enacted in the year two
thousand eight shall apply to all taxable years beginning after the
thirty-first day of December, two thousand seven, and shall apply
with retroactive effect with relation to taxable years beginning
prior to the date of passage of such amendments.
NOTE: The purpose of the bill is to amend the West Virginia
Film Industry Investment Act through clarifying definitions;
restricting double use of expenditures for different credits;
clarifying the application of the credits; requiring certification
of eligibility by the West Virginia Film Office, providing further
clarification of the information to be filed by an eligible
company; authorizing the transfer or sale of credits; expanding the
tax credit review information to be provided to the Legislature;
and making the amendments to the article applicable to all taxable
years beginning after the thirty-first day of December, two
thousand seven.
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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