Introduced by Representative Masland of Thetford
Subject: Taxation; income tax; film production investment tax credit
Statement of purpose: This bill proposes to provide an income tax credit for investment in film production.
AN ACT RELATING TO INCOME TAX FILM PRODUCTION INVESTMENT CREDIT
It is hereby enacted by the General Assembly of the State of Vermont:
Sec. 1. 32 V.S.A. § 5930z is added to read:
§ 5930z. Income Tax Credit for Investment in Film
(a) Definitions. For the purposes of this section:
(1) “Base investment” means the actual investment made and expended as direct production-related costs by a state-certified production in the state.
(2) “Domiciled in Vermont” means a corporation incorporated in Vermont or a partnership, limited liability company, or other business entity domiciled and headquartered in Vermont for the purpose of producing motion pictures as defined in this section, or an individual who maintains a permanent place of abode within the state and spends in the aggregate more than six months of each year within the state.
(3) “Motion picture” means a feature-length film, video, video games, television series, or commercial made in Vermont, in whole or in part, for theatrical or television viewing or as a television pilot. The term “motion picture” shall not include the production of television coverage of news or athletic events, nor shall it apply to any film, video, television series or commercial or a production for which records are required under 18 U.S.C. § 2257, to be maintained with respect to any performer in such production or reporting of books or films or other media, with respect to sexually explicit conduct.
(4) “Motion picture production company” means a company engaged in the business of producing motion pictures as defined in this section. Motion picture production company shall not mean or include any company owned, affiliated, or controlled, in whole or in part by any company or person which is in default on taxes owed to the state or on a loan made by the state or a loan guaranteed by the state, nor any company or person who has ever declared bankruptcy under which an obligation of the company or person to pay or repay public funds or monies was discharged as a part of such bankruptcy.
(5) “State-certified production” means a motion picture production approved by the Vermont film commission and produced by a motion picture production company domiciled and headquartered in Vermont, which has signed a viable distribution plan with either a major theatrical exhibitor, a television network or a cable television program.
(b) Investor tax credit; specific projects.
(1) There is hereby authorized a tax credit against state income tax imposed under this chapter for taxpayers other than motion picture production companies domiciled in the state of Vermont. The tax credit shall be earned by investors at the time of such investment in such state-certified productions and calculated as a percentage of the investment according to the total base investment dollars certified per project. The credit shall be nontransferable and earned in the taxable year in which the investment is certified.
(A) For state-certified productions approved by the Vermont film commission, if total base investment is greater than $300,000.00 and less than or equal to $5,000,000.00, each taxpayer shall be allowed a tax credit of 15 percent of the actual investment made by that taxpayer.
(B) For state-certified productions approved by the Vermont film commission, if the total base investment is greater than $5,000,000.00, each taxpayer shall be allowed a tax credit of 25 percent of the investment made by that taxpayer.
(C) Motion picture investor tax credits associated with a state‑certified production may not exceed the total base investment in that production.
(D) The credit shall be allowed against the income tax for the taxable period in which the credit is earned or can be carried forward for not more than three succeeding tax years.
(2) Application of the credit.
(A) All entities taxed as corporations for Vermont income tax purposes shall claim any credit allowed under this chapter on their corporation income tax return.
(B) Individuals shall claim any credit allowed under this chapter on their individual income tax return.
(C) Entities not taxed as corporations shall claim any credit allowed under this chapter on the returns of the partners, members, or S corporation shareholders as follows:
(i) Corporate partners or members shall claim their share of the credit on their corporation income tax returns.
(ii) Individual partners or members or S corporation shareholders shall claim their share of the credit on their individual income tax returns.
(iii) Partners or members that are estates or trusts shall claim their share of the credit on their fiduciary income tax returns.
(c) Motion picture production company tax credit.
(1) A motion picture production company shall be allowed a credit to be computed as provided in this chapter against a tax imposed under this chapter. The amount of the credit shall be 25 percent of the state‑certified production costs incurred within the state, provided that the primary locations are within the state of Vermont, and the total production budget as defined herein is a minimum of $300,000.00.
(2) For the purposes of this section, “total production budget” is defined as a preproduction cost, including the purchase of the screenplay, salaries, equipment, film processing, sound, editing, and other services related to a production filmed in Vermont. The budget shall not include costs associated with the promotion or marketing of the film, video, or television product.
(3) The credit shall not exceed the total production budget and shall be allowed against the income tax for the taxable period in which the credit is earned or can be carried forward for not more than three succeeding tax years.
(d) Certification and administration.
(1) The director of the Vermont film commission shall determine through the promulgation of rules what projects qualify according to this chapter.
(2) The Vermont film commission shall submit its initial certification of a project as a state-certified production to investors and to the commissioner of taxes. The initial certification shall include a unique identifying number for each state-certified production.
(3) Upon completion of the state-certified production, the Vermont film commission shall review the production expenses and will issue a credit certificate to the investors. The certificate shall include the identifying number assigned to that state-certified production in the initial certification.
(4) The tax commissioner, in consultation with the director of
the Vermont film commission shall promulgate such rules and regulations as are necessary to carry out the intent and purposes of this section.
(5) Any taxpayer applying for the credit shall be required to reimburse the department of taxes for any audits the commissioner determines are required in relation to granting the credit.
(e) Recapture of credits. If the Vermont film commission finds that funds for which an investor received credits according to this section are not invested in and expended with respect to a state-certified production within 24 months of the date that such credits are earned, the investor’s state income tax for such taxable period shall be increased by such amount necessary for the recapture of credit provided by this section.
(f) Recovery of credits by department of taxes.
(1) Credits previously granted to a taxpayer, but later disallowed, may be recovered by the commissioner of taxes through any collection remedy authorized and initiated within three years from December 31 of the year in which the 24‑month investment period specified in this chapter ends.
(2) The only interest that may be assessed and collected on recovered credits is interest at a rate three percentage points above the rate provided in section 3202 of this title, which shall be computed from the original due date of the return on which the credit was taken.
(3) The provisions of this section are in addition to and shall not limit the authority of the commissioner of taxes to assess or to collect under any other provision of law.
(g) Transferability of the credit.
(1) Any motion picture production company tax credit with respect to a state‑certified production allocated to a company and not previously claimed by any taxpayer against its income tax may be transferred or sold by such company to another Vermont taxpayer, subject to the following conditions:
(A) A single transfer or sale may involve one or more transferees. The transferee of the investor tax credits may transfer or sell such investor tax credits subject to the conditions of this section.
(B) Transferors and transferees shall submit to the Vermont film commission and to the commissioner of taxes in writing a notification of any transfer or sale of tax credits within 30 days after the transfer or sale of such tax credits. The notification shall include the transferor’s tax credit balance prior to transfer, the credit certificate number, the name of the state-certified production, the transferor’s remaining tax credit balance after transfer, all tax identification numbers for both transferor and transferee, the date of transfer, the amount transferred, a copy of the credit certificate, a certification and opinion by a certified public accountant as to the validity of the credit, and any other information required by the Vermont film commission or the department of taxes. The notification submitted to the department of taxes shall include a processing fee of up to $200.00 per transferee.
(2) Failure to comply with this section will result in the disallowance of the tax credit until the taxpayers are in full compliance.
(3) 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 earned.
(4) To the extent that the transferor did not have rights to claim or use the credit at the time of the transfer, the department of taxes shall either disallow the credit claimed by the transferee or recapture the credit from the transferee through any collection method authorized by Vermont law. The transferee’s recourse is against the transferor.
(5) The transferee shall apply such credits in the same manner and against the same taxes as the taxpayer originally awarded the credit.
(h) Disclaimer. The state of Vermont reserves the right to refuse the use of Vermont’s name in credits of any motion picture filmed or produced in the state.
(i) Film production tax credit. A taxpayer shall be allowed a credit, to be computed as provided in this section, against the tax imposed by this chapter. The amount of the credit shall be 25 percent of the total production budget for investments qualifying under this chapter for a film production business which:
(1) is located within the state of Vermont;
(2) has primary locations for the film production within the state of Vermont; and
(3) has a total production budget with a minimum of $300,000.00 but does not exceed $5,000,000.00. “Film production” is defined as the creation of a film, documentary, direct-to-video or independent television production sold for commercial distribution. For the purposes of this section, “total production budget” is defined as a preproduction cost, including the purchase of the screenplay, salaries, equipment, film processing, sound, editing, and other services related to production. The budget shall not include costs associated with the promotion or marketing of the film, video, or television product. Any cost overruns on the project shall also not be included in the total production budget.
(j) The Vermont film commission shall establish specific guidelines together with a certification process that shall govern the selection and evaluation of film projects that are eligible for investment tax credits.
Sec. 2. EFFECTIVE DATE
This act shall take effect upon passage and shall apply to any production certified by the Vermont film commission on or after January 1, 2006.
The Vermont General Assembly
115 State Street