2012 -- S 3002

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LC02673

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STATE OF RHODE ISLAND

IN GENERAL ASSEMBLY

JANUARY SESSION, A.D. 2012

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A N A C T

RELATING TO TAXATION

     Introduced By: Senator Daniel DaPonte

     Date Introduced: May 24, 2012

     Referred To: Senate Finance

It is enacted by the General Assembly as follows:

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     SECTION 1. Sections 44-31.2-2, 44-31.2-5 and 44-31.2-6 of the General Laws in

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Chapter 44-31.2 entitled "Motion Picture Production Tax Credits" are hereby amended to read as

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follows:

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     44-31.2-2. Definitions. -- For the purposes of this chapter:

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      (1) "Accountant's certification" as provided in this chapter means a certified audit by a

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Rhode Island certified public accountant licensed in accordance with section 5-3.1.

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      (2) "Base investment" means the actual investment made and expended by a state-

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certified production in the state as production-related costs.

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      (3) "Domiciled in Rhode Island" means a corporation incorporated in Rhode Island or a

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partnership, limited liability company, or other business entity formed under the laws of the state

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of Rhode Island for the purpose of producing motion pictures as defined in this section, or an

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individual who is a domiciled resident of the state of Rhode Island as defined in chapter 30 of this

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title.

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      (4) "Motion picture" means a feature-length film, video, video games, television series,

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or commercial made in Rhode Island, in whole or in part, for theatrical or television viewing or as

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a television pilot. The term "motion picture" shall not include the production of television

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coverage of news or athletic events, nor shall it apply to any film, video, television series or

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commercial or a production for which records are required under section 2257 of title 18, U.S.C.,

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to be maintained with respect to any performer in such production or reporting of books, films,

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etc. with respect to sexually explicit conduct.

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      (5) "Motion picture production company" means a corporation, partnership, limited

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liability company or other business entity engaged in the business of producing one or more

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motion pictures as defined in this section. Motion picture production company shall not mean or

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include: (a) any company owned, affiliated, or controlled, in whole or in part by any company or

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person which is in default: (i) on taxes owed to the state; or (ii) on a loan made by the state in the

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application year; or (iii) on a loan guaranteed by the state in the application year; nor (iv) any

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company or person who has even declared bankruptcy under which an obligation of the company

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or person to pay or repay public funds or monies was discharged as a part of such bankruptcy.

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      (6) "Primary locations" means the locations within which at least fifty-one percent (51%)

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of the motion picture principal photography days are filmed.

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      (7) "Rhode Island film and television office" means an office within the Rhode Island

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state council on the arts that has been established in order to promote and encourage the locating

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of film and television productions within the state of Rhode Island. The office is also referred to

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within as the "film office".

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      (8) "State-certified production" means a motion picture production approved by the

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Rhode Island film office and produced by a motion picture production company domiciled in

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Rhode Island, whether or not such company owns or controls the copyright and distribution rights

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in the motion picture; provided, that such company has either: (a) signed a viable distribution

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plan; or (b) is producing the motion picture for: (i) a major motion picture distributor; (ii) a major

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theatrical exhibitor; (iii) television network; or (iv) cable television programmer.

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      (9) "State certified production cost" means any pre-production, production and post-

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production cost that a motion picture production company incurs and pays to the extent it occurs

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within the state of Rhode Island. Without limiting the generality of the foregoing, "state certified

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production costs" include: set construction and operation; wardrobes, make-up, accessories, and

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related services; costs associated with photography and sound synchronization, lighting, and

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related services and materials; editing and related services, including, but not limited to, film

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processing, transfers of film to tape or digital format, sound mixing, computer graphics services,

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special effects services, and animation services, salary, wages, and other compensation, including

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related benefits, of persons employed, either director or indirectly, in the production of a film

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including writer, motion picture director, producer (provided the work is performed in the state of

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Rhode Island); rental of facilities and equipment used in Rhode Island; leasing of vehicles; costs

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of food and lodging; music, if performed, composed, or recorded by a Rhode Island musician, or

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released or published by a person domiciled in Rhode Island; travel expenses incurred to bring

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persons employed, either directly or indirectly, in the production of the motion picture, to Rhode

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Island (but not expenses of such persons departing from Rhode Island); and legal (but not the

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expense of a completion bond or insurance and accounting fees and expenses related to the

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production's activities in Rhode Island); provided such services are provided by Rhode Island

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licensed attorneys or accountants.

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     (10) “Application year” shall mean within the calendar year the motion picture

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production company files an application for the film tax credit.

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     44-31.2-5. Motion picture production company tax credit. -- (a) A motion picture

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production company shall be allowed a credit to be computed as provided in this chapter against a

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tax imposed by chapters 11, 14, 17 and 30 of this title. The amount of the credit shall be twenty-

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five percent (25%) of the state certified production costs incurred directly attributable to activity

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within the state, provided that the primary locations are within the state of Rhode Island and the

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total production budget as defined herein is a minimum of three hundred thousand dollars

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($300,000). The credit shall be earned in the taxable year in which production in Rhode Island is

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completed, as determined by the film office in final certification pursuant to subsection 44-31.2-

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6(c).

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      (b) For the purposes of this section: "total production budget" means and includes the

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motion picture production company's pre-production, production and post-production costs

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incurred for the production activities of the motion picture production company in Rhode Island

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in connection with the production of a state-certified production. The budget shall not include

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costs associated with the promotion or marketing of the film, video or television product.

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      (c) The Notwithstanding subsection (a), the credit shall not exceed the total production

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budget five million dollars ($5,000,000) and shall be allowed against the tax for the taxable

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period in which the credit is earned and can be carried forward for not more than three (3)

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succeeding tax years. Pursuant to rules promulgated by the tax administrator, the administrator

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may issue a waiver of the five million dollar ($5,000,000) tax credit cap for any feature-length

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film or television series up to the remaining funds available pursuant to subsection (e).

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      (d) Credits allowed to a motion picture production company, which is a subchapter S

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corporation, partnership, or a limited liability company that is taxed as a partnership, shall be

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passed through respectively to persons designated as partners, members or owners on a pro rata

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basis or pursuant to an executed agreement among such persons designated as subchapter S

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corporation shareholders, partners, or members documenting an alternate distribution method

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without regard to their sharing of other tax or economic attributes of such entity.

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      (e) No more than fifteen million dollars ($15,000,000) may be issued for any tax year

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beginning after December 31, 2007.

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     44-31.2-6. Certification and administration. -- (a) Initial certification of a production. -

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The applicant shall properly prepare, sign and submit to the film office an application for initial

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certification of the Rhode Island production. The application shall include such information and

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data as the film office deems necessary for the proper evaluation and administration of said

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application, including, but not limited to, any information about the motion picture production

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company, and a specific Rhode Island motion picture. The film office shall review the completed

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application and determine whether it meets the requisite criteria and qualifications for the initial

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certification for the production. If the initial certification is granted, the film office shall issue a

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notice of initial certification of the motion picture production to the motion picture production

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company and to the tax administrator. The notice shall state that, after appropriate review, the

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initial application meets the appropriate criteria for conditional eligibility. The notice of initial

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certification will provide a unique identification number for the production and is only a

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statement of conditional eligibility for the production and, as such, does not grant or convey any

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Rhode Island tax benefits.

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      (b) Final certification of a production. - Upon completion of the Rhode Island production

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activities, the applicant shall request a certificate of good standing from the Rhode Island division

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of taxation. The division shall expedite the process for reviewing the issuance of such certificates.

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Such certificates shall verify to the film office the motion picture production company's

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compliance with the requirements of subsection 44-31.2-2(5). The applicant shall properly

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prepare, sign and submit to the film office an application for final certification of the production

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and which must include the certificate of good standing from the division of taxation. In addition,

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the application shall contain such information and data as the film office determines is necessary

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for the proper evaluation and administration, including, but not limited to, any information about

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the motion picture production company, its investors and information about the production

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previously granted initial certification. The final application shall also contain a cost report and an

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"accountant's certification". The film office and tax administrator may rely without independent

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investigation, upon the accountant's certification, in the form of an opinion, confirming the

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accuracy of the information included in the cost report. Upon review of a duly completed and

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filed application, the film office will make a determination pertaining to the final certification of

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the production and the resultant credits for section 44-31.2-5.

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      (c) Final certification and credits. - Upon determination that the motion picture

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production company qualifies for final certification and the resultant credits, the film office shall

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issue a letter to the production company indicating "certificate of completion of a state certified

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production" and shall provide specifically designed certificates for the motion picture production

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company credit under section 44-31.2-5. A motion picture production company is prohibited from

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using state funds, state loans or state guaranteed loans to qualify for the motion picture production

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tax credit. All documents that are issued by the film office pursuant to this section shall reference

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the identification number that was issued to the production as part of its initial certification.

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      (d) The director of the Rhode Island film and television office, in consultation as needed

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with the tax administrator, shall promulgate such rules and regulations as are necessary to carry

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out the intent and purposes of this chapter in accordance with the general guidelines provided

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herein for the certification of the production and the resultant production credit.

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      (d)(e) The tax administrator of the division of taxation, in consultation with the director

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of the Rhode Island film and television office, shall promulgate such rules and regulations as are

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necessary to carry out the intent and purposes of this chapter in accordance with the general

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guidelines for the tax credit provided herein.

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      (e)(f) Any motion picture production company applying for the credit shall be required

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to reimburse the division of taxation for any audits required in relation to granting the credit.

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     SECTION 2. Section 42-75-12 of the General Laws in Chapter 42-75 entitled "Council

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on the Arts" is hereby amended to read as follows:

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     42-75-12. Rhode Island film and television office. -- Within the commission division of

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taxation there is established a separate, distinct office entitled the "Rhode Island film and

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television office." This office is established in order to promote and encourage film and television

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productions within the state of Rhode Island. This office is also responsible for the review of

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applications of motion picture productions pursuant to the requirements of chapter 31.2 of title

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44.

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     SECTION 3. This act shall take effect upon passage.

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LC02673

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EXPLANATION

BY THE LEGISLATIVE COUNCIL

OF

A N A C T

RELATING TO TAXATION

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     This act would amend certain provisions relative to motion picture production tax credits

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and funds which may be used to qualify for the credit.

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     This act would take effect upon passage.

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LC02673

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