2019 -- S 0203

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LC001046

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     STATE OF RHODE ISLAND

IN GENERAL ASSEMBLY

JANUARY SESSION, A.D. 2019

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A N   A C T

RELATING TO TAXATION - MUSICAL AND THEATRICAL PRODUCTION TAX

CREDITS

     

     Introduced By: Senator Joshua Miller

     Date Introduced: January 31, 2019

     Referred To: Senate Finance

     It is enacted by the General Assembly as follows:

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     SECTION 1. Sections 44-31.3-2 and 44-31.3-4 of the General Laws in Chapter 44-31.3

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entitled "Musical and Theatrical Production Tax Credits" are hereby amended to read as follows:

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     44-31.3-2. Musical and theatrical production tax credits.

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     (a) Definitions. As used in this chapter:

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

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

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

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

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

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of this chapter.

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

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

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

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of advertising to promote the accredited theater production.

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

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benefits for services performed and costs incurred within Rhode Island.

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     (5) "Pre-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 having a presentation scheduled

 

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

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presentation.

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     (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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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"film office".

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

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

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

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

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

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

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

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

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equipment.

 

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

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

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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

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production.

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     (b) Tax credit.

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

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

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thirty percent (30%) of the total production and performance expenditures and transportation

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expenditures for the accredited theater production and to be computed as provided in this chapter

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against a tax imposed by chapters 11, 12, 13, 14, 17, and 30 of this title. Said credit shall not

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

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

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

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     (2) No more than fifteen million dollars ($15,000,000) in total may be issued for any tax

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year for motion picture tax credits pursuant to chapter 31.2 of this title and/or musical and

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theatrical production tax credits pursuant to this chapter. Said credits shall be equally available to

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motion picture productions and musical and theatrical productions. No specific amount shall be

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set aside for either type of production.

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

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

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

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

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

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

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

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tax or economic attributes of such entity.

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

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

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

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

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

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

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

 

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

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

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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

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

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

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

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exempt from this title.

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

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

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

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     (c) Certification and administration.

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

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

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

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

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

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

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

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

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

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

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

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

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not grant or convey any Rhode Island tax benefits.

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

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

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

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

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

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

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

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

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resultant tax credits.

 

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

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

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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

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

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

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

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certification.

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

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

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

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the certification of the production and the resultant production credit.

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

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

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

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

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

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

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     (d) Information requests.

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

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

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

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

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

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

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

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

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information from the tax administrator.

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

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

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

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

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

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

 

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

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

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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

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provisions of § 44-31.2-6.1.

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     44-31.3-4. Sunset.

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     No credits shall be issued on or after July 1, 2019 July 1, 2024 unless the production has

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received initial certification under subsection 44-31.3-2(c) prior to July 1, 2019 July 1, 2024.

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     SECTION 2. 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 - MUSICAL AND THEATRICAL PRODUCTION TAX

CREDITS

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     This act would extend the period for musical and theatrical productions to obtain tax

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credits to July 1, 2024. The act would also increase the amount of the tax credit from twenty-five

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percent (25%) to thirty percent (30%) of the total production and performance expenditures and

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transportation expenditures for the accredited theater production.

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     This act would take effect upon passage.

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