Report Title:

Film, Television, and Music Labor Expenditure Tax Credit

Description:

Establishes labor expenditure tax credits for eligible Hawaii-based or Hawaii-controlled corporations conducting film or video production or masters recordings in Hawaii. Establishes a training tax credit for eligible corporations for productions or recordings for which one or more Hawaii-based individuals are participating as trainees. Allows certain sound recordings to be eligible for a tax credit.

HOUSE OF REPRESENTATIVES

H.B. NO.

2611

TWENTY-SECOND LEGISLATURE, 2004

 

STATE OF HAWAII

 


 

A BILL FOR AN ACT

 

relating to the entertainment industry.

 

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

SECTION 1. Chapter 235, Hawaii Revised Statutes, is amended by adding a new part to be appropriately designated and to read as follows:

"PART . FILM, TELEVISION, AND MUSIC LABOR EXPENDITURE TAX CREDIT

§235-A Applicability. (a) This chapter shall apply in conjunction with and in addition to the tax credit allowable under section 235-17.

§235-B Definitions. In this part, the following definitions shall apply:

"Accredited Hawaii labor expenditure" of an accredited production corporation for a taxable year in relation to an accredited production means the amount that would be the corporation's Hawaii labor expenditure for the taxable year in relation to the production.

"Accredited production" means a film or video production or masters recording, other than an excluded production, for which the total expenditures included in the cost of producing the production, incurred in the twenty-four month period beginning when principal photography or recording begins, other than any amounts determined by reference to profits or revenues, are:

(1) Greater than $20,000, in the case of a production that is a master recording;

(2) Greater than $100,000, in the case of a production that is an episode, or a pilot for an episode, with a running time of less than thirty minutes;

(3) Greater than $200,000, in the case of a production that is an episode, or a pilot for an episode, with a running time of thirty minutes or more; or

(4) Greater than $1,000,000 in any other case.

"Accredited production corporation", in relation to an accredited production for a taxable year, means:

(1) A corporation:

(A) That is Hawaii-based during the taxable year;

(B) The activities of which throughout the taxable year are primarily the carrying on of:

(i) A film or video production or music recording business; or

(ii) A film or video production or music recording services business; and

(C) That owns the copyright in the production throughout the period during which the production is produced in Hawaii; or

(2) If there is no accredited production corporation within the meaning of paragraph (1) in relation to the production, a corporation that:

(A) Meets the criteria established by paragraph (1) (A) and (B); and

(B) Has contracted directly with the owner of the copyright in the production, musical compositions, sound recordings, or masters to render production or recording services with respect to the production or masters, but does not include a corporation described in any of paragraphs (1) to (6) of the definition of "eligible production."

"Accredited qualified Hawaii labor expenditure" of an accredited production corporation for a taxable year in relation to an accredited production means the amount, if any, by which the total of the corporation's accredited Hawaii labor expenditure for the taxable year or each of the preceding taxable years in relation to the production exceeds the total of the following:

(1) All amounts that are the accredited qualified Hawaii labor expenditure of the corporation with respect to the production for each of the preceding taxable years before the end of which principal photography of the production or initial recording of the masters began; and

(2) All amounts included in the total referred to in paragraph (1) for which reimbursement is to be or has been provided to the corporation, as a parent within the meaning of paragraph (3) of the definition of "Hawaii labor expenditure," with respect to the accredited production under an agreement referred to in that paragraph.

"Corporation" means any legal entity that is subject to the provisions of subchapter C, subchapter K, and subchapter S of the Internal Revenue Code.

"Eligible production" means a film or video production or music recording made by an eligible production or recording corporation that meets the following criteria:

(1) The production is not an excluded production or recording;

(2) If the production is for television broadcast and comprises two or more episodes, and each episode in the production is suitable for initial broadcast in a standard television time slot of at least thirty minutes;

(3) No investor, and no partnership in which an investor has a direct or indirect interest, is entitled to deduct an amount in respect of the production in computing income for any taxable year for the purposes of the Internal Revenue Code;

(4) In the case of a production that is:

(A) Not a documentary, at least seventy-five per cent of the cost of producing the production, other than costs determined by reference to the amount of income from the production, or, in the case of an interstate co-production or an international co-production, at least seventy-five per cent of the cost of producing the Hawaii portion of the production, other than costs determined by reference to the amount of income from the production, is payable to Hawaii-based individuals or Hawaii-based corporations with respect to goods or services provided in Hawaii by:

(i) Hawaii-based individuals who are employees; or

(ii) Hawaii-based individuals, or Hawaii-based corporations, in the course of carrying on business through a permanent establishment in Hawaii;

(B) A documentary, at least seventy-five per cent of the cost of producing the production, other than costs determined by reference to the amount of income from the production, or, in the case of an interstate co-production or an international co-production, at least seventy-five per cent of the cost of producing the Hawaii portion of the production, other than costs determined by reference to the amount of income from the production, is payable to Hawaii-based individuals or Hawaii-based corporations with respect to goods or services provided by:

(i) Hawaii-based individuals who are employees; or

(ii) Hawaii-based individuals, or Hawaii-based corporations, in the course of carrying on business through a permanent establishment in Hawaii;

(5) There is a written agreement with a United States controlled corporation that is a distributor of film or video productions or phonorecords, or with a United States broadcaster that is not associated with the eligible production corporation, for consideration at fair market value, to have the production shown in or phonorecords distributed in the United States within twenty-four months after the completion of the production; and

(6) The following additional conditions are satisfied:

(A) If the production or master is neither an interstate co-production nor an international co-production;

(i) At least seventy-five per cent of the cost of post-production or post-recording work for the production or post-recording, other than costs determined by reference to the amount of income from the production or recording, is for post-production or post-recording work carried out in Hawaii; and

(ii) In the case of a production or recording that is not a documentary, principal photography of the production or recording, mixing and remixing of the masters, is done in Hawaii during at least seventy-five per cent of the total number of days during which principal photography of the production or recording of the masters is done;

(B) If the production is an international co-production:

(i) At least twenty per cent of the cost of producing the production, other than costs determined by reference to the amount of income from the production, is with respect to the Hawaii portion of the production; and

(ii) At least fifty per cent of the cost of post-production work for the production, other than costs determined by reference to the amount of income from the production, is for post-production work carried out in Hawaii; and

(C) If the production is an international co-production, at least twenty per cent of the cost of producing the United States portion of the production, other than costs determined by reference to the amount of income from the production, is in respect of the Hawaii portion of the production.

"Eligible production corporation", for a taxable year, means a Hawaii-based corporation that is throughout the taxable year a United States-controlled taxable United States corporation the activities of which in the taxable year are primarily the carrying on of a film or video production or sound recording business through a permanent establishment in Hawaii.

"Episode" means an episode of a film or video production intended for television broadcast as a series.

"Hawaii-based corporation" means a corporation that has a permanent establishment in Hawaii.

"Hawaii-based individual" in relation to an eligible production, means an individual who, by reason of being an individual described in section 235-1, is subject to tax under section 235 for the year preceding the year in which principal photography of the production or recording of the masters begins.

"Hawaii labor expenditure" of a corporation for a taxable year means, in relation to a film or video production or master recording, the total of the following amounts, to the extent that they are reasonable under the circumstances, that did not and do not form part of the Hawaii labor expenditure of any other corporation:

(1) The salary or wages that:

(A) Are directly attributable to the production or recording;

(B) Are incurred by the corporation:

(i) After the enactment of this statute;

(ii) In the taxable year or in the preceding taxable year; and

(iii) For the stages of production of the production, from the final script stage to the end of the post-production stage or the commencement of recording masters to completion of the masters, and

(C) Are amounts that:

(i) Were paid to Hawaii-based individuals by the corporation in the taxable year, or within sixty days after the end of the taxable year, and

(ii) Did not form part of the corporation's Hawaii labor expenditure for the preceding taxable year;

(2) Remuneration, other than salary or wages, that:

(A) Is directly attributable to the production;

(B) Relates to services rendered to the corporation:

(i) After the enactment of this statute;

(ii) In that taxable year or in the preceding taxable year; and

(iii) For the stages of production of the production, from the final script stage to the end of the post-production stage or from the commencement of recording masters to the completion of the masters;

(C) Did not form part of the corporation's Hawaii labor expenditure for the preceding taxable year; and

(D) Is paid, for the services referred to in subparagraph (B), by the corporation in the taxable year, or within sixty days after the end of the taxable year, to:

(i) A Hawaii-based individual, to the extent that the amount paid is attributable to services personally rendered by the individual for the production or recording, or is attributable to and does not exceed the salary or wages of the individual's employees who are Hawaii-based individuals for personally rendering services for the production;

(ii) Another corporation that is a taxable United States corporation, if all of the issued and outstanding shares of the capital stock of the corporation, except directors' qualifying shares, if any, belong to a Hawaii-based individual and the activities of the corporation consist principally of the provision of that individual's services, to the extent that the amount paid is attributable to services rendered personally by the individual for the production;

(iii) Another corporation that is a taxable United States corporation, to the extent that the amount paid is attributable to and does not exceed the salary or wages of that corporation's employees who are Hawaii-based individuals for personally rendering services for the production or recording; or

(iv) A partnership that is carrying on business in Hawaii, to the extent that the amount paid is attributable to services personally rendered for the production by a Hawaii-based individual who is a member of the partnership, or is attributable to and does not exceed the salary or wages of the partnership's employees who are Hawaii-based individuals rendering services for the production;

(3) A reimbursement, other than a reimbursement that constitutes remuneration within the meaning of paragraph (2), made by the corporation to a second corporation (in this paragraph the "parent") of an expenditure that was made by the parent with respect to the production in a particular taxable year of the parent if:

(A) The corporation is a wholly-owned subsidiary of the parent;

(B) The parent is a taxable United States corporation;

(C) The corporation and the parent have agreed that this paragraph applies in respect of the production or recording;

(D) The reimbursement is made by the corporation in the corporation's taxable year, or within sixty days after the end of that taxable year; and

(E) The expenditure would have qualified for inclusion in the Hawaii labor expenditure of the corporation with respect to the production for the taxable year under paragraph (1) or (2) if

(i) The taxable year for the corporation were the same as the taxable year for the parent; and

(ii) The expenditure had been incurred by the corporation for the same purpose, and had been paid by the corporation at the same time and to the same person or partnership, as it was by the parent; and

(4) Does not include the following:

(A) An amount that is not a cost of producing the production or recording the masters, within limiting paragraph;

(B) An amount in respect of advertising, marketing, promotion or market research; or

(C) An amount related in any way to another film or video production.

"Internal Revenue Code" means Title 26 of the United States Code.

"Master" means the final recording resulting from the production of a sound recording.

"Phonorecord" means a sound recording as defined by Title 17, section 101 of the United States Code.

"Qualified Hawaii-labor expenditure" of a corporation for a taxable year with respect to a film or video production or recording of masters means the lesser of:

(1) The positive amount, if any, determined by the formula LE + DL – RE, where:

(A) "LE" means the Hawaii labor expenditure of the corporation for the taxable year with respect to the production or recording;

(B) "DL" means, if the production or recording is not complete before the beginning of the previous taxable year and the corporation had, for the previous taxable year, a qualified Hawaii labor expenditure that was determined with respect to the production under paragraph (2) of this definition, the difference between the previous year's qualified Hawaii labor expenditure and the amount that would have been the previous year's qualified Hawaii labor expenditure had that amount been calculated under paragraph (1) of this definition; and

(C) "RE" means the total of those expenditures made with respect to the production:

(i) That are included in LE; and

(ii) For which reimbursement is to be or has been provided to the corporation under an agreement referred to in paragraph (3) of the definition of "Hawaii labor expenditure"; and

(2) The positive amount, if any, determined by the formula 48% (TPC - TA) – LC, where:

(A) "TPC" means the total, determined at the end of the taxable year, of the costs incurred by the corporation in producing the production or recording the masters;

(B) "TA" means the total of all amounts of assistance with respect to TPC that, at the time of the filing of the corporation's return of income for the year:

(i) The corporation or any other person or partnership has received, is entitled to receive, or can reasonably be expected to receive;

(ii) Has not been repaid under a legal obligation to do so; and

(iii) Does not otherwise reduce TPC; and

(C) "LC" means the total of the corporation's qualified Hawaii labor expenditures:

(i) With respect to the production or recording; and

(ii) For each of the preceding taxable years before the end of which principal photography of the production or recording of the masters began.

"Remuneration" does not include an amount determined by reference to profits or revenues.

"Taxable United States corporation" means a taxable United States corporation.

§235-C Television broadcast series. If a film or video production is intended for television broadcast as a series:

(1) For the purposes of a tax credit under section 235-D or 235-E, all the episodes constituting one cycle of the series are to be considered a single production; and

(2) For the purposes of a tax credit under section 235-F, each episode is to be considered a separate production.

§235-D Basic tax credit. (a) A corporation is eligible for a basic tax credit for a taxable year with respect to an eligible production if:

(1) Principal photography of the production or recording of masters begins:

(A) Before the end of the taxable year;

(B) After the effective date of this part; and

(C) Before January 1, 2006;

(2) The production is completed within twenty-four months after the end of the corporation's taxable year in which the principal photography of the production or recording of masters began;

(3) The corporation, throughout the taxable year with respect to which the tax credit is being claimed, is an eligible production corporation that is Hawaii-controlled;

(4) The producer of the production or masters, or, in the case of an interstate co-production or an international co-production, the producer of the Hawaii portion of the production or masters, is at all times during the production of the production or masters, a Hawaii-based individual who is a United States citizen;

(5) No distribution of the production or phonorecords is made in the United States, within twenty-four months after the completion of the production, by a person who is not a United States citizen;

(6) For a production that is neither an interstate co-production nor an international co-production:

(A) More than fifty per cent of the copyright in the production or masters is owned by the corporation or by a Hawaii-controlled eligible production corporation that is related to the corporation; and

(B) The balance, if any, of the copyright is owned by one or more of the following:

(i) An eligible production corporation;

(ii) A corporation that would be an eligible production corporation if it had a permanent establishment in Hawaii; or

(iii) A recognized person;

(7) For a production that is neither an interstate co-production nor an international co-production, the initial licensing of the commercial exploitation of the production or masters is controlled by one of the corporations referred to in paragraph (6)(A);

(8) For a production that is an interstate co-production or an international co-production, the corporation, or a Hawaii-controlled eligible production corporation that is related to the corporation, retains a share, acceptable to the department of taxation, of revenues from the exploitation of the production in non-United States markets;

(9) For a production that is an interstate co-production, more than twenty per cent of the copyright in the production is owned by the corporation or by a Hawaii-controlled eligible production corporation that is related to the corporation;

(10) The corporation has obtained a valid eligibility certificate issued to it under section 235-I with respect to the production and the claimed tax credit; and

(11) The corporation makes application for the basic tax credit in accordance with section 235-H.

(b) The amount of the tax credit that may be claimed by a qualifying corporation under this section is:

(1) In the case of a production that is an interstate co-production, twenty per cent of the corporation's qualified Hawaii labor expenditure for the taxable year with respect to the production multiplied by the percentage of the copyright in the production that is beneficially owned by the corporation; or

(2) In any other case, twenty per cent of the corporation's qualified Hawaii labor expenditure for the taxable year with respect to the production.

§235-E Training tax credit. (a) A corporation is eligible for a training tax credit for a taxable year with respect to an eligible production or recording if:

(1) The corporation is eligible for, and has made or is making an application in accordance with section 235-H for, a tax credit in relation to the production or recording under section 235-D;

(2) One or more Hawaii-based individuals are participating as trainees in an approved training program in relation to the production or recording;

(3) The corporation has obtained a valid eligibility certificate issued to it under section 235-I with respect to the production or recording and the claimed tax credit; and

(4) The corporation makes application for the training tax credit in accordance with section 235-H.

(b) The amount of the tax credit that may be claimed by a qualifying corporation under this section is five per cent of the qualified Hawaii labor expenditure of the corporation for the taxable year with respect to the production or recording.

§235-F Production or recording services tax credit. (a) Subject to subsections (c) and (d), a corporation is eligible for a production or recording services tax credit for a taxable year with respect to an accredited production or recording if:

(1) Principal photography for the production or initial recording of the masters begins:

(A) Before the end of the taxable year;

(B) After the effective date of this part; and

(C) Before January 1, 2006;

(2) The corporation is an accredited production or recording corporation with respect to the production or masters for the taxable year;

(3) The corporation has obtained an accreditation certificate issued under section 235-K with respect to the production or recording; and

(4) The corporation applies for the tax credit in accordance with section 235-H.

(b) The amount of the tax credit that may be claimed by an accredited production or recording corporation under this section is fifteen per cent of the accredited qualified Hawaii labor expenditure of the corporation for the taxable year with respect to the accredited production or recording.

(c) A corporation shall not claim a tax credit with respect to an accredited production or recording:

(1) Under this section, if an amount is deemed to have been paid under section 235-G in relation to a tax credit under one or more of sections 235-D and 235-E with respect to the production or recording; or

(2) Under one or more of sections 235-D and 235-E, if an amount is deemed to have been paid under this section with respect to the production or recording.

(d) Without limiting subsection (c), if an amount is deemed to have been paid under section 235-G in relation to a tax credit under one or more of sections 235-D and 235-E with respect to any or all of the episodes of a cycle referred to in section 235-C(1), no tax credit may be claimed under this section with respect to any episode of that cycle.

§235-G Deemed payment. A corporation that has claimed and is eligible for a tax credit under this section for a taxable year is deemed to have paid, at the time referred to in section 6072 of the Internal Revenue Code, as that section relates to that taxable year, the amount of that credit on account of its tax payable under this part.

§235-H Application for tax credit. (a) A corporation that wishes to claim a tax credit under this section with respect to a taxable year shall file the following with its return of income for that taxable year:

(1) In the case of a claim for a tax credit under sections 235-D and 235-E:

(A) The eligibility certificate issued to the corporation under section 235-I that is appropriate to:

(i) The tax credit; and

(ii) The film or video production or masters recording with respect to which the claim is made; and

(B) If the tax credit is claimed with respect to the taxable year in which the production or recording is completed, the completion certificate issued to the corporation with respect to the production under section 235-J;

(2) In the case of a claim for a tax credit under section 235-E, the accreditation certificate under section 235-K that is appropriate to the film or video production or masters recording with respect to which the claim is made; and

(3) In all cases, an application for the tax credit in the form, and containing the information and records, required by the department of taxation.

(b) A corporation is not entitled to a tax credit with respect to a taxable year under this section unless, within thirty-six months after the end of the taxable year, the corporation files the information and records required under subsection (a) for that tax credit.

§235-I Eligibility certificate. (a) A corporation that wishes to claim one or more of the tax credits referred to in section 235-D and 235-E with respect to a film or video production or masters recording shall apply to the department of taxation for an eligibility certificate.

(b) A corporation referred to in subsection (a) with its application, shall:

(1) Pay an application fee to a person prescribed by the director, and

(2) Provide the information and records that the department requires with respect to the corporation and the production or recording.

(c) On receiving an application under this section, the department shall issue to the applicant corporation an eligibility certificate if the department is satisfied, on the basis of the information provided by the corporation and any other information available to the department, that the corporation will, on completion of the production or recording, be entitled to receive a completion certificate under section 235-J with respect to the production or recording and the specified tax credits.

§235-J Completion certificate. (a) A corporation that has claimed or intends to claim a tax credit under section 235-D or 235-E with respect to a film or video production or masters recording shall apply to the department for a completion certificate promptly after the completion of the production or recording.

(b) A corporation referred to in subsection (a) with its application, shall:

(1) Pay an application fee to a person prescribed by the director; and

(2) Provide the information and records that the department requires with respect to the corporation and the production or recording.

(c) On receiving an application under this section, the department shall issue to the applicant corporation a completion certificate if the department is satisfied, on the basis of the information provided by the corporation and any other information available to the department, that the corporation is eligible for the specified tax credits that have been and are being claimed by the corporation with respect to the production or recording.

§235-K Accreditation certificate. (a) A corporation may apply to the department for an accreditation certificate with respect to a film or video production or masters recording for the purposes of claiming a tax credit referred to in section 235-E.

(b) A corporation referred to in subsection (a) with its application, shall:

(1) Pay an application fee to a person prescribed by the director; and

(2) Provide the information and records that the department requires with respect to the production.

(c) On receiving an application under this section, the department shall issue to the applicant corporation an accreditation certificate with respect to a production or recording if the department is satisfied, on the basis of the information provided by the corporation and any other information available to the department, that the production or recording is an accredited production or recording.

§235-L Revocation of certificates. (a) A certificate may be revoked by the department if:

(1) In the case of a certificate issued under sections 235-I, 235-J, or 235-K:

(A) An omission or incorrect statement was made for the purpose of obtaining the certificate;

(B) The corporation to which the certificate was issued does not meet the eligibility requirements for one or more of the tax credits to which the certificate relates; or

(C) The production with respect to which the certificate was issued does not meet the eligibility requirements for one or more of the tax credits to which the certificate relates; or

(2) In the case of an eligibility certificate issued to a corporation under section 235-I with respect to a production:

(A) A completion certificate is not issued under section 235-J with respect to the production within thirty months after the end of the corporation's taxable year in which the principal photography of the production began; or

(B) A completion certificate issued to the corporation under section 235-J with respect to the production or recording is revoked.

(b) A certificate that is revoked by the department is deemed never to have been issued.

§235-M Notice of refusal or revocation. (a) If the department refuses to issue a certificate for which application is made under section 235-I, 235-J, or 235-K, the department shall promptly give notice of that refusal, together with reasons for the refusal, to the applicant corporation.

(b) If the department revokes a certificate issued under section 235-I, 235-J or 235-K, the department shall promptly give notice of that revocation, together with reasons for the revocation, to the applicant corporation.

§235-N Tax credit must be reimbursed. Without limiting any provision of this chapter or the Internal Revenue Code, if a corporation has claimed a tax credit under this section with respect to a film or video production or masters recording and is, under section 235-G or this part, deemed for a taxable year to have paid the amount of the tax credit on account of its tax payable under this part, the amount of the tax credit shall be repaid, and is, together with interest from the time referred to in section 231-39 as that section relates to that taxable year, a debt of the corporation due to the State of Hawaii, if:

(1) The eligibility certificate issued to the corporation under section 235-I with respect to that tax credit has been revoked without another eligibility certificate having been issued in replacement; or

(2) A completion certificate is not issued to the corporation under section 235-J with respect to that tax credit within thirty months after the end of the corporation's taxable year in which the principal photography of the production or initial recording of the masters began;

(3) A completion certificate issued to the corporation under section 235-J with respect to the production is revoked without another completion certificate having been issued in replacement;

(4) An accreditation certificate issued under section 235-K with respect to the production is revoked without another accreditation certificate having been issued in replacement; or

(5) The corporation is not otherwise entitled to the tax credit.

§235-O Recovery of debt. Sections 231-51 through 231-59 shall apply to recovery of any debts owed to the State of Hawaii under this section."

SECTION 2. Section 235-17, Hawaii Revised Statutes, is amended to read as follows:

"§235-17 Motion picture and film production; income tax credit. (a) There shall be allowed to each taxpayer subject to the taxes imposed by this chapter, an income tax credit which 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 four per cent of the costs incurred in the State in the production of motion picture or television films. The director of taxation shall specify by rule a schedule of allowable tax credits based on the principle that greater tax credits shall be allowed for greater benefits to the state economy.

In the case of a partnership, S corporation, estate, or trust, the tax credit allowable is for production 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.

If a deduction is taken under section 179 (with respect to election to expense depreciable business assets) of the Internal Revenue Code of 1986, as amended, no tax credit shall be allowed for those costs for which the deduction is taken.

The basis for eligible property for depreciation of accelerated cost recovery system purposes for state income taxes shall be reduced by the amount of credit allowable and claimed.

(b) There shall be allowed to each taxpayer subject to the taxes imposed by this chapter, an income tax credit which 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 7.25 per cent effective January 1, 1999, of the costs incurred in the State in the production of motion picture or television films for actual expenditures for transient accommodations. The director of taxation shall specify by rule a schedule of allowable tax credits based on the principle that greater tax credits shall be allowed for greater benefits to the state economy.

In the case of a partnership, S corporation, estate, or trust, the tax credit allowable is for production 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.

(c) The credit allowed under this section shall be claimed against the net income tax liability for the taxable year. For the purpose of this section, "net income tax liability" means net income tax liability reduced by all other credits allowed under this chapter.

(d) If the tax credit under this section exceeds the taxpayer's income tax liability, the excess of credits over liability shall be refunded to the taxpayer; provided that no refunds or payment on account of the tax credits allowed by this section shall be made for amounts less than $1. All claims, including any amended claims, for tax credits 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.

(e) The director of taxation shall prepare forms as 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.

(f) All subsections of this section shall also apply to the creation of sound recordings for the purpose of creating and distributing phonorecords."

SECTION 3. New statutory material is underscored.

SECTION 4. In codifying the new sections added by section 1 of this Act, the revisor of statutes shall substitute appropriate section numbers for the letters used in designating the new sections in this Act.

SECTION 5. This Act, upon approval, shall apply to taxable years beginning December 31, 2003.

INTRODUCED BY:

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