Local Television Production; Advertising Tax Credit
Establishes a tax credit to assist qualifying local television producers in attracting advertisers.
HOUSE OF REPRESENTATIVES
TWENTY-SECOND LEGISLATURE, 2003
STATE OF HAWAII
A BILL FOR AN ACT
relating to the television industry and economic development.
BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF HAWAII:
SECTION 1. The legislature finds that there is a continuing need to support film and television production in the state and that while much has been done to attract out-of-state film and television productions to Hawaii, little has been done to encourage and nurture local production companies founded and based in Hawaii, particularly in their attempts to expand operations within the state.
The legislature believes that expanding episodic television production in Hawaii will provide a consistent level of job stability and growth for the local film and television industry and will fill the gaps left between the periodic visits by large out-of-state productions.
The legislature recognizes that for the most part, local production companies hire their entire staffs, shoot all of their content, and perform all post-production work within the state. Local television producers fund production through the sale of fifteen- and thirty-second television commercials purchased by local businesses interested in reaching a particular segment of the viewing audience.
These producers and production companies are separate and independent from local network affiliates, which are wholly owned by large, out-of-state entities. When advertisers spend advertising dollars to air commercials with network affiliates, the revenue to the affiliates is used first to cover local operating expenses, with profits then going to the large entities outside the state.
By encouraging advertisers to advertise on local producers' programs through the use of certain incentives, revenue will be used to increase local production capabilities, hire new employees, and purchase new equipment, with all profits remaining in Hawaii and being spent in-state.
The purpose of this Act is to expand Hawaii's current tax credits for film and television production to include incentives to support qualifying local production companies and qualifying local programs.
SECTION 2. Chapter 235, Hawaii Revised Statutes, is amended by adding a new section to be appropriately designated and to read as follows:
"§235- Television production; advertising tax credit.
(a) For advertising spent on qualifying local programs with qualifying local production companies, there shall be allowed to each taxpayer subject to the taxes imposed by this chapter, an income tax credit that shall be deductible from the taxpayer's net income tax liability, if any, imposed by this chapter for the taxable year in which the credit is properly claimed. The amount of the credit shall be up to one hundred per cent of the qualifying expenditure incurred; provided that:
(1) The maximum allowable credit for the qualifying expenditure shall be $500,000 in any taxable year; and
(2) The qualifying expenditure shall be limited to not more than $50,000 for any single qualifying local program and not more than $120,000 for any single qualifying local production company.
(b) The credit allowed under this section shall be claimed against the net income tax liability for the taxable year. For the purposes of this section, "net income tax liability" means net income tax liability reduced by all other credits allowed under this chapter.
(c) If the tax credit under this section exceeds the taxpayer's income tax liability, the excess of the tax credit over liability may be used as a credit against the taxpayer's income tax liability in subsequent years until exhausted. Every claim, including amended claims, for a tax credit under this section shall be filed on or before the end of the twelfth month following the close of the taxable year for which the credit may be claimed. Failure to comply with the foregoing provision shall constitute a waiver of the right to claim the credit.
In the case of a partnership, S corporation, estate, or trust, the tax credit allowable is for advertising costs incurred by the entity for the taxable year. The cost upon which the tax credit is computed shall be determined at the entity level. Distribution and share of credit shall be determined by rule.
(d) The director of taxation shall prepare forms that may be necessary to claim a credit under this section. The director may also require the taxpayer to furnish information to ascertain the validity of the claim for credit made under this section and may adopt rules necessary to effectuate the purposes of this section pursuant to chapter 91.
(e) As used in this section:
"Qualifying expenditure" means advertising purchased on a qualifying local program.
"Qualifying local production company" means an entity:
(1) Whose main place of business is the state of Hawaii;
(2) In which at least ninety per cent of the expenditures for the production costs go toward employment of Hawaii residents, including salaries and costs for the producer, director, writer, script, principal actors, as well as post-production work on the project and the purchase or lease of goods or services from individuals, vendors, or suppliers who are located and doing business in the State;
(3) That has had at least twelve continuous months of business operations within the state of Hawaii;
(4) That has created a minimum of twenty-six episodes of at least thirty minutes in length and that were broadcast during the previous twelve months (episodes must be original and may not be a compilation or re-assemblage of previous episodes); and
(5) That has broadcast episodes, as defined in paragraph (4), for fifty-two continuous weeks during the prior tax year.
"Qualifying local production company" does not include:
(1) Any entity where principals, shareholders, limited partners, or beneficiaries of or investors in the entity are employed or retained by or are owners of or investors in any of the local network affiliates or cable companies; and
(2) Any entity, or principal in the entity, who is receiving compensation or any assistance, including the use of equipment or personnel leased, owned, or employed by any local network affiliate or cable company on which the entity's program is being broadcast.
"Qualifying local program" means a television program that is produced by a qualifying local production company and broadcast in Hawaii on a continuous weekly basis.
SECTION 3. New statutory material is underscored.
SECTION 4. This Act, upon its approval, shall apply to taxable years beginning after December 31, 2003.