HOUSE OF REPRESENTATIVES |
H.B. NO. |
2228 |
THIRTY-FIRST LEGISLATURE, 2022 |
H.D. 1 |
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STATE OF HAWAII |
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A BILL FOR AN ACT
RELATING TO FILM INFRASTRUCTURE TAX CREDIT.
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- Motion
picture, digital media, and film infrastructure tax credit. (a)
There shall be allowed to each
taxpayer who:
(1) Is subject to
the taxes imposed by this chapter; and
(2) Invests $
or more in a qualified film infrastructure project,
a nonrefundable 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
per cent of the eligible infrastructure costs made by the taxpayer in any
county of the State.
A qualified film infrastructure project
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 eligible
infrastructure 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)
The credit allowed under this section shall be claimed
against the net income tax liability for the taxable year.
(c) 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.
(d) If a taxpayer sells, assigns, or
otherwise transfers a credit under this section to another taxpayer, the
transferor and transferee shall jointly submit written notification of the
transfer to the department of business, economic development, and tourism no
later than thirty days after the transfer. The notification shall include the credit
certificate number, date of transfer, amount of the credit transferred, tax
credit balance before and after the transfer, tax identification numbers for the
transferor and transferee, and any other information required by the director of
taxation. After the initial issuance of
a tax credit, the credit may be sold, assigned, or otherwise transferred not more
than three times. Failure to comply with
this subsection will result in a disallowance of the tax credit until there is full
compliance on both the part of the transferor and the transferee, and all
subsequent transferors and transferees. The
department of business, economic development, and tourism shall provide a copy
of the notification of assignment to the director of taxation upon request.
No tax credits transferred
pursuant to this subsection shall be subject to a post-certification remedy;
and the department of business, economic development, and tourism and director of
taxation shall have no right, except in the case of possible material
misrepresentation or fraud, to conduct any further or additional review,
examination or audit of the expenditures or costs for which the tax credits
were issued.
(e) Before claiming a tax credit under this
section, each taxpayer shall prequalify for the credit by registering with the
department of business, economic development, and tourism during the development
or preproduction stage. The taxpayer undertaking
a qualified film infrastructure project shall apply to the department of business,
economic development, and tourism for a film infrastructure tax credit certificate
no later than ninety days after the first expenses or costs are incurred, and
shall provide with the application the information as the department of business,
economic development, and tourism may require to determine the project's
eligibility as a qualified film infrastructure project.
Each application for a film infrastructure
tax credit certificate shall include:
(1) A detailed description
of the film infrastructure project;
(2) A preliminary
budget;
(3) Estimated
completion date; and
(4) Other
information as the department of business, economic development, and tourism
may require.
(f) The department of business, economic
development, and tourism may require an independent audit of all project costs
and expenditures before issuing a film infrastructure tax credit certificate. If the department of business, economic development,
and tourism determines that the project has eligible infrastructure costs, the
department shall indicate the amount of costs or expenditures that have been
established to the satisfaction of the department, and issue to the taxpayer a film
infrastructure tax credit certificate for investors indicating the amount of
tax credits available under this section. The department of business, economic development,
and tourism shall provide a copy of the film infrastructure tax credit certificate
to the director of taxation, upon request.
(g) Before the issuance of a film infrastructure
project tax credit voucher to a taxpayer based upon the film infrastructure tax
credit certificate issued by the department of business, economic development, and
tourism, the taxpayer undertaking the qualified film infrastructure project
shall provide the department with a description of the progress on the project
and an estimated completion date. The
department of business, economic development, and tourism may require an independent
audit of all project costs and expenditures before the issuance of the film infrastructure
tax credit voucher to a taxpayer. No film
infrastructure tax credit voucher shall be issued before the qualified film infrastructure
project is shown to be one hundred per cent complete.
(h) No later than
ninety days following the end of each taxable year in which eligible infrastructure
costs were expended, each taxpayer claiming a tax credit pursuant to this section
shall submit a written, sworn statement to the department of business, economic
development, and tourism, together with a verification review by a qualified certified
public accountant using procedures prescribed by the department, identifying:
(1) All eligible infrastructure
costs, if any, incurred in the previous taxable year;
(2) The amount of
tax credits claimed pursuant to this section, if any, in the previous taxable
year; and
(3) The number of
total hires versus the number of local hires by category and by county.
This information may be reported from the department
of business, economic development, and tourism to the legislature in a redacted
format pursuant to subsection (j)(5).
(i) The director of taxation shall prepare forms
as may be necessary to claim a credit under this section. The director of taxation 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.
(j) The department of business, economic development,
and tourism shall:
(1) Charge a reasonable
administrative fee sufficient to cover the department's costs to analyze applications
submitted under this section;
(2) Maintain records
of the names of the taxpayers and qualified film infrastructure project thereof
claiming the tax credits under this section;
(3) Obtain and
total the aggregate amounts of all eligible infrastructure costs per qualified film
infrastructure project and per qualified film infrastructure project per taxable
year;
(4) Provide a
letter to the director of taxation specifying the amount of the tax credit per
qualified film infrastructure project for each taxable year that a tax credit
is claimed and the cumulative amount of the tax credit for all years claimed;
and
(5) Submit a report
to the legislature no later than twenty days prior to the convening of each
regular session detailing the non-aggregated eligible infrastructure costs that
form the basis of the tax credit claims and expenditures, itemized by taxpayer,
in a redacted format to preserve the confidentiality of the taxpayers claiming
the credit.
Upon each determination required
under this subsection, the department of business, economic development, and tourism
shall issue a letter to the taxpayer, regarding the qualified film infrastructure
project, specifying the eligible infrastructure costs and tax credit amount
qualified for in each taxable year a tax credit is claimed. The taxpayer for each qualified film infrastructure
project shall file the letter with the taxpayer's tax return for the qualified film
infrastructure project to the department of taxation. Notwithstanding the authority of the department
of business, economic development, and tourism under this section, the director
of taxation may audit and adjust the tax credit amount to conform to the
information filed by the taxpayer.
(k)
The total amount of tax credits allowed under this section in any particular
year shall be $ ;
however, if the total amount of credits applied for in any year exceeds the
aggregate amount of credits allowed for that year under this section, the
excess shall be treated as having been applied for in the three immediately subsequent
taxable years and may be claimed in those years.
(l) For the purposes of this section:
"Eligible infrastructure costs" means
costs incurred by a qualified film infrastructure project 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 under this chapter. "Eligible infrastructure costs" include
but are not limited to include:
(1) All
expenditures to provide buildings, facilities, or installations, whether a capital
lease or purchase, together with necessary equipment for a film, video,
television, digital production facility, or digital animation production
facility;
(2) Project development,
including design, professional consulting fees and transaction costs;
(3) Development,
preproduction, production, post-production and distribution equipment, and
system access; and
(4) Fixtures and other
equipment.
"Qualified film infrastructure
project" means an infrastructure project undertaken in the State by an entity
that:
(1) Meets the definition
of a "qualified production" under section 235-17;
(2) Is authorized
to conduct business in the State;
(3) Is not in
default on a loan made by the State or a loan guaranteed by the State, or has
ever declared bankruptcy under which an obligation of the entity to pay or
repay public funds was discharged as a part of the bankruptcy; and
(4) Has been
approved by the department of business, economic development, and tourism as
qualifying for a film infrastructure tax credit under this section.
"Infrastructure project"
means a capital project to provide one or more building, facility, or
installation needed for the digital media and motion picture industry to function
in the State.
"Net income tax liability"
means net income tax liability reduced by all other credits allowed under this
chapter.
"Post-certification
remedy" means the recapture, disallowance, recovery, reduction, repayment,
forfeiture, decertification or any other remedy that would have the effect of
reducing or otherwise limiting the use of a tax credit provided by this section."
SECTION 2. New statutory material is underscored.
SECTION 3. This Act shall take effect on October 18, 2050, and shall apply to taxable years beginning after December 31, 2021.
Report Title:
Motion Picture, Digital Media, and Film Infrastructure Tax Credit; Department of Business, Economic Development, and Tourism
Description:
Creates a nonrefundable twenty percent film infrastructure tax credit. Requires that the film infrastructure project must spend an unspecified amount on buildings, facilities, or installations. Caps the credit at an unspecified amount per year. Effective 10/18/2050. (HD1)
The summary description
of legislation appearing on this page is for informational purposes only and is
not legislation or evidence of legislative intent.