2016 -- S 2745

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LC005424

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     STATE OF RHODE ISLAND

IN GENERAL ASSEMBLY

JANUARY SESSION, A.D. 2016

____________

A N   A C T

RELATING TO TAXATION - MOTION PICTURE PRODUCTION TAX CREDITS

     Introduced By: Senators Miller, Lynch Prata, Ruggerio, and Pearson

     Date Introduced: March 10, 2016

     Referred To: Senate Finance

     It is enacted by the General Assembly as follows:

     SECTION 1. The title of Chapter 44-31.2 of the General Laws entitled "Motion Picture

Production Tax Credits" is hereby amended to read as follows:

CHAPTER 44-31.2

Motion Picture Production Tax Credits

CHAPTER 44-31.2

MOTION PICTURE PRODUCTION INCENTIVE

     SECTION 2. Sections 44-31.2-1, 44-31.2-2, 44-31.2-5, 44-31.2-6, 44-31.2-6.1, 44-31.2-7

and 44-31.2-8 of the General Laws in Chapter 44-31.2 entitled "Motion Picture Production Tax

Credits" are hereby amended to read as follows:

     44-31.2-1. Findings and purpose. -- (a) The general assembly finds and declares that the

state of Rhode Island with its natural beauty, historical and architectural heritage of the state, its

majestic natural resources including Narragansett Bay and the independence and diversity of its

citizens and neighborhoods would provide a variety of excellent settings from which the motion

picture industry might choose a location for filming a motion picture or television program, and

together with those natural settings, the availability of labor, materials, climate, and hospitality of

its people have been instrumental in the filming of several successful motion pictures.

      (b) It is recognized that the motion picture industry brings with it a much needed

infusion of capital into areas of the state which may be economically depressed and the multiplier

effect of the infusion of capital resulting from the filming of a motion picture or television

program serves to stimulate economic activity beyond that immediately apparent on the film set.

      (c) Since a significant portion of the cost of a motion picture or television production

will not be eligible for existing tax incentives due to the fact that portions of the production are

carried out in another state, it is the purpose of this chapter to provide a financial incentive to the

film industry in order that the state might compete with other states for filming locations.

      (d) The primary objective of this chapter is to encourage development in Rhode Island of

a strong capital base for motion picture film, videotape, and television program productions, in

order to achieve a more independent, self-supporting industry. This objective is divided into

immediate and long-term objectives as follows:

      (1) Immediate objectives are to:

      (i) Attract private investment for the production of motion pictures, videotape

productions, and television programs which contain substantial Rhode Island content as defined

herein.

      (ii) Develop a tax infrastructure which encourages private investment. This infrastructure

will provide for state participation in the form of tax credits rebates to encourage investment in

state- certified productions.

      (iii) Develop a tax infrastructure utilizing tax credits rebates which encourage

investments in multiple state-certified production projects.

      (2) Long-term objectives are to:

      (i) Encourage increased employment opportunities within this sector and increased

competition with other states in fully developing economic development options within the film

and video industry.

      (ii) Encourage new education curricula in order to provide a labor force trained in all

aspects of film production.

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

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

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

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

certified production in the state as production-related costs.

      (3) "Documentary production" means a non-fiction production intended for educational

or commercial distribution that may require out of state principal photography.

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

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

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

title.

      (5) "Final Production Budget" means and includes the total pre-production, production

and post-production out-of-pocket costs incurred and paid in connection with the making of the

motion picture. The final production budget excludes costs associated with the promotion or

marketing of the motion picture

      (6) "Motion picture" means a feature-length film, documentary production, video, video

games, television series, or commercial made in Rhode Island, in whole or in part, for theatrical

or television viewing or as a television pilot or for educational distribution. 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 section 2257 of title 18, U.S.C., to be maintained with respect to any performer

in such production or reporting of books, films, etc. with respect to sexually explicit conduct.

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

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

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

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

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

application year; or (iii) on a loan guaranteed by the state in the application year; or (b) any

company or person who has discharged an obligation to pay or repay public funds or monies by:

(i) filing a petition under any Federal or state bankruptcy or insolvency law; (ii) having a petition

filed under any Federal or state bankruptcy or insolvency law against such company or person;

(iii) consenting to, or acquiescing or joining in, a petition named in (i) or (ii); (iv) consenting to,

or acquiescing or joining in, the appointment of a custodian, receiver, trustee, or examiner for

such company's or person's property; or (v) making an assignment for the benefit of creditors or

admitting in writing or in any legal proceeding its insolvency or inability to pay debts as they

become due.

      (8) "Primary locations" means the locations which (1) at least fifty-one percent (51%) of

the motion picture principal photography days are filmed; or (2) at least fifty-one percent (51%)

of the motion picture's final production budget is spent and employs at least five (5) individuals

during the production in this state; or (3) for documentary productions, the location of at least

fifty-one percent (51%) of the total productions days, which shall include pre- production and

post-production locations.

      (9) "Rhode Island film and television office" means an office within the department of

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administration that has been established in order to promote and encourage the locating of film

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

as the "film office".

     (10) "Rhode Island resident production payroll" means salary, wages and other

compensation, including related benefits, of persons employed either directly or indirectly and

paid to a Rhode Island resident who has established residency for at least one hundred-twenty

(120) days prior to the date of a production company's initial application.

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

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

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

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

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

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

      (11)(12) "State certified production cost" means any pre-production, production and

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

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

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

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

lighting, and related services and materials; editing and related services, including, but not limited

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

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

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

a film including writer, motion picture director, producer (provided the work is performed in the

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

vehicles; costs of food and lodging; music, if performed, composed, or recorded by a Rhode

Island musician, or released or published by a person domiciled in Rhode Island; travel expenses

incurred to bring persons employed, either directly or indirectly, in the production of the motion

picture, to Rhode Island (but not expenses of such persons departing from Rhode Island); and

legal (but not the expense of a completion bond or insurance and accounting fees and expenses

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

Rhode Island licensed attorneys or accountants.

      (12)(13) "Application year" means within the calendar year the motion picture

production company files an application for the tax credit rebate.

     44-31.2-5. Motion picture production company tax credit. -- Motion picture

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production company rebate. -- (a) A motion picture production company shall be allowed a

credit rebate to be computed as provided in this chapter against a tax imposed by chapters 11, 14,

17 and 30 of this title. The amount of the credit rebate shall be twenty-five percent (25%) of the

state certified production costs incurred directly attributable to activity within the state, with an

additional five percent (5%) for Rhode Island resident production payroll; provided, that the

primary locations are within the state of Rhode Island and the total production budget as defined

herein is a minimum of one hundred thousand dollars ($100,000). The credit rebate shall be

earned in the taxable year in which production in Rhode Island is completed, as determined by

the film office in final certification pursuant to subsection 44-31.2-6(c).

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

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

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

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

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

      (c) Notwithstanding subsection (a), the credit shall not exceed five million dollars

($5,000,000) and shall be allowed against the tax for the taxable period in which the credit is

earned and can be carried forward for not more than three (3) succeeding tax years. Pursuant to

rules promulgated by the tax administrator, the administrator may issue a waiver of the five

million dollar ($5,000,000) tax credit cap for any feature-length film or television series up to the

remaining funds available pursuant to section (e).

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

subchapter S corporation, partnership, or a limited liability company that is taxed as a partnership,

shall be passed through respectively to persons designated as partners, members or owners on a

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

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

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

      (e) No more than fifteen million dollars ($15,000,000) twenty-five million dollars

($25,000,000) in total may be issued for any tax year beginning after December 31, 2007 2015

for motion picture tax credits rebates pursuant to this chapter and/or musical and theatrical

production tax credits rebates pursuant to chapter 31.3 of this title. Said credits rebates shall be

equally available to motion picture productions and musical and theatrical productions. No

specific amount shall be set aside for either type of production.

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

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

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

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

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

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

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

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

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

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

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

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

Rhode Island tax benefits.

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

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

of taxation. Such certificates shall verify to the film office the motion picture production

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

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

production and which must include the certificate of good standing from the division of taxation.

In addition, the application shall contain such information and data as the film office determines

is necessary for the proper evaluation and administration, including, but not limited to, any

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

production previously granted initial certification. The final application shall also contain a cost

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

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

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

completed and filed application, the film office will make a determination pertaining to the final

certification of the production. Within ninety (90) days after the division of taxation's receipt of

the motion picture production company final certification and cost report, the division of taxation

shall issue a certification of the amount of credit rebate for which the motion picture production

company qualifies under § 44-31.2-5. To claim the tax credit, the division of taxation's

certification as to the amount of the tax credit shall be attached to all state tax returns on which

the credit is claimed.

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

production company qualifies for final certification, the film office shall issue a letter to the

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production company indicating "certificate of completion of a state certified production". A

motion picture production company is prohibited from using state funds, state loans or state

guaranteed loans to qualify for the motion picture tax credit rebate. All documents that are issued

by the film office pursuant to this section shall reference the identification number that was issued

to the production as part of its initial certification.

      (d) The director of the department of administration, in consultation as needed with the

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

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

the certification of the production and the resultant production credit.

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

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

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

guidelines for the tax credit rebate provided herein.

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

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

credit rebate.

     44-31.2-6.1. Impact analysis and periodic reporting. -- (a) The film office shall not

certify or approve any application under § 44-31.2-6 of this chapter until it has first prepared and

publicly released an analysis of the impact the proposed investment will or may have on the state.

The analysis shall be supported by appropriate data and documentation and shall consider, but not

be limited to, the following factors:

      (i) The impact on the industry or industries in which the applicant will be involved;

      (ii) State fiscal matters, including the state budget (revenues and expenses);

      (iii) The financial exposure of the taxpayers of the state under the plans for the proposed

investment and negative foreseeable contingencies that may arise therefrom;

      (iv) The approximate number of full-time, part-time, temporary, seasonal and/or

permanent jobs projected to be created, construction and non-construction;

      (v) Identification of geographic sources of the staffing for identified jobs;

      (vi) The projected duration of the identified construction jobs;

      (vii) The approximate wage rates for each category of the identified jobs;

      (viii) The types of fringe benefits to be provided with the identified jobs, including

healthcare insurance and any retirement benefits;

      (ix) The projected fiscal impact on increased personal income taxes to the state of Rhode

Island; and

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      (x) The description of any plan or process intended to stimulate hiring from the host

community, training of employees or potential employees, and outreach to minority job

applicants and minority businesses.

      (b) The film office shall monitor every impact analysis it completes through the duration

of any approved tax credit incentive. Such monitoring shall include annual reports made available

to the public on the:

      (1) Actual versus projected impact for all considered factors; and

      (2) Verification of all commitments made in consideration of state incentives or aid.

      (c) Upon its preparation and release of the analysis required by subsection (b) of this

section, the film office shall provide copies of that analysis to the chairpersons of the house and

senate finance committees, the house and senate fiscal advisors, the department of labor and

training and the division of taxation. Any such analysis shall be available to the public for

inspection by any person and shall by published by the tax administrator on the tax division

website. Annually thereafter, through and including the second tax year after any taxpayer has

applied for and received a tax credit pursuant to this chapter, the department of labor and training

shall certify to the chairpersons of the house and senate finance committees, the house and senate

fiscal advisors, the corporation and the division of taxation that: (i) the actual number of new full-

time jobs with benefits created by the state-certified production, not including construction jobs,

is on target to meet or exceed the estimated number of new jobs identified in the analysis above,

and (ii) the actual number of existing full-time jobs with benefits has not declined. For purposes

of this section, "full-time jobs with benefits" means jobs that require working a minimum of thirty

(30) hours per week within the state, with a median wage that exceeds by five percent (5%) the

median annual wage for full-time jobs in Rhode Island and within the taxpayer's industry, with a

benefit package that includes healthcare insurance plus other benefits typical of companies within

the motion picture industry. The department of labor and training shall also certify annually to the

house and senate fiscal committee chairs, the house and senate fiscal advisors, and the division of

taxation that jobs created by the state-certified production are "new jobs" in the state of Rhode

Island, meaning that the employees of the motion picture production company are in addition to,

and without a reduction of, those employees of the motion picture production company currently

employed in Rhode Island, are not relocated from another facility of the motion picture

production company in Rhode Island or are employees assumed by the motion picture production

company as the result of a merger or acquisition of a company already located in Rhode Island.

The certifications made by the department of labor and training shall be available to the public for

inspection by any person and shall be published by the tax administrator on the tax division

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website.

      (d) The film office, with the assistance of the motion picture production company, the

department of labor and training, the department of human services and the division of taxation

shall provide annually an analysis of whether any of the employees of the motion picture

production company has received RIte Care or RIte Share benefits and the impact such benefits

or assistance may have on the state budget. This analysis shall be available to the public for

inspection by any person and shall be published by the tax administrator on the tax division

website. Notwithstanding any other provision of law or rule or regulation, the division of

taxation, the department of labor and training and the department of human services are

authorized to present, review and discuss project-specific tax or employment information or data

with the film office, the chairpersons of the house and senate finance committees, and/or the

house and senate fiscal advisors for the purpose of verification and compliance with this tax

credit reporting requirement.

      (e) Any agreements or contracts entered into by the film office and the motion picture

production company shall be sent to the division of taxation and be available to the public for

inspection by any person and shall be published by the tax administrator on the tax division

website.

      (f) By August 15th of each year the motion picture production company shall report the

source and amount of any bonds, grants, loans, loan guarantees, matching funds or tax credits

received from any state governmental entity, state agency or public agency as defined in § 37-2-7

received during the previous state fiscal year. This annual report shall be sent to the division of

taxation and be available to the public for inspection by any person and shall be published by the

tax administrator on the tax division website.

      (g) By August 15th of each year the division of taxation shall report the name, address,

and amount of tax credit received for each motion picture production company during the

previous state fiscal year to the film office, the chairpersons of the house and senate finance

committees, the house and senate fiscal advisors, the department of labor and training and the

division of taxation. This report shall be available to the public for inspection by any person and

shall be published by the tax administrator on the tax division website.

      (h) On or before September 1, 2011, and every September 1 thereafter, the project lessee

shall file an annual report with the tax administrator. Said report shall contain each full-time

equivalent, part-time or seasonal employee's name, social security number, date of hire, and

hourly wage as of the immediately preceding July 1 and such other information deemed necessary

by the tax administrator. The report shall be filed on a form and in a manner prescribed by the tax

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administrator.

     44-31.2-7. Information requests. -- (a) The director of the film office and his or her

agents, for the purpose of ascertaining the propriety or correctness of any materials pertaining to

the certification of any motion picture production or to credits rebates claimed under the

provisions of this chapter, may examine any books, papers, records, or memoranda bearing upon

the matters required to be included in the return, report, or other statement, and may require the

attendance of the person executing the return, report, or other statement, and may require the

attendance of any taxpayer, or the attendance of any other person, and may examine the person

under oath respecting any matter which the director or his or her agent deems pertinent or

material in administration and application of this chapter and, where not inconsistent with other

legal provisions, the director may request information from the tax administrator.

      (b) The tax administrator and his or her agents, for the purpose of ascertaining the

correctness of any credit rebate claimed under the provisions of this chapter, may examine any

books, papers, records, or memoranda bearing upon matters required to be included in the return,

report, or other statement, and may require the attendance of the person executing the return,

report, or other statement, or of any officer or employee of any taxpayer, or the attendance of any

other person, and may examine the person under oath respecting any matter which the tax

administrator or his or her agent deems pertinent or material in determining the eligibility for

credits claimed and may request information from the film office, and the film office shall

provide the information in all cases to the tax administrator.

     44-31.2-8. Hearings and appeals. -- (a) From an action of the film office. - For matters

pertaining exclusively to application, production, and certification of motion picture productions,

any person aggrieved by a denial action of the film office under this chapter shall notify the

director of the film office in writing, within thirty (30) days from the date of mailing of the notice

of denial action by the film office and request a hearing relative to the denial or action. The

director of the film office shall, as soon as is practicable, fix a time and place of hearing, and shall

render a final decision. Appeals from a final decision of the director of the film office under this

chapter are to the sixth (6th) division district court pursuant to chapter 35 of title 42 of the general

laws.

      (b) From denial of tax credit rebate incentive. - Any person aggrieved by the tax

administrator's denial of a tax credit rebate incentive or tax benefit in this section shall notify the

tax administrator in writing within thirty (30) days from the date of mailing of the notice of denial

of the tax credit rebate incentive and request a hearing relative to the denial of the tax credit

rebate incentive. The tax administrator shall, as soon as is practicable, fix a time and place for a

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hearing, and shall render a final decision. Appeals from a final decision of the tax administrator

under this chapter are to the sixth (6th) division district court pursuant to chapter 8 of title 8 of the

general laws. The taxpayer's right to appeal is expressly made conditional upon prepayment of all

taxes, interest, and penalties, unless the taxpayer files a timely motion for exemption from

prepayment with the district court in accordance with the requirements imposed pursuant to § 8-

8-26 of the general laws.

     SECTION 3. Sections 44-31.2-9 and 44-31.2-11 of the General Laws in Chapter 44-31.2

entitled "Motion Picture Production Tax Credits" are hereby repealed.

     44-31.2-9. Transferability of the credit. -- (a) Any motion picture production company

tax credit certificate issued in accordance with § 44-31.2-5, which has been issued to a motion

picture production company or passed through in accordance with subsection 44-31.2-5(d), and to

the extent not previously claimed against the tax of the motion picture production company or of

the owner of the certificate if the certificate was issued in accordance with subsection 44-31.2-

5(d), may be transferred or sold by such company to another Rhode Island 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 submit to the Rhode Island Film Office, and to the tax

administrator in writing, a notification of any transfer or sale of tax credits within thirty (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, and any other information required by the Rhode Island office of film and

television or the division of taxation. The notification submitted to the division of taxation shall

include a processing fee of up to two hundred dollars ($200) per transferee which shall be

deposited as general revenues.

      (3) Failure to comply with this section will result in the disallowance of the tax credit

until the taxpayers are in full compliance.

      (4) 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.

      (5) To the extent that the transferor did not have rights to claim or use the credit at the

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time of the transfer, the division of taxation shall either disallow the credit claimed by the

transferee or recapture the credit from the transferee through any collection method authorized by

Rhode Island general law. The transferee's recourse is against the transferor.

      (6) The film office shall assess and collect an administrative fee of two hundred dollars

($200) per transfer, assignment or sale for issuing multiple motion picture production company

tax credit certificates or for reissuing certificates.

      (b) The transferee, assignee or purchaser shall apply such credits in the same manner as

the motion picture production company originally awarded the credit.

      (c) For purposes of this chapter, any assignment or sales proceeds received by the motion

picture production company for its assignment or sale of the tax credits allowed pursuant to this

section shall be exempt from this title.

     44-31.2-11. Sunset. -- No credits shall be issued on or after July 1, 2019 unless the

production has received initial certification under subsection 44-31.2-6(a) prior to July 1, 2019.

     SECTION 4. Section 44-31.3-2 of the General Laws in Chapter 44-31.3 entitled "Musical

and Theatrical Production Tax Credits" is hereby amended to read as follows:

     44-31.3-2. Musical and Theatrical Production Tax Credits. -- (a) Definitions. - As

used in this chapter:

      (1) "Accredited theater production" means a for-profit live stage presentation in a

qualified production facility, as defined in this chapter that is either: (i) A Pre-Broadway

production, or (ii) A Post-Broadway production.

      (2) "Accredited theater production certificate" means a certificate issued by the film

office certifying that the production is an accredited theater production that meets the guidelines

of this chapter.

      (3) "Advertising and public relations expenditure" means costs incurred within the state

by the accredited theater productions for goods or services related to the national marketing,

public relations, creation and placement of print, electronic, television, billboards and other forms

of advertising to promote the accredited theater production.

      (4) "Payroll" means all salaries, wages, fees, and other compensation including related

benefits for services performed and costs incurred within Rhode Island.

      (5) "Pre-broadway production" means a live stage production that, in its original or

adaptive version, is performed in a qualified production facility having a presentation scheduled

for Broadway's theater district in New York City within (12) months after its Rhode Island

presentation.

      (6) "Post-broadway production" means a live stage production that, in its original or

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adaptive version, is performed in a qualified production facility and opens its US tour in Rhode

Island after a presentation scheduled for Broadway's theater district in New York City.

      (7) "Production and performance expenditures" means a contemporaneous exchange of

cash or cash equivalent for goods or services related to development, production, performance, or

operating expenditures incurred in this state for a qualified theater production including, but not

limited to, expenditures for design; construction and operation, including sets, special and visual

effects, costumes, wardrobes, make-up, accessories; costs associated with sound, lighting,

staging, payroll, transportation expenditures, advertising and public relations expenditures,

facility expenses, rentals, per diems, accommodations and other related costs.

      (8) "Qualified production facility" means a facility located in the state of Rhode Island in

which live theatrical productions are, or are intended to be, exclusively presented that contains at

least one stage, a seating capacity of one thousand (1,000) or more seats, and dressing rooms,

storage areas, and other ancillary amenities necessary for the accredited theater production.

      (9) "Resident" or "Rhode Island resident" means for the purpose of determination of

eligibility for the tax incentives provided by this chapter, an individual who is domiciled in the

state of Rhode Island or who is not domiciled in this state but maintains a permanent place of

abode in this state and is in this state for an aggregate of more than one hundred eighty-three

(183) days of the taxable year, unless the individual is in the armed forces of the United States.

      (10) "Rhode Island film and television office" means the office within the department of

administration that has been established in order to promote and encourage the locating of film

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

"film office".

      (11) (i) "Transportation expenditures" means expenditures for the packaging, crating,

and transportation both to the state for use in a qualified theater production of sets, costumes, or

other tangible property constructed or manufactured out of state, and/or from the state after use in

a qualified theater production of sets, costumes, or other tangible property constructed or

manufactured in this state and the transportation of the cast and crew to and from the state. Such

term shall include the packaging, crating, and transporting of property and equipment used for

special and visual effects, sound, lighting and staging, costumes, wardrobes, make-up, and related

accessories and materials, as well as any other performance or production-related property and

equipment.

      (ii) Transportation expenditures shall not include any costs to transport property and

equipment to be used only for filming and not in a qualified theater production, any indirect costs,

and expenditures that are later reimbursed by a third party, or any amounts that are paid to

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persons or entities as a result of their participation in profits from the exploitation of the

production.

      (b) Tax Credit.

      (1) Any person, firm, partnership, trust, estate, or other entity that receives an accredited

theater production certificate shall be allowed a tax credit equal to twenty-five percent (25%) of

the total production and performance expenditures and transportation expenditures for the

accredited theater production and to be computed as provided in this chapter against a tax

imposed by chapters 11, 12, 13, 14, 17, and 30 of this title. Said credit shall not exceed five

million dollars ($5,000,000) and shall be limited to certified production cost directly attributable

to activities in the state and transportation expenditures defined above. The total production

budget shall be a minimum of one hundred thousand dollars ($100,000).

      (2) No more than fifteen million dollars ($15,000,000) twenty-five million dollars

($25,000,000) in total may be issued for any tax year for motion picture tax credits pursuant to

chapter 31.2 of this title and/or musical and theatrical production tax credits pursuant to this

chapter. Said credits shall be equally available to motion picture productions and musical and

theatrical productions. No specific amount shall be set aside for either type of production.

      (3) The tax credit shall be allowed against the tax for the taxable period in which the

credit is earned and can be carried forward for not more than three (3) succeeding tax years.

      (4) Credits allowed to a company that is a subchapter S corporation, partnership, or a

limited liability company that is taxed as a partnership, shall be passed through respectively to

persons designated as partners, members, or owners on a pro rata basis or pursuant to an executed

agreement among such persons designated as subchapter S corporation shareholders, partners, or

members documenting an alternate distribution method without regard to their sharing of other

tax or economic attributes of such entity.

      (5) If the company has not claimed the tax credits in whole or part, taxpayers eligible for

the tax credits may assign, transfer, or convey the tax credits, in whole or in part, by sale or

otherwise, to any individual or entity and such assignee of the tax credits that have not claimed

the tax credits in whole or part may assign, transfer, or convey the tax credits, in whole or in part,

by sale or otherwise, to any individual or entity. The assignee of the tax credits may use acquired

credits to offset up to one hundred percent (100%) of the tax liabilities otherwise imposed

pursuant to chapter 11, 12, 13 (other than the tax imposed under § 44-13-13), 14, 17, or 30 of this

title. The assignee may apply the tax credit against taxes imposed on the assignee for not more

than three (3) succeeding tax years. The assignor shall perfect the transfer by notifying the state

of Rhode Island division of taxation, in writing, within thirty (30) calendar days following the

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effective date of the transfer and shall provide any information as may be required by the division

of taxation to administer and carry out the provisions of this section.

      (6) For purposes of this chapter, any assignment or sales proceeds received by the

assignor for its assignment or sale of the tax credits allowed pursuant to this section shall be

exempt from this title.

      (7) In the case of a corporation, this credit is only allowed against the tax of a

corporation included in a consolidated return that qualifies for the credit and not against the tax of

other corporations that may join in the filing of a consolidated tax return.

      (c) Certification and administration.

      (1) The applicant shall properly prepare, sign, and submit to the film office an

application for initial certification of the theater production. The application shall include such

information and data as the film office deems reasonably necessary for the proper evaluation and

administration of said application, including, but not limited to, any information about the theater

production company and a specific Rhode Island live theater or musical production. The film

office shall review the completed application and determine whether it meets the requisite criteria

and qualifications for the initial certification for the production. If the initial certification is

granted, the film office shall issue a notice of initial certification of the accredited theater

production to the theater production company and to the tax administrator. The notice shall state

that, after appropriate review, the initial application meets the appropriate criteria for conditional

eligibility. The notice of initial certification will provide a unique identification number for the

production and is only a statement of conditional eligibility for the production and, as such, does

not grant or convey any Rhode Island tax benefits.

      (2) Upon completion of an accredited theater production, the applicant shall properly

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

theater production. The final application shall also contain a cost report and an "accountant's

certification." The film office and tax administrator may rely without independent investigation,

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

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

and upon no later than thirty (30) days of submission thereof, the division of taxation will make a

determination pertaining to the final certification of the accredited theater production and the

resultant tax credits.

      (3) Upon determination that the company qualifies for final certification and the resultant

tax credits, the tax administrator of the division of taxation shall issue to the company: (i) An

Accredited Theater Production Certificate; and (ii) A tax credit certificate in an amount in

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accordance with this section (b) hereof. A musical and theatrical production company is

prohibited from using state funds, state loans, or state guaranteed loans to qualify for the motion

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

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

certification.

      (4) The director of the department of administration, in consultation as needed with the

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

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

the certification of the production and the resultant production credit.

      (5) If information comes to the attention of the film office that is materially inconsistent

with representations made in an application, the film office may deny the requested certification.

In the event that tax credits or a portion of tax credits are subject to recapture for ineligible costs

and such tax credits have been transferred, assigned, and/or allocated, the state will pursue its

recapture remedies and rights against the applicant of the theater production tax credits. No

redress shall be sought against assignees, sellers, transferees, or allocates of such credits.

      (d) Information requests.

      (i) The director of the film office, and his or her agents, for the purpose of ascertaining

the correctness of any credit claimed under the provisions of this chapter, may examine any

books, paper, records, or memoranda bearing upon the matters required to be included in the

return, report, or other statement, and may require the attendance of the person executing the

return, report, or other statement, or of any officer or employee of any taxpayer, or the attendance

of any other person, and may examine the person under oath respecting any matter that the

director, or his or her agent, deems pertinent or material in administration and application of this

chapter and where not inconsistent with other legal provisions, the director may request

information from the tax administrator.

      (ii) The tax administrator, and his or her agents, for the purpose of ascertaining the

correctness of any credit claimed under the provisions of this chapter, may examine any books,

paper, records, or memoranda bearing upon the matters required to be included in the return,

report, or other statement, and may require the attendance of the person executing the return,

report, or other statement, or of any officer or employee of any taxpayer, or the attendance of any

other person, and may examine the person under oath respecting any matter which the tax

administrator or his or her agent deems pertinent or material in determining the eligibility for

credits claimed and may request information from the film office, and the film office shall

provide the information in all cases to the tax administrator.

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      (e) The film office shall comply with the impact analysis and periodic reporting

provisions of § 44-31.2-6.1.

     SECTION 5. This act shall take effect upon passage.

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EXPLANATION

BY THE LEGISLATIVE COUNCIL

OF

A N   A C T

RELATING TO TAXATION - MOTION PICTURE PRODUCTION TAX CREDITS

***

     This act would revise the financial incentives and tax infrastructure in connection with

motion picture productions by utilizing rebates instead of tax credits. The act would also increase

the amount available for the rebates from the sum of $15,000,000 to the sum of $25,000,000, and

provide that any rebate would include 5% for Rhode Island resident production payroll. The act

would also remove video games from the definition of "motion picture".

     This act would take effect upon passage.

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