Report Title:

Digital Media; Tax Credit



Authorizes the department of labor and industrial relations to implement and operate media production training programs. Amends the motion picture, digital media, and film production income tax credit to allow a tax credit on fifty per cent of wages paid to below-the-line crew who are Hawaii residents that meet certain training and certification requirements.



S.B. NO.













relating to digital media.





SECTION 1. Section 235-17, Hawaii Revised Statutes, is amended as follows:

1. By amending subsection (a) to read:

"(a) Any law to the contrary notwithstanding, 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:

(1) Fifteen per cent of the qualified production costs incurred by a qualified production in any county of the State with a population of over seven hundred thousand; or

(2) Twenty per cent of the qualified production costs incurred by a qualified production in any county of the State with a population of seven hundred thousand or less[.]; and

(3) Fifty per cent of the wages or salaries paid to below-the-line crew members; provided that the below-the-line crew member:

(A) Is a Hawaii resident;

(B) Has participated in below-the-line crew on-the job-training or attended a below-the-line crew training course established under section 394-8 or approved by the film industry branch of the department of business, economic development, and tourism; and

(C) Has been certified as a film and multimedia trainee by the film industry branch of the department of business, economic development, and tourism;

provided further that any credit claimed under this paragraph shall first be applied to a qualified production's qualified production costs prior to calculating any credit under paragraph (1) or (2).

[A] For the purposes of calculating a tax credit amount under paragraphs (1) or (2), qualified production occurring in more than one county may prorate its expenditures based upon the amounts spent in each county, if the population bases differ enough to change the percentage of tax credit.

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

2. By amending subsection (l) to read:

"(l) For the purposes of this section:

"Below-the-line crew" includes production, art construction, set dressing, props, camera, sound, stage and studio, electrical, grip, wardrobe, makeup, special effects, laboratory and film, food transportation, locations, editorial and other hires based upon industry standards.


(1) Means an advertising message that is filmed using film, videotape, or digital media, for dissemination via television broadcast or theatrical distribution;

(2) Includes a series of advertising messages if all parts are produced at the same time over the course of six consecutive weeks; and

(3) Does not include an advertising message with Internet‑only distribution.

"Digital media" means production methods and platforms directly related to the creation of cinematic imagery and content, specifically using digital means, including but not limited to digital cameras, digital sound equipment, and computers, to be delivered via film, videotape, interactive game platform, or other digital distribution media (excluding Internet-only distribution).

"Post production" means production activities and services conducted after principal photography is completed, including but not limited to editing, film and video transfers, duplication, transcoding, dubbing, subtitling, credits, closed captioning, audio production, special effects (visual and sound), graphics, and animation.

"Production" means a series of activities that are directly related to the creation of visual and cinematic imagery to be delivered via film, videotape, or digital media and to be sold, distributed, or displayed as entertainment or the advertisement of products for mass public consumption, including but not limited to scripting, casting, set design and construction, transportation, videography, photography, sound recording, interactive game design, and post production.

"Qualified production":

(1) Means a production, with expenditures in the State, for the total or partial production of a feature-length motion picture, short film, made-for-television movie, commercial, music video, interactive game, television series pilot, single season (up to twenty‑two episodes) of a television series regularly filmed in the State (if the number of episodes per single season exceeds twenty‑two, additional episodes for the same season shall constitute a separate qualified production), television special, single television episode that is not part of a television series regularly filmed or based in the State, national magazine show, or national talk show. For the purposes of subsections (d) and (j), each of the aforementioned qualified production categories shall constitute separate, individual qualified productions; and

(2) Does not include: daily news; public affairs programs; non-national magazine or talk shows; televised sporting events or activities; productions that solicit funds; productions produced primarily for industrial, corporate, institutional, or other private purposes; and productions that include any material or performance prohibited by chapter 712.

"Qualified production costs" means the costs incurred by a qualified production within the State that are subject to the general excise tax under chapter 237 or income tax under this chapter and that have not been financed by any investments for which a credit was or will be claimed pursuant to section 235‑110.9. Qualified production costs include but are not limited to:

(1) Costs incurred during preproduction such as location scouting and related services;

(2) Costs of set construction and operations, purchases or rentals of wardrobe, props, accessories, food, office supplies, transportation, equipment, and related services;

(3) Wages or salaries of cast, crew, and musicians;

(4) Costs of photography, sound synchronization, lighting, and related services;

(5) Costs of editing, visual effects, music, other post-production, and related services;

(6) Rentals and fees for use of local facilities and locations;

(7) Rentals of vehicles and lodging for cast and crew;

(8) Airfare for flights to or from Hawaii, and interisland flights;

(9) Insurance and bonding;

(10) Shipping of equipment and supplies to or from Hawaii, and interisland shipments; and

(11) Other direct production costs specified by the department in consultation with the department of business, economic development, and tourism."

SECTION 2. Section 383-128, Hawaii Revised Statutes, is amended by amending subsection (c) to read as follows:

"(c) The director shall require employers who use or who are assisted by any of these programs to contribute fifty per cent of the cost of the assistance in cash or in-kind contributions[.]; provided that this subsection shall not apply to section 394-8(c)."

SECTION 3. Section 394-8, Hawaii Revised Statutes, is amended to read as follows:

"[[]394-8[]] New industry training program. (a) There is hereby established the new industry training program, which shall be administered by the department of labor and industrial relations. Program moneys may be used to tailor training or retraining programs to meet the needs of qualifying businesses, to reimburse instructors for valid and approved expenditures in delivering instruction under the program, to rent appropriate training facilities and equipment, when necessary, to purchase or develop materials required to deliver the instruction, and for any other training-related expenses.

(b) The department shall utilize the resources of the University of Hawaii, including the community college system, the high technology development corporation, and other educational and training resources in the public and private sectors throughout the State as may be appropriate to be used to provide preemployment or employment training or on-the-job training for local residents hired by businesses relocating to Hawaii or expanding their local operations. The department may contract for these training needs from public agencies including the various University of Hawaii campuses, private educational institutions, nonprofit corporations, or private entities in order to provide the required training.

(c) The department shall be authorized to implement and operate media production training programs under this section; provided that the media production training programs shall be developed and administered under the guidance of an advisory group consisting of members from the University of Hawaii, including the community colleges and the academy of creative media, the Hawaii film office, and trade unions."

SECTION 4. Statutory material to be repealed is bracketed and stricken. New statutory material is underscored.

SECTION 5. This Act shall take effect on July 1, 2008; provided that:

(1) Section 1 of this Act shall apply to wages and salaries paid to Hawaii residents in below-the-line crew positions on or after July 1, 2008, and before January 1, 2016; and

(2) Section 1 of this Act shall be repealed on January 1, 2016, and section 235-17, Hawaii Revised Statutes, shall be reenacted in the form in which it read on the day before the effective date of this Act.