THE SENATE

S.B. NO.

750

TWENTY-SEVENTH LEGISLATURE, 2013

S.D. 1

STATE OF HAWAII

 

 

 

 

 

 

A BILL FOR AN ACT

 

 

RELATING TO DIGITAL MEDIA INFRASTRUCTURE.

 

 

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

 


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

"235-   Media infrastructure project tax credit. (a) In addition to the credits described in section 235‑17, beginning on or after July 1, 2013, and ending prior to January 1, 2016, there shall be allowed to each taxpayer subject to the taxes imposed by this chapter, a media infrastructure project 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 equal to twenty-five per cent of the qualified costs incurred for qualified media infrastructure projects situated in West Oahu or on the most populous island in a county with a population between 100,000 and 175,000.

(b) The following shall apply to the qualified media infrastructure project tax credit described in subsection (a):

(1) The base investment for a qualified media infrastructure project shall be in excess of $          ;

(2) The qualified media infrastructure project tax credit shall be non-refundable. The portion of the tax credit that exceeds the tax liability of the taxpayer for the tax year in which the credit was earned may be carried forward to offset net income tax liability in subsequent tax years for a period not to exceed ten taxable years or until exhausted, whichever occurs first. The director of taxation may require the tax credit to be taken in the tax period in which the credit is earned or may structure the tax credit in the initial certification of the project to provide that only a portion of the tax credit be taken over the course of two or more years;

(3) The total qualified media infrastructure project tax credit allowed for any state-certified infrastructure project shall not exceed $          ;

(4) If all or a portion of an infrastructure project is a facility that may be used for other purposes unrelated to production or post production activities, then the project shall be approved only if a determination is made that the multiple use facility will support and will be necessary to secure production or post production activity for the production and post production facility and the applicant provides sufficient contractual assurances that the facility will be used as a state-of-the-art production or post production facility, or as a support and component thereof, for the useful life of the facility; provided that no tax credits described in subsection (a) shall be earned on a multiple use facility until the production or post production facility is complete;

(5) Tax credits for qualified media infrastructure projects shall be earned only as follows:

(A) Construction of the infrastructure project shall begin within six months of the initial certification and shall be       per cent complete within a       year time frame;

(B) Expenditures shall be certified by the director of taxation, and credits shall not be earned until that certification is made; and

(C) For purposes of allowing tax credits against state income tax liability, the tax credits shall be deemed earned at the time the expenditures are made; provided that all requirements of this subsection have been met and the tax credits have been certified;

(6) For state-certified infrastructure projects, the application for a qualified media infrastructure project tax credit shall include:

(A) A detailed description of the infrastructure project;

(B) A preliminary budget;

(C) A complete detailed business plan and market analysis;

(D) Estimated start and completion dates;

(E) A letter issued by the mayor and council of the county in which the infrastructure project is to be located indicating that the project has been approved; and

(F) If the application is incomplete, additional information may be requested prior to further action by the director of taxation;

(7) An application fee shall be submitted with the application for a qualified media infrastructure project tax credit based on the following:

(A)       per cent multiplied by the estimated total incentive tax credits; and

(B) The minimum application fee shall be $           and the maximum application fee shall be $          ; and

(8) Prior to any final certification of a tax credit for a state-certified infrastructure project, the applicant for the qualified media infrastructure project tax credit shall submit to the director of taxation an audit of the expenditures that is performed and certified by an independent certified public accountant pursuant to rule. Upon approval of the audit, the director of taxation shall issue a final tax credit certification letter indicating the amount of tax credits certified for the state-certified infrastructure project to the investors. Bank loan finance fees applicable to the qualified media infrastructure project expenditures, as certified by the director of taxation, and any general excise taxes that have been paid on the bank loan finance fees and remitted to the State may be included as part of the tax credit.

(c) Any taxpayer eligible to claim a tax credit under subsection (a) shall:

(1) File an annual progress report with the department of business, economic development, and tourism on a calendar basis, which shall include the following information:

(A) Percentage of completion of each qualified media infrastructure project;

(B) Amount of moneys expended on, and amount remaining to complete, each qualified media infrastructure project; and

(C) Tax and labor clearances;

(2) Deliver to the department of business, economic development, and tourism a performance bond in a form prescribed by the department of business, economic development, and tourism by rule, executed by a surety company authorized to do business in this State or otherwise secured in a manner satisfactory to the department of business, economic development, and tourism, in an amount equal to one hundred per cent of total projected expenditures determined upon initial certification; and

(3) Provide either of the following:

(A) Pledge of a lien on the qualified media infrastructure project in favor of the State in the amount of $          ; provided that the lien shall expire five years after completion of the project; or

(B) Collateral security in the amount of $          ; provided that the collateral security shall be released five years after completion of the qualified media infrastructure project.

(d) Any taxpayer eligible to claim a qualified media infrastructure project tax credit under subsection (a) shall file with the department of business, economic development, and tourism an annual report no later than March 1 following each taxable year for which the credit is claimed. The report shall include the following information:

(1) The amount of general excise tax paid under chapter 237;

(2) The amount of transient accommodations tax paid under chapter 237D;

(3) The amount of tax credits claimed under this section;

(4) Gross proceeds of each project;

(5) Number of full-time employees employed on each qualified media infrastructure project;

(6) Number of part-time employees employed on each qualified media infrastructure project;

(7) Number of independent contractors contracted to work on each qualified media infrastructure project;

(8) Amount disbursed as payroll in the State on each qualified media infrastructure project; and

(9) List of job classifications with average wage level.

(e) For purposes of this section:

"Qualified media infrastructure project" means the development, construction, renovation, or operation of a film, video, television, or media production or post-production facility and the immovable property and equipment related thereto, or any other facility that supports and is a necessary component of the proposed infrastructure project, that is located in the State; provided that the facility may include a movie theater or other commercial exhibition facility to assist in offsetting operating costs of the production or postproduction facility, but shall not include a facility used to produce pornographic matter or a pornographic performance.

(f) A taxpayer shall not be prohibited from claiming the media infrastructure project tax credit for qualifying investments made prior to the reenactment of section 235-17 pursuant to section 4 of Act 88, Session Laws of Hawaii 2006.

A taxpayer may claim the media infrastructure project tax credit for investments made on a qualified media infrastructure project prior to January 1, 2016; provided that:

(1) Construction of the media infrastructure project shall commence prior to January 1, 2016; and

(2) The claim for the media infrastructure project tax credit shall be properly filed on or before the end of the twelfth month following the close of the taxable year for which the tax credit may be claimed.

Failure to comply with either of the foregoing provisions shall constitute a waiver of the right to claim the tax credit.

(g) If at the close of any taxable year:

(1) The qualified digital media infrastructure project no longer qualifies for the tax credit established under this section;

(2) The qualified digital media infrastructure project or an interest in the qualified digital media infrastructure project has been sold by the taxpayer making a base investment in the qualified digital media infrastructure project; or

(3) The taxpayer has withdrawn the taxpayer's base investment wholly or partially from the qualified digital media infrastructure project,

the tax credit claimed under this section shall be recaptured.

The recapture shall be equal to ninety per cent of the amount of the total tax credit claimed under this section in the preceding five taxable years. The amount of the tax credit recaptured shall apply only to the investment in the particular qualified digital media infrastructure project that meets the conditions of paragraph (1), (2), or (3). The amount of the recaptured tax credit determined under this subsection shall be added to the taxpayer's tax liability for the taxable year in which the recapture occurs under this subsection.

(h) Failure to complete a qualified media infrastructure project for which a tax credit is claimed under subsection (a) within five years of initial certification shall result in ineligibility to claim the tax credit."

SECTION 2. New statutory material is underscored.

SECTION 3. This Act, upon its approval, shall apply to taxable years beginning after December 31, 2012.

 


 


 

Report Title:

Media Infrastructure Project Tax Credit

 

Description:

Establishes a media infrastructure tax credit for qualified media infrastructure projects in West Oahu or on the most populous island in a county with a population between 100,000 and 150,000. Provides for recapture of the media infrastructure tax credit in certain circumstances. (SD1)

 

 

 

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