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First Substitute S.B. 14

Representative Kevin S. Garn proposes the following substitute bill:


             1     
FINANCIAL INCENTIVES FOR MOTION

             2     
PICTURE PRODUCTIONS

             3     
2009 GENERAL SESSION

             4     
STATE OF UTAH

             5     
Chief Sponsor: Lyle W. Hillyard

             6     
House Sponsor: Kevin S. Garn

             7      Cosponsors:
             8      Allen M. ChristensenPatricia W. Jones
Mark B. MadsenKaren W. Morgan              9     
             10      LONG TITLE
             11      General Description:
             12          This bill modifies provisions of the Motion Picture Incentive Fund and enacts
             13      additional statutes related to the process and criteria for granting economic incentives to
             14      motion picture companies for new state-approved productions.
             15      Highlighted Provisions:
             16          This bill:
             17          .    modifies statutes governing the Governor's Office of Economic Development's
             18      procedures and criteria for granting economic incentives to motion picture
             19      companies for the production of motion pictures, television series, and
             20      made-for-television movies within the state;
             21          .    provides for motion picture incentives in the form of cash rebate incentives for
             22      small budget productions and refundable tax credits for larger budget productions;
             23          .    provides for definitions related to the determination and calculation of certain
             24      motion picture incentives;
             25          .    provides for standards in determining the awarding of an incentive;


             26          .    provides for certain restrictions in the issuance of motion picture tax credit
             27      certificates;
             28          .    provides for reports to the Revenue and Taxation and Workforce Services and
             29      Community and Economic Development Interim Committees and the Utah Tax
             30      Review Commission and details the content of those reports; and
             31          .    makes certain technical changes.
             32      Monies Appropriated in this Bill:
             33          None
             34      Other Special Clauses:
             35          This bill has retrospective operation of certain provisions for a taxable year beginning
             36      on or after January 1, 2009.
             37      Utah Code Sections Affected:
             38      AMENDS:
             39          63M-1-1801, as renumbered and amended by Laws of Utah 2008, Chapter 382
             40          63M-1-1802, as renumbered and amended by Laws of Utah 2008, Chapter 382
             41          63M-1-1803, as renumbered and amended by Laws of Utah 2008, Chapter 382
             42          63M-1-1805, as renumbered and amended by Laws of Utah 2008, Chapter 382
             43      ENACTS:
             44          59-7-614.5, Utah Code Annotated 1953
             45          59-10-1108, Utah Code Annotated 1953
             46      REPEALS AND REENACTS:
             47          63M-1-1804, as renumbered and amended by Laws of Utah 2008, Chapter 382
             48     
             49      Be it enacted by the Legislature of the state of Utah:
             50          Section 1. Section 59-7-614.5 is enacted to read:
             51          59-7-614.5. Refundable motion picture tax credit.
             52          (1) As used in this section:
             53          (a) "Motion picture company" means a taxpayer that meets the definition of a motion
             54      picture company under Subsection 63M-1-1802 (5).
             55          (b) "Office" means the Governor's Office of Economic Development.
             56          (c) "State-approved production" has the same meaning as defined in Subsection


             57      63M-1-1802 (10).
             58          (2) For taxable years beginning on or after January 1, 2009, a motion picture company
             59      may claim a refundable tax credit for a state-approved production.
             60          (3) The tax credit under this section is the amount listed as the tax credit amount on the
             61      tax credit certificate that the office issues to a motion picture company under Section
             62      63M-1-1803 for the taxable year.
             63          (4) (a) In accordance with any rules prescribed by the commission under Subsection
             64      (4)(b), the commission shall make a refund to a motion picture company that claims a tax
             65      credit under this section if the amount of the tax credit exceeds the motion picture company's
             66      tax liability for a taxable year.
             67          (b) In accordance with Title 63G, Chapter 3, Utah Administrative Rulemaking Act, the
             68      commission may make rules providing procedures for making a refund to a motion picture
             69      company as required by Subsection (4)(a).
             70          (5) (a) On or before October 1, 2014, and every five years after October 1, 2014, the
             71      Utah Tax Review Commission shall study the tax credit allowed by this section and make
             72      recommendations to the Revenue and Taxation Interim Committee and the Workforce Services
             73      and Community and Economic Development Interim Committee concerning whether the tax
             74      credit should be continued, modified, or repealed.
             75          (b) For purposes of the study required by this Subsection (5), the office shall provide
             76      the following information to the Utah Tax Review Commission:
             77          (i) the amount of tax credit that the office grants to each motion picture company for
             78      each calendar year;
             79          (ii) the criteria that the office uses in granting the tax credit;
             80          (iii) the dollars left in the state, as defined in Subsection 63M-1-1802 (2), by each
             81      motion picture company for each calendar year;
             82          (iv) the information contained in the office's latest report to the Legislature under
             83      Section 63M-1-1805 ; and
             84          (v) any other information requested by the Utah Tax Review Commission.
             85          (c) The Utah Tax Review Commission shall ensure that its recommendations under
             86      Subsection (5)(a) include an evaluation of:
             87          (i) the cost of the tax credit to the state;


             88          (ii) the effectiveness of the tax credit; and
             89          (iii) the extent to which the state benefits from the tax credit.
             90          Section 2. Section 59-10-1108 is enacted to read:
             91          59-10-1108. Refundable motion picture tax credit.
             92          (1) As used in this section:
             93          (a) "Motion picture company" means a claimant, estate, or trust that meets the
             94      definition of a motion picture company under Subsection 63M-1-1802 (5).
             95          (b) "Office" means the Governor's Office of Economic Development.
             96          (c) "State-approved production" has the same meaning as defined in Subsection
             97      63M-1-1802 (10).
             98          (2) For taxable years beginning on or after January 1, 2009, a motion picture company
             99      may claim a refundable tax credit for a state-approved production.
             100          (3) The tax credit under this section is the amount listed as the tax credit amount on the
             101      tax credit certificate that the office issues to a motion picture company under Section
             102      63M-1-1803 for the taxable year.
             103          (4) (a) In accordance with any rules prescribed by the commission under Subsection
             104      (4)(b), the commission shall make a refund to a motion picture company that claims a tax
             105      credit under this section if the amount of the tax credit exceeds the motion picture company's
             106      tax liability for the taxable year.
             107          (b) In accordance with Title 63G, Chapter 3, Utah Administrative Rulemaking Act, the
             108      commission may make rules providing procedures for making a refund to a motion picture
             109      company as required by Subsection (4)(a).
             110          (5) (a) On or before October 1, 2014, and every five years after October 1, 2014, the
             111      Utah Tax Review Commission shall study the tax credit allowed by this section and make
             112      recommendations to the Revenue and Taxation Interim Committee and the Workforce Services
             113      and Community and Economic Development Interim Committee concerning whether the tax
             114      credit should be continued, modified, or repealed.
             115          (b) For purposes of the study required by this Subsection (5), the office shall provide
             116      the following information to the Utah Tax Review Commission:
             117          (i) the amount of tax credit the office grants to each taxpayer for each calendar year;
             118          (ii) the criteria the office uses in granting a tax credit;


             119          (iii) the dollars left in the state, as defined in Subsection 63M-1-1802 (2), by each
             120      motion picture company for each calendar year;
             121          (iv) the information contained in the office's latest report to the Legislature under
             122      Section 63M-1-1805 ; and
             123          (v) any other information requested by the Utah Tax Review Commission.
             124          (c) The Utah Tax Review Commission shall ensure that its recommendations under
             125      Subsection (5)(a) include an evaluation of:
             126          (i) the cost of the tax credit to the state;
             127          (ii) the effectiveness of the tax credit; and
             128          (iii) the extent to which the state benefits from the tax credit.
             129          Section 3. Section 63M-1-1801 is amended to read:
             130           63M-1-1801. Purpose.
             131          (1) The Legislature finds that:
             132          (a) the state's natural beauty, scenic wonders, and diverse topography provide a variety
             133      of magnificent settings from which the motion picture industry can choose to film part or all of
             134      major or independent motion pictures, made-for-television movies, and television series;
             135          (b) the state has an abundance of resources, including a skilled and able workforce, the
             136      required infrastructure, and a friendly and hospitable populace that have been instrumental in
             137      the filming of [several] hundreds of successful motion pictures and several television series;
             138      and
             139          (c) further development of the motion picture industry in Utah is a state public purpose
             140      that will significantly impact growth in the state's economy and contribute to the fiscal well
             141      being of the state and its people.
             142          (2) The purpose of this part is to:
             143          (a) encourage the use of Utah as a site for the production of motion pictures, television
             144      series, and made-for-television movies;
             145          (b) provide [a] financial [incentive] incentives to the film industry so that Utah might
             146      compete successfully with other states and countries for filming locations; and
             147          (c) help develop a strong motion picture industry presence in the state that will
             148      contribute substantially to improving the state's economy.
             149          Section 4. Section 63M-1-1802 is amended to read:


             150           63M-1-1802. Definitions.
             151          As used in this part:
             152          [(1) "Administrator" means the director of the Governor's Office of Economic
             153      Development or the director's designee.]
             154          [(2)] (1) "Board" means the [Board of Business and] Governor's Office of Economic
             155      Development Board.
             156          (2) "Dollars left in the state" means expenditures made in the state for a state-approved
             157      production, including:
             158          (a) an expenditure that is subject to:
             159          (i) a corporate franchise or income tax under Title 59, Chapter 7, Corporate Franchise
             160      and Income Taxes;
             161          (ii) an individual income tax under Title 59, Chapter 10, Individual Income Tax Act;
             162      and
             163          (iii) a sales and use tax under Title 59, Chapter 12, Sales and Use Tax Act,
             164      notwithstanding any sales and use tax exemption allowed by law;
             165          (b) payments made to a nonresident only to the extent of the income tax paid to the
             166      state on the payments, the amount of per diems paid, and other direct reimbursements
             167      transacted in the state; and
             168          (c) payments made to a payroll company or loan-out corporation that is registered to do
             169      business in the state, only to the extent of the amount of withholding under Section 59-10-402 .
             170          (3) "Fund" means the restricted account known as the Motion Picture Incentive Fund
             171      created in Section 63M-1-1803 .
             172          (4) "Loan-out corporation" means a corporation owned by one or more artists that
             173      provides services of the artists to a third party production company.
             174          [(4)] (5) "Motion picture company" means a company engaged in the production of:
             175          (a) motion pictures[,];
             176          (b) television series[,]; or
             177          (c) made-for-television movies.
             178          (6) "Motion picture incentive" means either a cash rebate from the Motion Picture
             179      Incentive Fund or a refundable tax credit under Section 59-7-614.5 or 59-10-1108 .
             180          (7) "Office" means the Governor's Office of Economic Development.


             181          (8) "Payroll company" means a business entity that handles the payroll and becomes
             182      the employer of record for the staff, cast, and crew of a motion picture production.
             183          (9) "Refundable tax credit" means a refundable motion picture tax credit authorized
             184      under Section 63M-1-1803 and claimed under Section 59-7-614.5 or 59-10-1108 .
             185          [(5)] (10) "State-approved production" means a motion picture, television series, or
             186      made-for-television movie approved by the administrator and ratified by the board that is
             187      produced in the state by a motion picture company.
             188          (11) "Tax credit amount" means the amount the office lists as a tax credit on a tax
             189      credit certificate for a taxable year.
             190          (12) "Tax credit certificate" means a certificate issued by the office that:
             191          (a) lists the name of the applicant;
             192          (b) lists the applicant's taxpayer identification number;
             193          (c) lists the amount of tax credit that the office awards the applicant for the taxable
             194      year; and
             195          (d) may include other information as determined by the office.
             196          Section 5. Section 63M-1-1803 is amended to read:
             197           63M-1-1803. Motion Picture Incentive Fund created -- Cash rebate incentives --
             198      Refundable tax credit incentives.
             199          (1) (a) There is created within the General Fund a restricted account known as the
             200      Motion Picture Incentive Fund, which shall be used to provide cash rebate incentives for
             201      within-the-state production of television series, made-for-television movies, and motion
             202      pictures, including feature films and independent films.
             203          [(2) (a) The fund shall be administered by the administrator with advice from the
             204      board.]
             205          [(b) The administrator, with advice from the board, shall approve fund policies and
             206      qualification criteria to receive an incentive award consistent with the provisions of this part.]
             207          [(3)] (b) All interest generated from investment of money in the fund shall be deposited
             208      in the fund.
             209          [(4)] (c) The fund shall consist of an annual appropriation by the Legislature.
             210          (d) The Division of Finance shall make payments from the account as required under
             211      this section.


             212          (2) (a) A motion picture company seeking disbursement of an incentive allowed under
             213      an agreement with the office shall follow the procedures and requirements of this Subsection
             214      (2).
             215          (b) (i) The motion picture company shall provide the office with a report identifying
             216      and documenting the dollars left in the state by the motion picture company for its
             217      state-approved production, including any related tax returns by the motion picture company,
             218      payroll company, or loan-out corporation under Subsection (2)(c).
             219          (ii) An independent certified public accountant shall:
             220          (A) prepare the report on behalf of the motion picture company; and
             221          (B) attest to the accuracy and validity of the report, including the amount of dollars left
             222      in the state.
             223          (c) The motion picture company, payroll company, or loan-out corporation shall
             224      provide the office with a document that expressly directs and authorizes the State Tax
             225      Commission to disclose the entity's tax returns and other information concerning the entity that
             226      would otherwise be subject to confidentiality under Section 59-1-403 or Section 6103, Internal
             227      Revenue Code, to the office.
             228          (d) The office shall submit the document described in Subsection (2)(c) to the State
             229      Tax Commission.
             230          (e) Upon receipt of the document described in Subsection (2)(c), the State Tax
             231      Commission shall provide the office with the information requested by the office that the
             232      motion picture company, payroll company, or loan-out corporation directed or authorized the
             233      State Tax Commission to provide to the office in the document described in Subsection (2)(c).
             234          (f) Subject to Subsection (3), the office shall:
             235          (i) review the report from the motion picture company described in Subsection (2)(b)
             236      and verify that it was prepared by an independent certified public accountant; and
             237          (ii) based upon the certified public accountant's attestation under Subsection (2)(b),
             238      determine the amount of the incentive that the motion picture company is entitled to under its
             239      agreement with the office.
             240          (g) Subject to Subsection (3), if the incentive is in the form of a cash rebate, the office
             241      shall submit to the Division of Finance:
             242          (i) a request for payment of the cash rebate incentive to the motion picture company;


             243          (ii) the name and address of the payee; and
             244          (iii) any other information requested by the Division of Finance.
             245          (h) Upon receipt of a request for payment of a cash rebate incentive under Subsection
             246      (2)(g), the Division of Finance shall:
             247          (i) transfer from the General Fund to the restricted account the amount contained in the
             248      request for payment of a cash rebate incentive after reducing the amount transferred by any
             249      unencumbered balances in the restricted account; and
             250          (ii) notwithstanding Subsections 51-5-3 (23)(b) and 63J-1-404 (4)(c), after receiving a
             251      request for payment of a cash rebate incentive and making the transfer required by Subsection
             252      (2)(h)(i), pay the incentive from the restricted account.
             253          (i) If the incentive is in the form of a refundable tax credit under Section 59-7-614.5 or
             254      59-10-1108 , the office shall:
             255          (i) issue a tax credit certificate to the motion picture company; and
             256          (ii) provide a duplicate copy of the tax credit certificate to the State Tax Commission.
             257          (j) A motion picture company may not claim a motion picture tax credit under Section
             258      59-7-614.5 or 59-10-1108 unless the motion picture company has received a tax credit
             259      certificate for the claim issued by the office under Subsection (2)(i)(i).
             260          (k) A motion picture company may claim a motion picture tax credit on its tax return
             261      for the amount listed on the tax credit certificate issued by the office.
             262          (l) A motion picture company that claims a tax credit under Subsection (2)(k) shall
             263      retain the tax credit certificate in accordance with Subsection 63M-1-1804 (5)(d).
             264          (3) (a) Subject to Subsection (3)(b), the office may issue up to:
             265          (i) (A) $7,793,700 in tax credit certificates under this part in fiscal year 2009-10; and
             266          (B) $7,793,700 in tax credit certificates under this part in fiscal year 2010-11; and
             267          (ii) $2,206,300 in motion picture cash rebates under this part in a fiscal year.
             268          (b) If the total amount of tax credit certificates the office issues in a fiscal year is less
             269      than the amount of tax credit certificates the office may issue in that fiscal year under
             270      Subsection (3)(a)(i)(A) or (B), the office may issue the remaining amount of tax credit
             271      certificates in a fiscal year after the fiscal year for which there is a remaining amount of tax
             272      credit certificates.
             273          (c) Notwithstanding any other provision of this part or Section 59-7-614.5 or


             274      59-10-1108 , beginning on July 1, 2011, the office may not issue a tax credit certificate unless:
             275          (i) the Legislature expressly provides funding in the office's budget for the office to
             276      issue the tax credit certificate; or
             277          (ii) there is a remaining amount of tax credit that the office may issue in accordance
             278      with Subsection (3)(b).
             279          Section 6. Section 63M-1-1804 is repealed and reenacted to read:
             280          63M-1-1804. Motion picture incentives -- Standards to qualify for an incentive --
             281      Limitations -- Content of agreement between office and motion picture company.
             282          (1) In addition to the requirements for receiving a motion picture incentive as set forth
             283      in this part, the office, in accordance with Title 63G, Chapter 3, Utah Administrative
             284      Rulemaking Act, shall make rules establishing the standards that a motion picture company
             285      must meet to qualify for the motion picture incentive.
             286          (2) The office shall ensure that those standards include the following:
             287          (a) an incentive may only be issued for a within-the-state production of:
             288          (i) a television series;
             289          (ii) a made-for-television movie; or
             290          (iii) a motion picture, including feature films and independent films;
             291          (b) financing has been obtained and is in place for the production; and
             292          (c) the economic impact of the production on the state represents new incremental
             293      economic activity in the state as opposed to existing economic activity.
             294          (3) The office may also consider giving preference to a production that stimulates
             295      economic activity in rural areas of the state or that has Utah content, such as recognizing that
             296      the production was made in the state or uses Utah as Utah in the production.
             297          (4) (a) The office, with advice from the board, may enter into an agreement with a
             298      motion picture company that meets the standards established under this section and satisfies the
             299      other qualification requirements under this part.
             300          (b) Subject to Subsection 63M-1-1803 (3), the office may commit or authorize a motion
             301      picture incentive to a motion picture company if that incentive does not exceed 20% of the
             302      dollars left in the state by the motion picture company.
             303          (c) A cash rebate incentive from the Motion Picture Incentive Fund may not exceed
             304      $500,000 per production.


             305          (5) The office shall ensure that the agreement entered into with a motion picture
             306      company under Subsection (4)(a):
             307          (a) details the requirements that the motion picture company must meet to qualify for
             308      an incentive under this part;
             309          (b) specifies:
             310          (i) the nature of the incentive; and
             311          (ii) the maximum amount of the motion picture incentive that the motion picture
             312      company may earn for a taxable year and over the life of the production;
             313          (c) establishes the length of time over which the motion picture company may claim
             314      the motion picture incentive;
             315          (d) requires the motion picture company to retain records supporting its claim for a
             316      motion picture incentive for at least four years after the motion picture company claims the
             317      incentive under this part; and
             318          (e) requires the motion picture company to submit to audits for verification of the
             319      claimed motion picture incentive.
             320          Section 7. Section 63M-1-1805 is amended to read:
             321           63M-1-1805. Annual report.
             322          [(1) The administrator shall prepare an annual report for the board on the economic
             323      impact of this part.]
             324          [(2)] The [board] office shall [present the] report annually to the Legislature's
             325      Workforce Services and Community and Economic Development Interim Committee and the
             326      [Economic Development and Human Resources Appropriations Subcommittee, together with
             327      any proposed recommendations for modifications in this part or the annual ongoing
             328      appropriation for the fund.] Utah Tax Review Commission describing:
             329          (1) its success in attracting within-the-state production of television series,
             330      made-for-television movies, and motion pictures, including feature films and independent
             331      films;
             332          (2) the amount of incentive commitments made by the office under this part and the
             333      period of time over which the incentives will be paid; and
             334          (3) the economic impact on the state related to:
             335          (a) dollars left in the state; and


             336          (b) providing motion picture incentives under this part.
             337          Section 8. Retrospective operation.
             338          Sections 59-7-614.5 and 59-10-1108 have retrospective operation for a taxable year
             339      beginning on or after January 1, 2009.


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