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ARIZONA HOUSE OF REPRESENTATIVESFifty-fifth Legislature Second Regular Session |
Senate: APPROP DPA 9-1-0-0 | 3rd Read 21-7-2-0 |
SB 1708: motion picture production; tax credits
Sponsor: Senator Gowan, LD 14
Caucus & COW
Overview
Requires the Arizona Commerce Authority (ACA) to implement an Arizona Motion Picture Production Program (Program). Establishes individual and corporate tax credits for motion picture production costs.
History
The ACA manages Arizona's economic and workforce development programs and projects (A.R.S. § 41-1502). One responsibility of the ACA is to administer applications and grant preapprovals for various tax credits, including the tax credit for increased research activity and the qualified facility income tax credit (A.R.S. §§ 41-1507, 41-1512).
The Arizona Department of Revenue (ADOR) administers and enforces the collection of individual income and corporate income taxes, along with other taxes (A.R.S. § 42-1004). For the individual income tax, taxable income is the Arizona adjusted gross income minus any allowed deductions. A tax credit is then applied to reduce the final amount of tax owed (A.R.S. § 43-1001). For the corporate income tax, tax credits are also applied to reduce the final amount of tax owed, based on the Arizona taxable income (A.R.S. § 43-1101).
Provisions
Program Administration
1.
Directs the ACA to implement the Program
and certify motion picture production companies for the purpose of the motion
picture production cost tax credits. (Sec. 1)
2. Establishes qualification requirements for the Program, including:
a) Either:
i. Using a qualified production facilities in Arizona to produce the film; or
ii. For a production filmed primarily at a practical location, performing all preproduction, postproduction and editing at an industry standard facility in Arizona;
b) Maintaining the production company's production labor positions in Arizona;
c) Including an acknowledgement that the production was filmed in Arizona in the credits of each production;
d) Submitting a completed application; and
e) Providing supporting records requested by the ACA. (Sec. 1)
3. Prescribes contents of the form set by the ACA for an application for certification. (Sec. 1)
4. Instructs the ACA to establish procedures for the review of completed applications and certification and preapproval of tax credits. (Sec. 1)
5. Directs the ACA to deny an application if it determines the motion picture does not meet the established criteria, is obscene, violates obscenity laws or would constitute sexual exploitation of a minor. (Sec. 1)
6. Sets the maximum amount of tax credits that may be approved by the ACA at $150,000,000 in any calendar year. (Sec. 1)
7. Allows up to $25,000,000 of the total maximum to be for a production filmed primarily at a practical location and all preproduction, postproduction and editing is done at an industry standard facility in Arizona. (Sec. 1)
8. Provides for the treatment of information gathered from motion picture production companies as confidential taxpayer information. (Sec. 1)
9. Authorizes the ACA to adopt fees, rules and forms necessary to administer the Program. (Sec. 1)
10. Establishes annual reporting requirements for the ACA to submit and outlines information that must be included in the annual report. (Sec. 1)
11. Requires an audit of the Program by the ACA at least every five years, beginning on the fifth year after the first preapproval letter is issued. (Sec. 1)
12. States that the ACA shall make a recommendation to the Legislature whether to repeal the Program in its audit on the twentieth year after the first audit. (Sec. 1)
Related Tax Provisions
13. Allows the disclosure of confidential taxpayer information to the ACA for its annual reporting responsibility and certifying applicants for the tax credits for motion picture production costs. (Sec. 3)
14. Adds the tax credits for motion picture production costs to the Joint Legislative Income Tax Credit Review Committee's schedule for years ending in 2 and 7. (Sec. 4)
15. Adds, to Arizona adjusted gross income, the amount of any motion picture production costs that were deducted under the federal Internal Revenue Code for which a tax credit was claimed under state law. (Sec. 5 and 7)
Tax Credits for Motion Picture Production Costs
16. Creates an individual and a corporate income tax credit for motion picture production costs, with the amount of the credit equal to a percentage of the total amount of approved, qualified production costs:
a) 15%, when the motion picture production company spends up to $10,000,000;
b) 17.5%, when the motion picture production company spends between $10,000,000 and $35,000,000; and
c) 20%, when the motion picture production company spends more than $35,000,000. (Sec. 6 and 8)
17. Allows an additional tax credit equal to 2.5% of the motion picture production company's production labor costs. (Sec. 6 and 8)
18. Grants an additional tax credit equal to 2.5% of the total amount of qualified production costs, if the motion picture production company either:
a) Uses a qualified production facility in Arizona to produce the motion picture production; or
b) Films primarily at a practical location in Arizona and performs all preproduction, postproduction and editing at a qualified production facility in Arizona. (Sec. 6 and 8)
19. Provides an additional tax credit equal to 2.5% of qualified production costs if the motion picture production is made in association with a long-term tenant of a qualified production facility. (Sec. 6 and 8)
20. Sets the tax credit qualifications based on preapproval and postapproval by the ACA. (Sec. 6 and 8)
21. Establishes procedures for the pro rata sharing of the tax credit to co-owners of a motion picture production company, except that total of tax credits may not exceed the amount that would have been allowed to a sole owner. (Sec. 6 and 8)
22. Requires the amount of the allowable tax credit which exceeds owed income taxes to be paid to the taxpayer within 180 days after receiving a notice of postapproval by the ACA. (Sec. 6 and 8)
23. Directs ADOR to maintain data on the total amount of motion picture production cost tax credits and provide the data to ACA on request. (Sec. 6 and 8)
24. Authorizes ADOR to adopt fees, rules and forms necessary to administer the tax credits. (Sec. 6 and 8)
25. States the motion picture production cost tax credit is in place of any allowance of a deduction allowed by the federal Internal Revenue Code. (Sec. 6 and 8)
Miscellaneous
26. Exempts the ACA and ADOR from rulemaking requirements for one year. (Sec. 9)
27. Contains a purpose statement. (Sec. 10)
28. Defines relevant terms. (Sec. 1, 6 and 8)
29. Makes technical and conforming changes. (Sec. 2, 3 and 5)
Amendments
Committee on Appropriations
1. Requires the annual report to include a third-party review of the relative benefits to the state, based on specified analyses.
2. Adds an intent clause.
3.
4.
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6. SB 1708
7. Initials AF Page 0 Caucus & COW
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