1     
MOTION PICTURE INCENTIVE AMENDMENTS

2     
2016 GENERAL SESSION

3     
STATE OF UTAH

4     
Chief Sponsor: Brad R. Wilson

5     
Senate Sponsor: ____________

6     

7     LONG TITLE
8     General Description:
9          This bill modifies the motion picture incentives administered by the Governor's Office
10     of Economic Development (GOED).
11     Highlighted Provisions:
12          This bill:
13          ▸     amends definitions;
14          ▸     prohibits a cash rebate incentive from the Motion Picture Incentive Account for a
15     digital media project;
16          ▸     amends the amount of tax credit certificates GOED may issue to a motion picture
17     company or digital media company in a fiscal year;
18          ▸     provides that GOED may issue an additional $5,000,000 in tax credit certificates in
19     a fiscal year beginning on or after July 1, 2017, to a motion picture company whose
20     state-approved project is the making of an episodic series in the state;
21          ▸     amends the criteria for determining the amount of an incentive;
22          ▸     provides that GOED review certain data in determining an incentive amount for a
23     motion picture company or digital media project;
24          ▸     requires GOED to provide a comprehensive plan on the future of motion picture
25     incentives in the state;
26          ▸     provides a sunset date for statutory provisions related to the comprehensive plan;
27     and
28          ▸     makes technical changes.
29     Money Appropriated in this Bill:
30          None
31     Other Special Clauses:
32          None
33     Utah Code Sections Affected:
34     AMENDS:
35          63I-2-263, as last amended by Laws of Utah 2015, Chapters 182, 258, 283, 292, and
36     297
37          63N-8-102, as renumbered and amended by Laws of Utah 2015, Chapter 283
38          63N-8-103, as renumbered and amended by Laws of Utah 2015, Chapter 283
39          63N-8-104, as renumbered and amended by Laws of Utah 2015, Chapter 283
40          63N-8-105, as renumbered and amended by Laws of Utah 2015, Chapter 283
41     

42     Be it enacted by the Legislature of the state of Utah:
43          Section 1. Section 63I-2-263 is amended to read:
44          63I-2-263. Repeal dates, Title 63A to Title 63N.
45          (1) Section 63A-5-104.1 is repealed on January 1, 2016.
46          (2) Section 63C-9-501.1 is repealed on July 1, 2015.
47          (3) Title 63C, Chapter 15, Prison Relocation Commission, is repealed on January 1,
48     2016.
49          (4) Subsection 63N-3-103(1)(d) is repealed on July 1, 2015.
50          (5) Subsections 63N-8-105(2) and (3) are repealed on January 1, 2018.
51          [(5)] (6) Subsection 63N-12-208(3) is repealed on January 1, 2016.
52          Section 2. Section 63N-8-102 is amended to read:
53          63N-8-102. Definitions.
54          As used in this chapter:
55          (1) "Digital media company" means a company engaged in the production of a digital
56     media project.
57          (2) "Digital media project" means all or part of a production of interactive
58     entertainment or animated production that is produced for distribution in commercial or
59     educational markets, [which shall include projects] including a project intended for Internet or
60     wireless distribution.
61          (3) "Dollars left in the state" means expenditures made in the state for a state-approved
62     production, including:
63          (a) an expenditure that is subject to:
64          (i) a corporate franchise or income tax under Title 59, Chapter 7, Corporate Franchise
65     and Income Taxes;
66          (ii) an individual income tax under Title 59, Chapter 10, Individual Income Tax Act;
67     [and]
68          (iii) a sales and use tax under Title 59, Chapter 12, Sales and Use Tax Act,
69     notwithstanding any sales and use tax exemption allowed by law; or
70          (iv) a combination of Subsections (3)(a)(i), (ii), and (iii);
71          (b) payments made to a nonresident only to the extent of the income tax paid to the
72     state on the payments, the amount of per diems paid in the state, and other direct
73     reimbursements transacted in the state; and
74          (c) payments made to a payroll company or loan-out corporation that is registered to do
75     business in the state, only to the extent of the amount of withholding under Section 59-10-402.
76          (4) "Loan-out corporation" means a corporation owned by one or more artists that
77     provides services of the artists to a third party production company.
78          (5) "Motion picture company" means a company engaged in the production of:
79          (a) [motion pictures;] a motion picture; or
80          [(b) television series; or]
81          [(c) made-for-television movies.]
82          (b) an episodic series.
83          (6) "Motion picture incentive" means either a cash rebate from the Motion Picture
84     Incentive Account or a refundable tax credit under Section 59-7-614.5 or 59-10-1108.
85          (7) "New state [revenues] revenue" means:
86          (a) incremental new state sales and use tax [revenues] revenue generated as a result of
87     a digital media project that a digital media company pays under Title 59, Chapter 12, Sales and
88     Use Tax Act;
89          (b) incremental new state tax [revenues] revenue that a digital media company pays as
90     a result of a digital media project under:
91          (i) Title 59, Chapter 7, Corporate Franchise and Income Taxes;
92          (ii) Title 59, Chapter 10, Part 1, Determination and Reporting of Tax Liability and
93     Information;
94          (iii) Title 59, Chapter 10, Part 2, Trusts and Estates;
95          (iv) Title 59, Chapter 10, Part 4, Withholding of Tax; or
96          (v) a combination of Subsections (7)(b)(i), (ii), (iii), and (iv);
97          (c) incremental new state [revenues] revenue generated as individual income taxes
98     under Title 59, Chapter 10, Part 1, Determination and Reporting of Tax Liability and
99     Information, paid by employees of the new digital media project as evidenced by payroll
100     records from the digital media company; or
101          (d) a combination of Subsections (7)(a), (b), and (c).
102          (8) "Payroll company" means a business entity that handles the payroll and becomes
103     the employer of record for the staff, cast, and crew of a motion picture production.
104          (9) "Refundable tax credit" means a refundable motion picture tax credit authorized
105     under Section 63N-8-103 and claimed under Section 59-7-614.5 or 59-10-1108.
106          (10) "Restricted account" means the Motion Picture Incentive Account created in
107     Section 63N-8-103.
108          (11) "State-approved production" means a production under Subsections (2) and (5)
109     that is:
110          (a) approved by the office and ratified by the board; and
111          (b) produced in the state by a motion picture company.
112          (12) "Tax credit amount" means the amount the office lists as a tax credit on a tax
113     credit certificate for a taxable year.
114          (13) "Tax credit certificate" means a certificate issued by the office that:
115          (a) lists the name of the applicant;
116          (b) lists the applicant's taxpayer identification number;
117          (c) lists the amount of tax credit that the office awards the applicant for the taxable
118     year; and
119          (d) may include other information as determined by the office.
120          Section 3. Section 63N-8-103 is amended to read:
121          63N-8-103. Motion Picture Incentive Account created -- Cash rebate incentives --
122     Refundable tax credit incentives.
123          (1) (a) There is created within the General Fund a restricted account known as the
124     Motion Picture Incentive Account, which the office shall use to provide cash rebate incentives
125     for state-approved productions by a motion picture company, subject to legislative
126     appropriations and the unencumbered amount in the restricted account.
127          (b) All interest generated from investment of money in the restricted account shall be
128     deposited in the restricted account.
129          (c) The restricted account shall consist of an annual appropriation by the Legislature.
130          (d) The office shall:
131          (i) with the advice of the board, administer the restricted account; and
132          (ii) make payments from the restricted account as required under this section.
133          (e) The cost of administering the restricted account shall be paid from money in the
134     restricted account.
135          (f) The office may not give a cash rebate incentive from the Motion Picture Incentive
136     Account for a digital media project.
137          (2) (a) A motion picture company or digital media company seeking disbursement of
138     an incentive allowed under an agreement with the office shall follow the procedures and
139     requirements of this Subsection (2).
140          (b) The motion picture company or digital media company shall [provide the office
141     with]:
142          (i) submit a report to the office identifying and documenting the dollars left in the state
143     or new state [revenues] revenue generated by the motion picture company or digital media
144     company [for its state-approved production, including any related tax returns by the motion
145     picture company, payroll company, digital media company, or loan-out corporation under
146     Subsection (2)(d).], including any documentation requested by the office; and
147          (ii) provide the office with a document that expressly directs and authorizes the State
148     Tax Commission to disclose the company's tax returns and other information concerning the
149     company that would otherwise be subject to confidentiality under Section 59-1-403 or Section
150     6103, Internal Revenue Code.
151          (c) The office shall submit the document received under Subsection (2)(b)(ii) to the
152     State Tax Commission, which shall, upon receipt, provide the office with all information
153     requested in the document received under Subsection (2)(b)(ii).
154          [(c) For a] (d) A motion picture company[,] or digital media company shall engage an
155     independent certified public accountant [shall] who is a resident of Utah and holds a current
156     valid license issued under Title 58, Chapter 26a, Certified Public Accountant Licensing Act, to:
157          (i) review the report submitted by the [motion picture] company; and
158          (ii) attest to the accuracy and validity of the report, including the amount of dollars left
159     in the state.
160          [(d) The motion picture company, digital media company, payroll company, or
161     loan-out corporation shall provide the office with a document that expressly directs and
162     authorizes the State Tax Commission to disclose the entity's tax returns and other information
163     concerning the entity that would otherwise be subject to confidentiality under Section 59-1-403
164     or Section 6103, Internal Revenue Code, to the office.]
165          [(e) The office shall submit the document described in Subsection (2)(d) to the State
166     Tax Commission.]
167          [(f) Upon receipt of the document described in Subsection (2)(d), the State Tax
168     Commission shall provide the office with the information requested by the office that the
169     motion picture company, digital media company, payroll company, or loan-out corporation
170     directed or authorized the State Tax Commission to provide to the office in the document
171     described in Subsection (2)(d).]
172          [(g)] (e) [Subject to Subsection (3), for a motion picture company the] The office shall:
173          (i) review the report from the motion picture company or digital media company
174     described in Subsection (2)(b) and verify that it was reviewed by an independent certified
175     public accountant as described in Subsection (2)[(c)](d); [and]
176          (ii) based upon the certified public accountant's attestation under Subsection
177     (2)[(c)](d), determine the amount of the incentive that the motion picture company or digital
178     media company is entitled to receive under its agreement with the office[.];
179          [(h) Subject to Subsection (3), for a digital media company, the office shall:]
180          [(i) ensure the digital media project results in new state revenue; and]
181          [(ii) based upon review of new state revenue, determine the amount of the incentive
182     that a digital media company is entitled to under its agreement with the office.]
183          [(i) Subject to Subsection (3), if the incentive is in the form of a cash rebate, the office
184     shall]
185          (iii) if the incentive is in the form of a cash rebate, pay the incentive from the restricted
186     account to the motion picture company, notwithstanding Subsections 51-5-3(23)(b) and
187     63J-1-104[(4)(c).](2)(e); and
188          [(j) If] (iv) if the incentive is in the form of a refundable tax credit under Section
189     59-7-614.5 or 59-10-1108, [the office shall: (i)] issue a tax credit certificate to the motion
190     picture company or digital media company[;] and [(ii)] provide a duplicate copy of the tax
191     credit certificate to the State Tax Commission.
192          [(k)] (f) A motion picture company or digital media company may not claim a motion
193     picture tax credit under Section 59-7-614.5 or 59-10-1108 unless the motion picture company
194     or digital media company has received a tax credit certificate for the claim issued by the office
195     under Subsection (2)[(j)(i)](e)(iv).
196          [(l)] (g) A motion picture company or digital media company may claim a motion
197     picture tax credit on its tax return for the amount listed on the tax credit certificate issued by
198     the office.
199          [(m)] (h) A motion picture company or digital media company that claims a tax credit
200     under Subsection (2)[(l)](g) shall retain the tax credit certificate and all supporting
201     documentation in accordance with Subsection 63N-8-104[(6)](2).
202          (3) (a) Subject to Subsection (3)(b), the office may issue $6,793,700 in tax credit
203     certificates to a motion picture company or digital media company under this part in a fiscal
204     year.
205          (b) (i) For a fiscal year beginning on or after July 1, 2017, the office may issue an
206     additional $5,000,000 in tax credit certificates under this part in a fiscal year to a motion
207     picture company whose state-approved project is the making of an episodic series that has a
208     minimum contract for six episodes with a budget of $500,000 per episode to be spent in Utah.
209          (ii) A tax credit issued under this Subsection (3)(b) does not preclude the motion
210     picture company from receiving tax credits under Subsection (3)(a) for the same state-approved
211     project.
212          [(b)] (c) If the office does not issue tax credit certificates in a fiscal year totaling the
213     amount authorized under Subsection (3)(a) or (b), [it] the office may carry over that amount for
214     issuance in subsequent fiscal years.
215          (d) All carry over amounts from authorized amounts under Subsection (3)(b) may only
216     be used for a state-approved project as outlined under Subsection (3)(b).
217          Section 4. Section 63N-8-104 is amended to read:
218          63N-8-104. Motion picture incentives -- Standards to qualify for an incentive --
219     Limitations -- Content of agreement between office and motion picture company.
220          (1) (a) The office, with advice from the board, may only enter into an agreement with a
221     motion picture company or digital media company that meets the standards established under
222     this section and satisfies the other qualification requirements under this part.
223          (b) Subject to Subsection 63N-8-103(3), the office may commit or authorize an
224     incentive of up to 20% of the dollars left in the state by the motion picture company or digital
225     media company.
226          (c) Subject to the provisions of Subsection (4)(b), a company may receive an additional
227     5%, not to exceed 25%, of the dollars left in the state by the motion picture company or digital
228     media company.
229          (2) The office shall ensure that the agreement entered into with a motion picture
230     company or digital media company under Subsection (1)(a):
231          (a) specifies the requirements for receiving an incentive under this part;
232          (b) specifies the maximum amount of the incentive that the motion picture company or
233     digital media company may earn for a taxable year and over the life of the production;
234          (c) establishes the length of time over which the motion picture company or digital
235     media company may claim the incentive;
236          (d) requires the motion picture company or digital media company to retain records
237     supporting the company's claim for an incentive for at least four years after the motion picture
238     company or digital media company claims the incentive under this part; and
239          (e) requires the motion picture company or digital media company to submit to audits
240     for verification of the claimed incentive.
241          (3) In order to qualify for an incentive, a motion picture company or digital media
242     company shall highlight the state of Utah and the Utah Film Commission in the motion picture
243     credits.
244          [(1)] (4) In addition to the requirements for receiving a motion picture incentive as set
245     forth in this part, the office, in accordance with Title 63G, Chapter 3, Utah Administrative
246     Rulemaking Act, shall make rules establishing:
247          (a) the standards [that a motion picture company or digital media company must meet
248     to qualify for the motion picture] for receiving an incentive; and
249          (b) criteria for determining the amount of the incentive[.], which may include a
250     preference for:
251          (i) a family friendly production;
252          (ii) filming in an underutilized region of the state;
253          (iii) employing state residents as a significant portion of cast and crew;
254          (iv) a production made in a rural area of the state; or
255          (v) a production that features the state.
256          [(2)] (5) The office shall ensure that [those] the standards for receiving an incentive
257     include the following:
258          (a) an incentive may only be issued for a [state approved] state-approved production by
259     a motion picture company or digital media company;
260          (b) financing has been obtained and is in place for the production; and
261          (c) the economic impact of the production on the state represents new incremental
262     economic activity in the state as opposed to existing economic activity.
263          [(3) With respect to a digital media project, the office shall consider economic
264     modeling, including the costs and benefits of the digital media project to state and local
265     governments in determining the motion picture incentive amount.]
266          [(4) The office may also consider giving preference to a production that stimulates
267     economic activity in rural areas of the state or that has Utah content, such as recognizing that
268     the production was made in the state or uses Utah as Utah in the production.]
269          [(5) (a) The office, with advice from the board, may enter into an agreement with a
270     motion picture company or digital media company that meets the standards established under
271     this section and satisfies the other qualification requirements under this part.]
272          [(b) Subject to Subsection 63N-8-103(3), the office may commit or authorize a motion
273     picture incentive:]
274          [(i) to a motion picture company of up to 20% of the dollars left in the state by the
275     motion picture company, and a motion picture company can receive an additional 5%, not to
276     exceed 25% of the dollars left in the state by the motion picture company if the company
277     fulfills certain requirements determined by the office including:]
278          [(A) employing a significant percentage of cast and crew from Utah;]
279          [(B) highlighting the state of Utah and the Utah Film Commission in the motion
280     picture credits; or]
281          [(C) other promotion opportunities as agreed upon by the office and the motion picture
282     company; and]
283          [(ii) to a digital media company, if the incentive does not exceed 100% of the new state
284     revenue less the considerations under Subsection (3), but not to exceed 20% of the dollars left
285     in the state by the digital media company.]
286          [(c) A cash rebate incentive from the Motion Picture Incentive Restricted Account may
287     not exceed $500,000 per state approved production for a motion picture project.]
288          [(d) The office may not give a cash rebate incentive from the Motion Picture Incentive
289     Restricted Account for a digital media project.]
290          [(6) The office shall ensure that the agreement entered into with a motion picture
291     company or digital media company under Subsection (5)(a):]
292          [(a) details the requirements that the motion picture company or digital media company
293     must meet to qualify for an incentive under this part;]
294          [(b) specifies:]
295          [(i) the nature of the incentive; and]
296          [(ii) the maximum amount of the motion picture incentive that the motion picture
297     company or digital media company may earn for a taxable year and over the life of the
298     production;]
299          [(c) establishes the length of time over which the motion picture company or digital
300     media company may claim the motion picture incentive;]
301          [(d) requires the motion picture company or digital media company to retain records
302     supporting its claim for a motion picture incentive for at least four years after the motion
303     picture company or digital media company claims the incentive under this part; and]
304          [(e) requires the motion picture company or digital media company to submit to audits
305     for verification of the claimed motion picture incentive.]
306          Section 5. Section 63N-8-105 is amended to read:
307          63N-8-105. Annual report.
308          (1) The office shall include the following information in the annual written report
309     described in Section 63N-1-301:
310          [(1)] (a) the office's success in attracting within-the-state production of television
311     series, made-for-television movies, and motion pictures, including feature films and
312     independent films;
313          [(2)] (b) the amount of incentive commitments made by the office under this part and
314     the period of time over which the incentives will be paid; and
315          [(3)] (c) the economic impact on the state related to:
316          [(a)] (i) dollars left in the state; and
317          [(b)] (ii) providing motion picture incentives under this part.
318          (2) On or before October 1, 2016, the office shall provide a written report to the
319     Economic Development and Workforce Services Interim Committee containing a
320     comprehensive plan for the future of motion picture incentives in the state, including:
321          (a) an effective strategy and recommendations for awarding and using motion picture
322     incentives;
323          (b) a clear assessment of the advantages and disadvantages for the state of the current
324     motion picture incentives program;
325          (c) specific recommendations on how the existing program of motion picture
326     incentives could, in a cost-effective way, be improved and better targeted at:
327          (i) economic development in the state, including the creation of new long-term jobs,
328     industry, and economic growth; and
329          (ii) positive branding and exposure for the state; and
330          (d) improved and effective metrics for annually reporting the results of the motion
331     picture incentives program as described in Subsection (1).
332          (3) As part of preparing the report described in Subsection (2), the office shall meet
333     with and receive the input of interested stakeholders, including:
334          (a) the Utah Film Commission;
335          (b) the Utah Office of Tourism;
336          (c) representatives of film, digital media, animation, and game development companies
337     in the state;
338          (d) representatives of higher education film, digital media, animation, and game
339     development programs in the state;
340          (e) the Motion Picture Association of America;
341          (f) the Office of the Legislative Fiscal Analyst; and
342          (g) the Governor's Office of Management and Budget.




Legislative Review Note
Office of Legislative Research and General Counsel