Hawaii Film Enhancement Rebate Program
Creates the Hawaii film enhancement rebate program which issues rebate payments to qualifying film and television productions for production costs incurred in Hawaii.
TWENTY-SECOND LEGISLATURE, 2004
STATE OF HAWAII
A BILL FOR AN ACT
Relating to the Hawaii film enhancement rebate Program.
BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF HAWAII:
SECTION 1. The legislature finds that Hawaii has had a long and storied history of successful film productions in Hawaii. Movies such as Pearl Harbor, Jurassic Park, and North Shore, just to name a few, have used Hawaii's rich cultural heritage and beautiful scenery as part of their stories.
The legislature notes that in the present day global market, Hawaii is vulnerable to other states and countries that have major financial incentives programs targeted to the motion picture industry. The United States Commerce Department issued a report which estimated that runaway production costs drain as much as $10,000,000,000 a year from the United States economy. These losses are most pronounced in made-for-television movies and miniseries productions. Specifically, the report noted that out of three hundred and eight United States' developed television movies produced in 1998, one hundred and thirty nine were produced outside the United States. The findings of the Commerce Department are manifested in the growing popularity of Canada as an in-demand location for movie producers given Canada's low production costs. In light of these developments, Hawaii must move aggressively with new business development tools so that Hawaii is competitive in site location decision-making for film productions. In an increasingly global economy, Hawaii's long term development will benefit from a rational and strategic use of state resources in support of film production development.
The purpose of this Act is to enact the Hawaii film enhancement rebate program. This program shall consist of a rebate program to reduce production costs for qualifying film and television production companies that film in Hawaii. This rebate program shall be funded by the Hawaii television and film development special fund under section 201-113, Hawaii Revised Statutes.
SECTION 2. The Hawaii Revised Statutes is amended by adding a new chapter to be appropriately designated and to read as follows:
Hawaii film enhancement rebate program
§ -1 Definitions. As used in this chapter:
"Department" means the department of business, economic development, and tourism.
"Film" means a single media or multimedia program, fixed on film or digital video, which is not child pornography, as defined in part VI of chapter 707, or obscene material, as defined in part II of chapter 712, including, but not limited to, national advertising messages, which can be viewed or reproduced and which is exhibited in theaters, licensed for exhibition by individual television stations, groups of stations, networks, cable television stations, or other means or licensed for home viewing markets.
"Production company" means a person who produces film for exhibition in theaters, on television or elsewhere.
"Production costs" means:
(1) The wages or salaries of persons who are residents of this State and who have earned income from working on a film in this State, including payments to personal services corporations with respect to the service of qualified performing artists as determined under section 62(a)(A) of the Internal Revenue Code of 1986, as amended;
(2) The costs of construction and operations, wardrobe, accessories and related services;
(3) The cost of photography, sound synchronization, lighting and related services;
(4) Rental of facilities and equipment; and
(5) Other direct costs of producing a film.
§ -2 Hawaii film enhancement rebate program; administration; eligibility. (a) There is created the Hawaii film enhancement rebate program which shall be administered by the department. Subject to the availability of funds in the Hawaii television and film development special fund under section 201-113, a rebate in the amount of fifteen per cent of documented expenditures made in Hawaii directly attributable to the production of a long-form narrative film or production in this State shall be paid to the production company responsible for the production if the department determines that the project has a reasonable chance of economic success.
(b) To be eligible for a rebate payment under this subsection, the production company shall be in the process of producing, in this State, a long-form narrative film or television production and shall:
(1) Submit documentation to the department regarding the amount of wages paid for employment in this State by residents of this State directly relating to the production and the amount of other production costs incurred in this State directly relating to the production;
(2) File a Hawaii income tax return; and
(3) Submit a completion bond.
(c) The department shall approve or disapprove all claims for rebates and shall issue payments for all approved claims from the funds in the Hawaii television and film development special fund under section 201-113. The total amount of payments shall not exceed $2,000,000 in a fiscal year. If the amount of approved claims exceeds the amount of moneys available for the making of rebate payments in the fund or exceeds the amount specified in this subsection in a fiscal year, payment shall be made in the order in which the claims are approved by the department. If an approved claim is not paid in whole, or in part, the unpaid claim or unpaid portion may be paid in the following fiscal year subject to the limitations imposed in this subsection.
(d) A production company shall not be eligible to receive a rebate payment under this section and a tax credit under section 235-110.9. If the production company has received a tax credit under section 235-110.9 and a rebate payment under this section, the production company shall be required to fully repay the amount of the tax credit to the department of taxation. A claim for a rebate payment shall include documentation from the department of taxation that repayment of the tax credit has been made as required herein and shall include an affidavit from the production company that the company has not received a tax credit pursuant to section 235-110.9."
SECTION 3. Section 201-111, Hawaii Revised Statutes, is amended by amending the definition of "eligible Hawaii project" or "project" to read as follows:
"Eligible Hawaii project" or "project" means an entertainment project in which at least seventy-five per cent of the budget for the production costs, excluding salaries and costs for the producer, director, writer, screenplay, and actors in the project, is dedicated for the purchase or lease of goods or services from a vendor or supplier who is located and doing business in the State[
.], provided that it also includes qualifying film and television productions approved by the department of business, economic development, and tourism under section -2 of the Hawaii film enhancement rebate program for the purpose of issuing a rebate payment.
SECTION 4. Section 201-113, Hawaii Revised Statutes, is amended by amending subsection (b) to read as follows:
"(b) The fund shall be used by the board and the department of business, economic development, and tourism to assist in, and provide incentives for, the production of eligible Hawaii projects that are in compliance with criteria and standards established by the board and the department in accordance with rules adopted by the board and the department pursuant to chapter 91. In particular, the board and the department shall adopt rules to provide for the implementation of the following programs:
(1) A grant program. The board shall adopt rules pursuant to chapter 91 to provide conditions and qualifications for grants. Applications for grants shall be made to the board and shall contain such information as the board shall require by rules adopted pursuant to chapter 91. At a minimum, the applicant shall agree to the following conditions:
(A) The grant shall be used exclusively for eligible Hawaii projects;
(B) The applicant shall have applied for or received all applicable licenses and permits;
(C) The applicant shall comply with applicable federal and state laws prohibiting discrimination against any person on the basis of race, color, national origin, religion, creed, sex, age, or physical handicap;
(D) The applicant shall comply with other requirements as the board may prescribe;
(E) All activities undertaken with funds received shall comply with all applicable federal, state, and county statutes and ordinances;
(F) The applicant shall indemnify and save harmless the State of Hawaii and its officers, agents, and employees from and against any and all claims arising out of or resulting from activities carried out or projects undertaken with funds provided hereunder, and procure sufficient insurance to provide this indemnification if requested to do so by the department;
(G) The applicant shall make available to the board all records the applicant may have relating to the project, to allow the board to monitor the applicant's compliance with the purpose of this chapter; and
(H) The applicant, to the satisfaction of the board, shall establish that sufficient funds are available for the completion of the project for the purpose for which the grant is awarded; [
(2) A venture capital program. The board shall adopt rules pursuant to chapter 91 to provide conditions and qualifications for venture capital investments in eligible Hawaii projects. The program may include a written agreement between the borrower and the board, as the representative of the State, that as consideration for the venture capital investment made under this part, the borrower shall share any royalties, licenses, titles, rights, or any other monetary benefits that may accrue to the borrower pursuant to terms and conditions established by the board by rule pursuant to chapter 91. Venture capital investments may be made on such terms and conditions as the board shall determine to be reasonable, appropriate, and consistent with the purposes and objectives of this part[
(3) A film production rebate program. The department of business, economic development, and tourism shall adopt rules pursuant to chapter 91 to provide for the payment of rebates from the Hawaii television and film development special fund pursuant to the Hawaii film enhancement rebate program established under chapter ."
SECTION 5. Statutory material to be repealed is bracketed and stricken. New statutory material is underscored.
SECTION 6. This Act shall take effect upon its approval.