SF 1434

as introduced - 88th Legislature (2013 - 2014) Posted on 03/19/2013 09:14am

A bill for an act
relating to taxation; individual income, corporate franchise, sales; providing
a credit for a qualified film production investment; providing an exemption
for qualifying film production purchases; amending Minnesota Statutes 2012,
section 297A.67, by adding a subdivision; proposing coding for new law in
Minnesota Statutes, chapter 290.

BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF MINNESOTA:

Section 1.

new text begin [290.0682] FILM PRODUCTION INVESTMENT CREDIT.
new text end

new text begin Subdivision 1. new text end

new text begin Definitions. new text end

new text begin (a) For the purposes of this section, the following terms
have the meanings given.
new text end

new text begin (b) "Qualifying film production" means a motion picture that is certified by the
commissioner as made wholly in Minnesota.
new text end

new text begin (c) "Qualified investment" means an amount of cash used to pay qualified production
expenses that is provided by an investor who does not have any financial interest in the
motion picture or the production company responsible for filming the motion picture.
new text end

new text begin (d) "Motion picture" means a feature-length film, video, digital media project,
television series defined as a season not to exceed 27 episodes, or commercial made in
the state, in whole or in part, for theatrical or television viewing or as a television pilot.
Motion picture shall not include a production featuring news, current events, weather and
financial market reports, talk shows, game shows, sporting events, awards shows, or other
gala events; a production whose sole purpose is fund-raising; a long-form production that
primarily markets a product or service; or a production containing obscene material or
performances.
new text end

new text begin (e) "Motion picture production company" means a company, including its
subsidiaries, engaged in the business of producing motion pictures, videos, television
series, or commercials intended for a theatrical release or for television viewing. Motion
picture production company shall not mean or include any company that is more than 25
percent owned, affiliated, or controlled by any company or person that is in default on a
loan made by the state or a loan guaranteed by the state.
new text end

new text begin (f) "Principal photography" means the phase of production during which the
motion picture is actually filmed. Principal photography shall not include preproduction
or postproduction.
new text end

new text begin (g) "Production expense" or "production cost" means preproduction, production,
and postproduction expenditures directly incurred in the production of a motion picture.
Production expenses or costs shall include wages and salaries paid to individuals
employed in the production of the motion picture; the costs of set construction and
operation, editing and related services, photography, sound synchronization, lighting,
wardrobe, makeup, and accessories; film processing, transfer, sound mixing, special and
visual effects; music; location fees; and the cost of purchase or rental of facilities and
equipment or any other production expense as may be determined by the commissioner to
be a qualified production expense. Production expenses or costs shall not include costs
incurred in marketing or advertising a motion picture; costs related to the transfer of tax
credits; or amounts paid to persons or businesses as a result of their participation in profits
from the exploitation of the production.
new text end

new text begin Subd. 2. new text end

new text begin Credit allowed. new text end

new text begin (a) A taxpayer engaged in making a motion picture
shall be allowed a credit against the taxes imposed by this chapter for the employment of
persons in Minnesota in connection with the filming or production of one or more motion
pictures in the state within any consecutive 12-month period. The credit shall be equal to
25 percent of the total aggregate payroll paid by a motion picture production company that
constitutes Minnesota source income, when total production costs incurred in the state
equal or exceed $100,000 during the taxable year. For purposes of this subdivision, "total
aggregate payroll" shall not include the salary of any employee whose salary is equal to or
greater than $1,000,000.
new text end

new text begin (b) A taxpayer shall be allowed an additional credit against the taxes imposed by
this chapter equal to 25 percent of all Minnesota production expenses, not including the
payroll expenses used to claim a credit pursuant to paragraph (a), where the motion picture
is also eligible for a credit pursuant to paragraph (a), and either: (1) Minnesota production
expenses exceed 50 percent of the total production expenses for a motion picture; or (2) at
least 50 percent of the total principal photography days of the film take place in the state.
new text end

new text begin Subd. 3. new text end

new text begin Certification of credits. new text end

new text begin (a) Before making a qualified investment,
taxpayers must apply to the Department of Revenue for a film production investment
credit certificate. The application must be in the form and made under the procedures
specified by the commissioner. Credit certificates must only be issued for qualifying
investments in qualifying film productions.
new text end

new text begin (b) Certificates must not be issued for more than $10,000,000 in film production
investment credits per year.
new text end

new text begin Subd. 4. new text end

new text begin Carryover; transfers; refunds. new text end

new text begin (a) The tax credit shall be taken against
the taxes imposed under this chapter and shall, at the election of the taxpayer, be
refundable to the extent provided for in paragraph (d). Any amount of the tax credit that
exceeds the tax due for a taxable year may be carried forward by the taxpayer to any of
the five subsequent taxable years.
new text end

new text begin (b) All or any portion of tax credits issued under this subdivision may be transferred,
sold, or assigned to other taxpayers with tax liabilities under this chapter. Any tax credit
that is transferred, sold, or assigned and taken against taxes imposed by this chapter shall
not be refundable to the transferee, buyer, or assignee. A person or corporate taxpayer
must not transfer a credit more than once in a 12-month period. Any amount of the tax
credit that exceeds the tax due for a taxable year may be carried forward by the transferee,
buyer, or assignee to any of the five subsequent taxable years from which a certificate is
initially issued by the Department of Revenue.
new text end

new text begin (c) An owner, transferee, or assignee desiring to make a transfer, sale, or assignment
allowed under paragraph (b) shall submit to the commissioner a statement that describes
the amount of tax credit for which the transfer, sale, or assignment of tax credit is eligible.
The statement must be in the form and manner prescribed by the commissioner. The
commissioner shall provide to the taxpayer a certificate of eligibility to transfer, sell, or
assign the tax credits. The commissioner shall not issue a certificate to a taxpayer that has an
outstanding tax obligation with the state in connection with any motion picture for any prior
taxable year. A tax credit shall not be transferred, sold, or assigned without a certificate.
new text end

new text begin (d) At the written election of a taxpayer entitled to a credit under paragraph (a), the
commissioner shall apply the credit against the liability of the taxpayer as determined on its
return, as first reduced by any other available credits, and shall then refund to the taxpayer
90 percent of the balance of the credits. The commissioner may require substantiation of a
taxpayer's claim for a refund under paragraph (a) before payment of the refund. No interest
shall accrue on a refund before the commissioner's receipt of the substantiation request.
new text end

new text begin Subd. 5. new text end

new text begin Limitations. new text end

new text begin Notwithstanding any other provision of this section,
aggregate salary, and compensation amounts, including all per diems, housing, and other
allowances, paid to, or for the services of, an individual shall not qualify for the credit
under this section to the extent that the amounts exceed $2,000,000.
new text end

new text begin EFFECTIVE DATE. new text end

new text begin This section is effective for taxable years beginning after
December 31, 2012.
new text end

Sec. 2.

Minnesota Statutes 2012, section 297A.67, is amended by adding a subdivision
to read:

new text begin Subd. 33. new text end

new text begin Film productions. new text end

new text begin (a) Sales of tangible personal property to a qualifying
motion picture production company, as defined under section 290.0682, subdivision 1,
paragraph (e), are exempt, provided the qualifying motion picture production company
spends at least $50,000 within the state in connection with the filming or production of
one or more motion pictures in the state within any consecutive 12-month period.
new text end

new text begin (b) Any motion picture production company that intends to film all, or parts of, a
motion picture in the state and qualifies for the exemption provided by this subdivision
shall provide an estimate of total expenditures to be made in the state in connection with
the filming or production of the motion picture. The estimate of expenditures shall be filed
with the commissioner prior to the commencement of filming in the state and is required
for the issuance of an exemption certificate. Any qualifying motion picture production
company that has been approved that fails to expend $50,000 within a consecutive
12-month period shall be liable for the sales taxes that would have been paid had the
approval not been granted. The sales taxes shall be considered due as of the date that
taxable expenditures were made.
new text end

new text begin EFFECTIVE DATE. new text end

new text begin This section is effective for sales and purchases made after
June 30, 2013.
new text end