2012 -- S 2271

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LC00668

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STATE OF RHODE ISLAND

IN GENERAL ASSEMBLY

JANUARY SESSION, A.D. 2012

____________

A N A C T

RELATING TO TAXATION -- ARTS AND ENTERTAINMENT--JOB STIMULUS

INCENTIVES

     Introduced By: Senators Miller, Goodwin, Ruggerio, Jabour, and Pichardo

     Date Introduced: February 01, 2012

     Referred To: Senate Finance

It is enacted by the General Assembly as follows:

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     SECTION 1. Chapter 44-31.2 of the General Laws entitled "Motion Picture Production

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Tax Credits" is hereby repealed in its entirety.

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     CHAPTER 44-31.2

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Motion Picture Production Tax Credits

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     44-31.2-1. Findings and purpose. -- (a) The general assembly finds and declares that the

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state of Rhode Island with its natural beauty, historical and architectural heritage of the state, its

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majestic natural resources including Narragansett Bay and the independence and diversity of its

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citizens and neighborhoods would provide a variety of excellent settings from which the motion

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picture industry might choose a location for filming a motion picture or television program, and

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together with those natural settings, the availability of labor, materials, climate, and hospitality of

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its people have been instrumental in the filming of several successful motion pictures.

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      (b) It is recognized that the motion picture industry brings with it a much needed

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infusion of capital into areas of the state which may be economically depressed and the multiplier

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effect of the infusion of capital resulting from the filming of a motion picture or television

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program serves to stimulate economic activity beyond that immediately apparent on the film set.

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      (c) Since a significant portion of the cost of a motion picture or television production

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will not be eligible for existing tax incentives due to the fact that portions of the production are

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carried out in another state, it is the purpose of this chapter to provide a financial incentive to the

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film industry in order that the state might compete with other states for filming locations.

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      (d) The primary objective of this chapter is to encourage development in Rhode Island of

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a strong capital base for motion picture film, videotape, and television program productions, in

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order to achieve a more independent, self-supporting industry. This objective is divided into

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immediate and long-term objectives as follows:

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      (1) Immediate objectives are to:

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      (i) Attract private investment for the production of motion pictures, videotape

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productions, and television programs which contain substantial Rhode Island content as defined

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herein.

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      (ii) Develop a tax infrastructure which encourages private investment. This infrastructure

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will provide for state participation in the form of tax credits to encourage investment in state-

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certified productions.

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      (iii) Develop a tax infrastructure utilizing tax credits which encourage investments in

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multiple state-certified production projects.

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      (2) Long-term objectives are to:

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      (i) Encourage increased employment opportunities within this sector and increased

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competition with other states in fully developing economic development options within the film

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and video industry.

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      (ii) Encourage new education curricula in order to provide a labor force trained in all

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aspects of film production.

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     44-31.2-2. Definitions. -- For the purposes of this chapter:

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      (1) "Accountant's certification" as provided in this chapter means a certified audit by a

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Rhode Island certified public accountant licensed in accordance with section 5-3.1.

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      (2) "Base investment" means the actual investment made and expended by a state-

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certified production in the state as production-related costs.

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      (3) "Domiciled in Rhode Island" means a corporation incorporated in Rhode Island or a

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partnership, limited liability company, or other business entity formed under the laws of the state

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of Rhode Island for the purpose of producing motion pictures as defined in this section, or an

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individual who is a domiciled resident of the state of Rhode Island as defined in chapter 30 of this

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title.

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      (4) "Motion picture" means a feature-length film, video, video games, television series,

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or commercial made in Rhode Island, in whole or in part, for theatrical or television viewing or as

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a television pilot. The term "motion picture" shall not include the production of television

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coverage of news or athletic events, nor shall it apply to any film, video, television series or

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commercial or a production for which records are required under section 2257 of title 18, U.S.C.,

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to be maintained with respect to any performer in such production or reporting of books, films,

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etc. with respect to sexually explicit conduct.

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      (5) "Motion picture production company" means a corporation, partnership, limited

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liability company or other business entity engaged in the business of producing one or more

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motion pictures as defined in this section. Motion picture production company shall not mean or

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include: (a) any company owned, affiliated, or controlled, in whole or in part by any company or

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person which is in default: (i) on taxes owed to the state; or (ii) on a loan made by the state; or

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(iii) a loan guaranteed by the state; nor (iv) any company or person who has even declared

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bankruptcy under which an obligation of the company or person to pay or repay public funds or

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monies was discharged as a part of such bankruptcy.

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      (6) "Primary locations" means the locations within which at least fifty-one percent (51%)

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of the motion picture principal photography days are filmed.

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      (7) "Rhode Island film and television office" means an office within the Rhode Island

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state council on the arts that has been established in order to promote and encourage the locating

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of film and television productions within the state of Rhode Island. The office is also referred to

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within as the "film office".

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      (8) "State-certified production" means a motion picture production approved by the

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Rhode Island film office and produced by a motion picture production company domiciled in

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Rhode Island, whether or not such company owns or controls the copyright and distribution rights

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in the motion picture; provided, that such company has either: (a) signed a viable distribution

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plan; or (b) is producing the motion picture for: (i) a major motion picture distributor; (ii) a major

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theatrical exhibitor; (iii) television network; or (iv) cable television programmer.

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      (9) "State certified production cost" means any pre-production, production and post-

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production cost that a motion picture production company incurs and pays to the extent it occurs

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within the state of Rhode Island. Without limiting the generality of the foregoing, "state certified

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production costs" include: set construction and operation; wardrobes, make-up, accessories, and

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related services; costs associated with photography and sound synchronization, lighting, and

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related services and materials; editing and related services, including, but not limited to, film

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processing, transfers of film to tape or digital format, sound mixing, computer graphics services,

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special effects services, and animation services, salary, wages, and other compensation, including

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related benefits, of persons employed, either director or indirectly, in the production of a film

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including writer, motion picture director, producer (provided the work is performed in the state of

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Rhode Island); rental of facilities and equipment used in Rhode Island; leasing of vehicles; costs

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of food and lodging; music, if performed, composed, or recorded by a Rhode Island musician, or

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released or published by a person domiciled in Rhode Island; travel expenses incurred to bring

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persons employed, either directly or indirectly, in the production of the motion picture, to Rhode

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Island (but not expenses of such persons departing from Rhode Island); and legal (but not the

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expense of a completion bond or insurance and accounting fees and expenses related to the

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production's activities in Rhode Island); provided such services are provided by Rhode Island

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licensed attorneys or accountants.

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     44-31.2-3., 44-31.2-4. Repealed.. --

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     44-31.2-5. Motion picture production company tax credit. -- (a) A motion picture

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production company shall be allowed a credit to be computed as provided in this chapter against a

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tax imposed by chapters 11, 14, 17 and 30 of this title. The amount of the credit shall be twenty-

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five percent (25%) of the state certified production costs incurred directly attributable to activity

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within the state, provided that the primary locations are within the state of Rhode Island and the

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total production budget as defined herein is a minimum of three hundred thousand dollars

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($300,000). The credit shall be earned in the taxable year in which production in Rhode Island is

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completed, as determined by the film office in final certification pursuant to subsection 44-31.2-

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6(c).

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      (b) For the purposes of this section: "total production budget" means and includes the

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motion picture production company's pre-production, production and post-production costs

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incurred for the production activities of the motion picture production company in Rhode Island

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in connection with the production of a state-certified production. The budget shall not include

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costs associated with the promotion or marketing of the film, video or television product.

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      (c) The credit shall not exceed the total production budget and shall be allowed against

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the tax for the taxable period in which the credit is earned and can be carried forward for not

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more than three (3) succeeding tax years.

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      (d) Credits allowed to a motion picture production company, which is a subchapter S

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corporation, partnership, or a limited liability company that is taxed as a partnership, shall be

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passed through respectively to persons designated as partners, members or owners on a pro rata

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basis or pursuant to an executed agreement among such persons designated as subchapter S

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corporation shareholders, partners, or members documenting an alternate distribution method

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without regard to their sharing of other tax or economic attributes of such entity.

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      (e) No more than fifteen million dollars ($15,000,000) may be issued for any tax year

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beginning after December 31, 2007.

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     44-31.2-6. Certification and administration. -- (a) Initial certification of a production. -

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The applicant shall properly prepare, sign and submit to the film office an application for initial

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certification of the Rhode Island production. The application shall include such information and

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data as the film office deems necessary for the proper evaluation and administration of said

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application, including, but not limited to, any information about the motion picture production

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company, and a specific Rhode Island motion picture. The film office shall review the completed

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application and determine whether it meets the requisite criteria and qualifications for the initial

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certification for the production. If the initial certification is granted, the film office shall issue a

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notice of initial certification of the motion picture production to the motion picture production

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company and to the tax administrator. The notice shall state that, after appropriate review, the

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initial application meets the appropriate criteria for conditional eligibility. The notice of initial

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certification will provide a unique identification number for the production and is only a

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statement of conditional eligibility for the production and, as such, does not grant or convey any

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Rhode Island tax benefits.

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      (b) Final certification of a production. - Upon completion of the Rhode Island production

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activities, the applicant shall request a certificate of good standing from the Rhode Island division

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of taxation. The division shall expedite the process for reviewing the issuance of such certificates.

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Such certificates shall verify to the film office the motion picture production company's

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compliance with the requirements of subsection 44-31.2-2(5). The applicant shall properly

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prepare, sign and submit to the film office an application for final certification of the production

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and which must include the certificate of good standing from the division of taxation. In addition,

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the application shall contain such information and data as the film office determines is necessary

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for the proper evaluation and administration, including, but not limited to, any information about

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the motion picture production company, its investors and information about the production

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previously granted initial certification. The final application shall also contain a cost report and an

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"accountant's certification". The film office and tax administrator may rely without independent

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investigation, upon the accountant's certification, in the form of an opinion, confirming the

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accuracy of the information included in the cost report. Upon review of a duly completed and

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filed application, the film office will make a determination pertaining to the final certification of

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the production and the resultant credits for section 44-31.2-5.

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      (c) Final certification and credits. - Upon determination that the motion picture

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production company qualifies for final certification and the resultant credits, the film office shall

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issue a letter to the production company indicating "certificate of completion of a state certified

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production" and shall provide specifically designed certificates for the motion picture production

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company credit under section 44-31.2-5. All documents that are issued by the film office pursuant

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to this section shall reference the identification number that was issued to the production as part

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of its initial certification.

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      (d) The director of the Rhode Island film and television office, in consultation as needed

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with the tax administrator, shall promulgate such rules and regulations as are necessary to carry

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out the intent and purposes of this chapter in accordance with the general guidelines provided

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herein for the certification of the production and the resultant production credit.

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      (e) The tax administrator of the division of taxation, in consultation with the director of

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the Rhode Island film and television office, shall promulgate such rules and regulations as are

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necessary to carry out the intent and purposes of this chapter in accordance with the general

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guidelines for the tax credit provided herein.

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      (f) Any motion picture production company applying for the credit shall be required to

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reimburse the division of taxation for any audits required in relation to granting the credit.

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     44-31.2-6.1. Impact analysis and periodic reporting. -- (a) The film office shall not

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certify or approve any application under section 44-31.2-6 of this chapter until it has first

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prepared and publicly released an analysis of the impact the proposed investment will or may

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have on the state. The analysis shall be supported by appropriate data and documentation and

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shall consider, but not be limited to, the following factors:

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      (i) The impact on the industry or industries in which the applicant will be involved;

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      (ii) State fiscal matters, including the state budget (revenues and expenses);

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      (iii) The financial exposure of the taxpayers of the state under the plans for the proposed

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investment and negative foreseeable contingencies that may arise therefrom;

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      (iv) The approximate number of full-time, part-time, temporary, seasonal and/or

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permanent jobs projected to be created, construction and non-construction;

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      (v) Identification of geographic sources of the staffing for identified jobs;

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      (vi) The projected duration of the identified construction jobs;

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      (vii) The approximate wage rates for each category of the identified jobs;

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      (viii) The types of fringe benefits to be provided with the identified jobs, including

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healthcare insurance and any retirement benefits;

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      (ix) The projected fiscal impact on increased personal income taxes to the state of Rhode

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Island; and

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      (x) The description of any plan or process intended to stimulate hiring from the host

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community, training of employees or potential employees, and outreach to minority job

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applicants and minority businesses.

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      (b) The film office shall monitor every impact analysis it completes through the duration

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of any approved tax credit. Such monitoring shall include annual reports made available to the

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public on the:

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      (1) Actual versus projected impact for all considered factors; and

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      (2) Verification of all commitments made in consideration of state incentives or aid.

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      (c) Upon its preparation and release of the analysis required by subsection (b) of this

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section, the film office shall provide copies of that analysis to the chairpersons of the house and

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senate finance committees, the house and senate fiscal advisors, the department of labor and

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training and the division of taxation. Any such analysis shall be available to the public for

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inspection by any person and shall by published by the tax administrator on the tax division

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website. Annually thereafter, through and including the second tax year after any taxpayer has

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applied for and received a tax credit pursuant to this chapter, the department of labor and training

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shall certify to the chairpersons of the house and senate finance committees, the house and senate

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fiscal advisors, the corporation and the division of taxation that: (i) the actual number of new full-

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time jobs with benefits created by the state-certified production, not including construction jobs,

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is on target to meet or exceed the estimated number of new jobs identified in the analysis above,

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and (ii) the actual number of existing full-time jobs with benefits has not declined. For purposes

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of this section, "full-time jobs with benefits" means jobs that require working a minimum of thirty

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(30) hours per week within the state, with a median wage that exceeds by five percent (5%) the

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median annual wage for full-time jobs in Rhode Island and within the taxpayer's industry, with a

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benefit package that includes healthcare insurance plus other benefits typical of companies within

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the motion picture industry. The department of labor and training shall also certify annually to the

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house and senate fiscal committee chairs, the house and senate fiscal advisors, and the division of

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taxation that jobs created by the state-certified production are "new jobs" in the state of Rhode

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Island, meaning that the employees of the motion picture production company are in addition to,

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and without a reduction of, those employees of the motion picture production company currently

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employed in Rhode Island, are not relocated from another facility of the motion picture

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production company in Rhode Island or are employees assumed by the motion picture production

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company as the result of a merger or acquisition of a company already located in Rhode Island.

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The certifications made by the department of labor and training shall be available to the public for

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inspection by any person and shall be published by the tax administrator on the tax division

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website.

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      (d) The film office, with the assistance of the motion picture production company, the

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department of labor and training, the department of human services and the division of taxation

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shall provide annually an analysis of whether any of the employees of the motion picture

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production company has received RIte Care or RIte Share benefits and the impact such benefits

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or assistance may have on the state budget. This analysis shall be available to the public for

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inspection by any person and shall be published by the tax administrator on the tax division

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website. Notwithstanding any other provision of law or rule or regulation, the division of

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taxation, the department of labor and training and the department of human services are

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authorized to present, review and discuss project-specific tax or employment information or data

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with the film office, the chairpersons of the house and senate finance committees, and/or the

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house and senate fiscal advisors for the purpose of verification and compliance with this tax

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credit reporting requirement.

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      (e) Any agreements or contracts entered into by the film office and the motion picture

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production company shall be sent to the division of taxation and be available to the public for

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inspection by any person and shall be published by the tax administrator on the tax division

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website.

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      (f) By August 15th of each year the motion picture production company shall report the

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source and amount of any bonds, grants, loans, loan guarantees, matching funds or tax credits

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received from any state governmental entity, state agency or public agency as defined in section

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37-2-7 received during the previous state fiscal year. This annual report shall be sent to the

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division of taxation and be available to the public for inspection by any person and shall be

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published by the tax administrator on the tax division website.

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      (g) By August 15th of each year the division of taxation shall report the name, address,

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and amount of tax credit received for each motion picture production company during the

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previous state fiscal year to the film office, the chairpersons of the house and senate finance

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committees, the house and senate fiscal advisors, the department of labor and training and the

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division of taxation. This report shall be available to the public for inspection by any person and

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shall be published by the tax administrator on the tax division website.

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      (h) On or before September 1, 2011, and every September 1 thereafter, the project lessee

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shall file an annual report with the tax administrator. Said report shall contain each full-time

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equivalent, part-time or seasonal employee's name, social security number, date of hire, and

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hourly wage as of the immediately preceding July 1 and such other information deemed necessary

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by the tax administrator. The report shall be filed on a form and in a manner prescribed by the tax

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administrator.

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     44-31.2-7. Information requests. -- (a) The director of the film office and his or her

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agents, for the purpose of ascertaining the propriety or correctness of any materials pertaining to

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the certification of any motion picture production or to credits claimed under the provisions of

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this chapter, may examine any books, papers, records, or memoranda bearing upon the matters

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required to be included in the return, report, or other statement, and may require the attendance of

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the person executing the return, report, or other statement, and may require the attendance of any

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taxpayer, or the attendance of any other person, and may examine the person under oath

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respecting any matter which the director or his or her agent deems pertinent or material in

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administration and application of this chapter and, where not inconsistent with other legal

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provisions, the director may request information from the tax administrator.

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      (b) The tax administrator and his or her agents, for the purpose of ascertaining the

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correctness of any credit claimed under the provisions of this chapter, may examine any books,

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papers, records, or memoranda bearing upon matters required to be included in the return, report,

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or other statement, and may require the attendance of the person executing the return, report, or

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other statement, or of any officer or employee of any taxpayer, or the attendance of any other

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person, and may examine the person under oath respecting any matter which the tax administrator

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or his or her agent deems pertinent or material in determining the eligibility for credits claimed

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and may request information from the film office, and the film office shall provide the

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information in all cases to the tax administrator.

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     44-31.2-8. Hearings and appeals. -- (a) From an action of the film office. - For matters

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pertaining exclusively to application, production, and certification of motion picture productions,

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any person aggrieved by a denial action of the film office under this chapter shall notify the

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director of the film office in writing, within thirty (30) days from the date of mailing of the notice

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of denial action by the film office and request a hearing relative to the denial or action. The

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director of the film office shall, as soon as is practicable, fix a time and place of hearing, and shall

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render a final decision. Appeals from a final decision of the director of the film office under this

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chapter are to the sixth (6th) division district court pursuant to chapter 35 of title 42 of the general

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laws.

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      (b) From denial of tax credit. - Any person aggrieved by the tax administrator's denial of

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a tax credit or tax benefit in this section shall notify the tax administrator in writing within thirty

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(30) days from the date of mailing of the notice of denial of the tax credit and request a hearing

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relative to the denial of the tax credit. The tax administrator shall, as soon as is practicable, fix a

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time and place for a hearing, and shall render a final decision. Appeals from a final decision of

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the tax administrator under this chapter are to the sixth (6th) division district court pursuant to

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chapter 8 of title 8 of the general laws. The taxpayer's right to appeal is expressly made

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conditional upon prepayment of all taxes, interest, and penalties, unless the taxpayer files a timely

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motion for exemption from prepayment with the district court in accordance with the

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requirements imposed pursuant to section 8-8-26 of the general laws.

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     44-31.2-9. Transferability of the credit. -- (a) Any motion picture production company

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tax credit certificate issued in accordance with section 44-31.2-5, which has been issued to a

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motion picture production company or passed through in accordance with subsection 44-31.2-

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5(d), and to the extent not previously claimed against the tax of the motion picture production

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company or of the owner of the certificate if the certificate was issued in accordance with

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subsection 44-31.2-5(d), may be transferred or sold by such company to another Rhode Island

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taxpayer, subject to the following conditions:

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      (1) A single transfer or sale may involve one or more transferees, assignees or

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purchasers. A transfer or sale of the credits may involve multiple transfers to one or more

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transferees, assignees or purchasers.

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      (2) Transferors and sellers shall submit to the Rhode Island Film Office, and to the tax

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administrator in writing, a notification of any transfer or sale of tax credits within thirty (30) days

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after the transfer or sale of such tax credits. The notification shall include the transferor's tax

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credit balance prior to transfer, the credit certificate number, the name of the state-certified

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production, the transferor's remaining tax credit balance after transfer, all tax identification

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numbers for both transferor and transferee, the date of transfer, the amount transferred, a copy of

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the credit certificate, and any other information required by the Rhode Island office of film and

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television or the division of taxation. The notification submitted to the division of taxation shall

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include a processing fee of up to two hundred dollars ($200) per transferee which shall be

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deposited as general revenues.

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      (3) Failure to comply with this section will result in the disallowance of the tax credit

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until the taxpayers are in full compliance.

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      (4) The transfer or sale of this credit does not extend the time in which the credit can be

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used. The carry forward period for credit that is transferred or sold begins on the date on which

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the credit was originally granted by the film office.

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      (5) To the extent that the transferor did not have rights to claim or use the credit at the

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time of the transfer, the division of taxation shall either disallow the credit claimed by the

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transferee or recapture the credit from the transferee through any collection method authorized by

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Rhode Island general law. The transferee's recourse is against the transferor.

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      (6) The film office shall assess and collect an administrative fee of two hundred dollars

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($200) per transfer, assignment or sale for issuing multiple motion picture production company

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tax credit certificates or for reissuing certificates.

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      (b) The transferee, assignee or purchaser shall apply such credits in the same manner as

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the motion picture production company originally awarded the credit.

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      (c) For purposes of this chapter, any assignment or sales proceeds received by the motion

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picture production company for its assignment or sale of the tax credits allowed pursuant to this

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section shall be exempt from this title.

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     44-31.2-10. Disclaimer and severability. -- (a) The state of Rhode Island reserves the

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right to refuse the use of Rhode Island's name in credits of any motion picture filmed or produced

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in the state.

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      (b) If any clause, sentence, paragraph, or part of this chapter is for any reason judged

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invalid by any court of competent jurisdiction, the judgment does not affect, impair, or invalidate

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the remainder of this chapter but is confined in its operation to the clause, sentence, paragraph, or

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part of this chapter directly involved in the controversy in which the judgment has been rendered.

11-11

     SECTION 2. Title 44 of the General Laws entitled "TAXATION" is hereby amended by

11-12

adding thereto the following chapter:

11-13

     CHAPTER 31.3

11-14

THE ARTS AND ENTERTAINMENT JOB STIMULUS INCENTIVES ACT OF 2012

11-15

     44-31.3-1. Declaration of purpose. – The general assembly finds and declares that it is

11-16

Rhode Island’s priority to reduce the state unemployment rate by stimulating new industries that

11-17

have large employment growth potential by providing tax incentives and other means necessary

11-18

and therefore recognizes that such incentives should be created for the arts and entertainment

11-19

industry. The purpose of this chapter is to create economic incentives for the purpose of

11-20

stimulating the local economy and reducing unemployment in Rhode Island.

11-21

     44-31.3-2. Motion picture production tax credits. – (a) Definitions. -- As used in this

11-22

chapter:

11-23

     (1) “Accountant’s certification” as provided in this chapter means a certified audit by a

11-24

Rhode Island certified public accountant licensed in accordance with the provisions of chapter 5-

11-25

3.1 (“Public Accountancy”).

11-26

     (2) “Base investment” means the actual investment made and expended by a state-

11-27

certified production in the state as production-related costs.

11-28

     (3) “Domiciled in Rhode island means: (i) A corporation incorporated in Rhode Island or

11-29

a partnership, limited liability company, or other business entity formed under the laws of the

11-30

state of Rhode Island for the purpose of producing motion pictures as defined in this section; or

11-31

(ii) An individual who is a domiciled resident of the state of Rhode Island or who is not domiciled

11-32

in this state but maintains a permanent place of abode in this state and is in this state for an

11-33

aggregate of more than one hundred eighty-three (183) days of the taxable year, unless the

11-34

individual is in the armed forces of the United States.

12-1

     (4) “EDC’ means the Rhode Island Economic Development Corporation created pursuant

12-2

to chapter 42-64 (“Rhode Island Economic Development Corporation”).

12-3

      (5) “Full-Time Equivalent Employee” means a person who works a minimum of thirty

12-4

(30) hours per week within the state of Rhode Island and earns no less than two hundred percent

12-5

(200%) of the hourly minimum wage prescribed by Rhode Island law.

12-6

     (6) “Motion picture” means a feature-length film, video, television series, or commercial

12-7

made in Rhode Island, in whole or in part, for theatrical or television viewing or as a television

12-8

pilot. The term “motion picture” shall not include the production of television coverage of news

12-9

or athletic events, nor shall it apply to any film, video, television series or commercial or a

12-10

production for which records are required under section 2257 of title 18, U.S.C., to be maintained

12-11

with respect to any performer in such production or reporting of books, films, etc. with respect to

12-12

sexually explicit conduct.

12-13

     (7) “Motion picture production company” means a corporation, partnership, limited

12-14

liability company or other business entity engaged in the business of producing one or more

12-15

motion pictures as defined in this section and domiciled in Rhode Island. Motion picture

12-16

production company shall not mean or include any company owned, affiliated, or controlled, in

12-17

whole or in part by any company or person which is in default: (i) On taxes owed to the state; or

12-18

(ii) On a loan made by the state; or (iii) On a loan guaranteed by the state; or (iv) Any company

12-19

or person who has even declared bankruptcy under which an obligation of the company or person

12-20

to pay or repay public funds or monies was discharged as a part of such bankruptcy.

12-21

     (8) “Primary locations” means the locations within which at least fifty-one percent (51%)

12-22

of the motion picture principal photography days are filmed.

12-23

     (9) “Qualified Film Production Facility” means a film production facility in the state,

12-24

which contains at least one sound stage having a minimum of seven thousand square feet (7,000

12-25

sq ft) of contiguous production space that is soundproof with a Noise Criteria (“NC”) of thirty

12-26

(30) or better, has sufficient heating and cooling and incorporates a permanent grid and sufficient

12-27

built-in electric service for shooting, and is column-free with a clear height of at least sixteen feet

12-28

under the permanent grid.

12-29

     (10) “Rhode Island film and television office” means an office within the Rhode Island

12-30

state council on the arts that has been established in order to promote and encourage the locating

12-31

of film and television productions within the state of Rhode Island. The office is also referred to

12-32

within as the “film office”.

12-33

     (11) “Rhode Island Resident” means for the purpose of determination of eligibility for the

12-34

tax incentives provided by this chapter, an individual who is domiciled in the state of Rhode

13-1

Island or who is not domiciled in this state but maintains a permanent place of abode in this state

13-2

and is in this state for an aggregate of more than one hundred eighty-three (183) days of the

13-3

taxable year, unless the individual is in the armed forces of the United States.

13-4

     (12) “State-certified production” means a motion picture production approved by the

13-5

Rhode Island film office and produced by a motion picture production company, whether or not

13-6

such company owns or controls the copyright and distribution rights in the motion picture;

13-7

provided, that such company is principally engaged in the production of the motion picture and

13-8

controls the production of the motion picture.

13-9

     (13) “State certified production cost” means any pre-production, production and post-

13-10

production cost that a motion picture production company incurs and pays to the extent it occurs

13-11

within the state of Rhode Island and specifically excluding costs associated with the promotion or

13-12

marketing of the motion picture. Without limiting the generality of the foregoing, “state certified

13-13

production costs” include: set construction and operation; wardrobes, make-up, accessories, and

13-14

related services; costs associated with photography and sound synchronization, lighting, and

13-15

related services and materials; editing and related services, including, but not limited to, film

13-16

processing, transfers of film to tape or digital format, sound mixing, computer graphics services,

13-17

special effects services, and animation services, salary, wages, and other compensation, including

13-18

related benefits, of persons employed, either directly or indirectly, in the production of a film

13-19

including writer, motion picture director, producer (provided the work is performed in the state of

13-20

Rhode Island); rental of facilities and equipment used in Rhode Island; leasing of vehicles; costs

13-21

of food and lodging; music, if performed, composed, or recorded by a Rhode Island musician, or

13-22

released or published by a person domiciled in Rhode Island; travel expenses incurred to bring

13-23

persons employed, either directly or indirectly, in the production of the motion picture, to Rhode

13-24

Island (but not expenses of such persons departing from Rhode Island); legal (but not the expense

13-25

of a completion bond or insurance); accounting fees and expenses related to the production’s

13-26

activities in Rhode Island, provided such services are provided by Rhode Island licensed

13-27

attorneys or accountants; and finance fees, provided that the finance company is domiciled in

13-28

Rhode Island and has at least one full-time equivalent employee who is a Rhode Island resident

13-29

and such finance company is not an equity investor in the motion picture.

13-30

     (b) Tax Credit. -- (1) A motion picture production company shall be allowed a tax credit

13-31

to be computed as provided in this chapter against a tax imposed by chapters 11, 12, 13, 14, 17

13-32

and/or 30 of title 44 (“Taxation”) in the amount of thirty percent (30%) of the state certified

13-33

production costs, provided that: (i) The primary locations are within the state of Rhode Island; (ii)

13-34

The state certified production costs are a minimum of three hundred thousand dollars ($300,000);

14-1

and (iii) At least fifteen percent (15%) of the total principal photography shooting days for the

14-2

motion picture are spent at a qualified film production facility. If a qualified film production

14-3

facility is not available, such company may petition the EDC for a waiver of such condition and

14-4

the EDC shall have five (5) days to grant or reject the petition. A stage will be deemed

14-5

unavailable if consideration has been paid for its use or such stage is currently under an

14-6

agreement with an option for use and, in either circumstance, such period of use includes the

14-7

petitioner’s estimated start date of principal photography. The tax credit shall be earned in the

14-8

taxable year in which the motion picture production in Rhode Island is completed, as determined

14-9

by the film office in final certification pursuant to this chapter and can be carried forward for not

14-10

more than three (3) succeeding years. To the extent that the motion picture production company

14-11

incurs any costs on payroll for a Rhode Island resident employed for such motion picture, the

14-12

motion picture production company shall be allowed an additional tax credit of five percent (5%)

14-13

of such payroll.

14-14

     (2) Tax credits allowed to a motion picture production company, which is a subchapter S

14-15

corporation, partnership, or a limited liability company that is taxed as a partnership, shall be

14-16

passed through respectively to persons designated as partners, members or owners on a pro rata

14-17

basis or pursuant to an executed agreement among such persons designated as subchapter S

14-18

corporation shareholders, partners, or members documenting an alternate distribution method

14-19

without regard to their sharing of other tax or economic attributes of such entity.

14-20

     (3) If the motion picture production company has not claimed the tax credits in whole or

14-21

part, the motion picture production company eligible for the tax credits may assign, transfer or

14-22

convey the tax credits, in whole or in part, by sale or otherwise to any individual or entity and

14-23

such assignee of the tax credits that have not claimed the tax credits in whole or part may assign,

14-24

transfer or convey the tax credits, in whole or in part, by sale or otherwise to any individual or

14-25

entity. The assignee of the tax credits may use acquired credits to offset up to one hundred

14-26

percent (100%) of the tax liabilities otherwise imposed pursuant to chapter 11, 12, 13, (other than

14-27

the tax imposed under section 44-13-13), 14, 17 or 30 of title 44 (“Taxation”). The assignee may

14-28

apply the tax credit against taxes imposed on the assignee until the end of the third (3rd) calendar

14-29

year after the year in which the motion picture production is completed or until the full credit

14-30

assigned is used, whichever occurs first. The assignor shall perfect the transfer by notifying the

14-31

state of Rhode Island division of taxation, in writing, within thirty (30) calendar days following

14-32

the effective date of the transfer and shall provide any information as may be required by the

14-33

division of taxation to administer and carry out the provisions of this section.

15-34

     (4) For purposes of this chapter, any assignment or sales proceeds received by the

15-35

assignor for its assignment or sale of the tax credits allowed pursuant to this section shall be

15-36

exempt from this title.

15-37

     (5) In the case of a corporation, this credit is only allowed against the tax of a corporation

15-38

included in a consolidated return that qualifies for the credit and not against the tax of other

15-39

corporations that may join in the filing of a consolidated tax return.

15-40

     (6) No more than fifteen million dollars ($15,000,000) in tax credits in the aggregate may

15-41

be issued under this chapter for any tax year beginning after December 31, 2011.

15-42

     (c) Certification and administration. -- (1) Initial certification of a production. The

15-43

applicant shall properly prepare, sign and submit to the film office an application for initial

15-44

certification of the Rhode Island production. The application shall include such information and

15-45

data as the film office deems reasonably necessary for the proper evaluation and administration of

15-46

said application, including, but not limited to, any information about the motion picture

15-47

production company, and a specific Rhode Island motion picture. The film office shall review the

15-48

completed application and determine whether it meets the requisite criteria and qualifications for

15-49

the initial certification for the production. If the initial certification is granted, the film office shall

15-50

issue a notice of initial certification of the motion picture production to the motion picture

15-51

production company and to the tax administrator. The notice shall state that, after appropriate

15-52

review, the initial application meets the appropriate criteria for conditional eligibility. The notice

15-53

of initial certification will provide a unique identification number for the production and is only a

15-54

statement of conditional eligibility for the production and, as such, does not grant or convey any

15-55

Rhode Island tax benefits.

15-56

     (2) Final certification of a production. Upon completion of the Rhode Island production

15-57

activities, the applicant shall request a certificate of good standing from the Rhode Island division

15-58

of taxation. The division shall expedite the process for reviewing the issuance of such certificates.

15-59

The applicant shall properly prepare, sign and submit to the film office an application for final

15-60

certification of the production and which must include the certificate of good standing from the

15-61

division of taxation. The final application shall contain a cost report and an “accountant’s

15-62

certification”. The film office and tax administrator may rely without independent investigation,

15-63

upon the accountant’s certification, in the form of an opinion, confirming the accuracy of the

15-64

information included in the cost report. Within thirty (30) days of a duly completed and filed

15-65

application, the film office will make a determination pertaining to the final certification of the

15-66

production and the resultant tax credits.

15-67

     (3) Final certification and credits. (i) Upon determination that the motion picture

15-68

production company qualifies for final certification and the resultant tax credits, the film office

16-1

shall issue a letter to the production company indicating “certificate of completion of a state

16-2

certified production” and shall provide specifically designed tax credit certificates to the motion

16-3

picture production company. All documents that are issued by the film office pursuant to this

16-4

section shall reference the identification number that was issued to the production as part of its

16-5

initial certification.

16-6

     (ii) The director of the Rhode Island film and television office, in consultation as needed

16-7

with the tax administrator, shall promulgate such rules and regulations as are necessary to carry

16-8

out the intent and purposes of this chapter in accordance with the general guidelines provided

16-9

herein for the certification of the production and the resultant production credit.

16-10

     (iii) Any motion picture production company applying for the credit shall be required to

16-11

reimburse the division of taxation for any audits required in relation to granting the credit.

16-12

     (4) Notwithstanding any provisions of the general laws or regulations adopted thereunder

16-13

to the contrary, the film office and the division of taxation are hereby expressly authorized and

16-14

empowered to enter into contracts with motion picture production companies that incur state

16-15

certified production costs.

16-16

     (5) The film office shall charge an administration fee in an amount equal to five-

16-17

thousandths (.005) multiplied by tax credits allowed, which fee is payable upon delivery of a fully

16-18

executed contract guarantying the tax credits as set forth herein.

16-19

     (6) Simultaneously with payment of the fee, the film office shall, on behalf of the state of

16-20

Rhode Island, guaranty the deliver of one hundred percent (100%) of the tax credit and use of one

16-21

hundred percent of the tax credit in the tax year the state certified production costs are incurred by

16-22

the motion picture production company.

16-23

     (7) Any contract executed pursuant to this chapter by a motion picture production

16-24

company that incurs state certified production costs shall be assignable to: (i) An affiliate thereof

16-25

without any consent from the division of taxation or the film office; or (ii) A person, firm,

16-26

partnership, trust, estate, limited liability company, corporation (whether for profit or non-profit)

16-27

or other business entity approved by the film office, which approval shall not be unreasonably

16-28

withheld. For purposes of this subsection, affiliate” shall be defined as any entity controlling,

16-29

controlled by or under common control with such person, firm, partnership, trust, estate, limited

16-30

liability company, corporation (whether for profit or non-profit) or other business entity.

16-31

     (8) If information comes to the attention of the film office that is materially inconsistent

16-32

with representations made in an application, film office may deny the requested certification. In

16-33

the event that tax credits or a portion of tax credits are subject to recapture for ineligible costs and

16-34

such tax credits have been transferred, assigned and/or allocated, the state will pursue its

17-1

recapture remedies and rights against the motion picture production company. No redress shall be

17-2

sought against assignees, sellers, transferees or allocates of such credits.

17-3

     (d) Information Requests. -- The tax administrator and his or her agents, for the purpose

17-4

of ascertaining the correctness of any credit claimed under the provisions of this chapter, may

17-5

examine any books, paper, records, or memoranda bearing upon the matters required to be

17-6

included in the return, report, or other statement, and may require the attendance of the person

17-7

executing the return, report, or other statement, or of any officer or employee of any taxpayer, or

17-8

the attendance of any other person, and may examine the person under oath respecting any matter

17-9

which the tax administrator or his or her agent deems pertinent or material in determining the

17-10

eligibility for credits claimed.

17-11

     44-31.3-3. Digital media tax credit. – (a) Definitions. -- As used in this chapter:

17-12

     (1) “Contrary to Public Policy” means products that in the opinion of the EDC capable of

17-13

inciting hatred against an identifiable group, including a section of the public distinguished by

17-14

color, race, religion, sex, sexual orientation or ethnic origin and products whose dominate

17-15

characteristic is the undue exploitation of sex and one or more of crime, horror or cruelty.

17-16

     (2) “Development” means in the arts and entertainment industry the stages of production

17-17

up to product launch including without limitation, concept development, product design,

17-18

planning, and production.

17-19

     (3) “EDC” means the Rhode Island Economic Development Corporation created pursuant

17-20

to chapter 42-64 (“Rhode Island Economic Development Corporation”).

17-21

     (4) “Eligible Product” means a combination of one or more application files and one or

17-22

more data files, all in a digital media format, that are integrated and are intended to be operated

17-23

together and that have the following characteristics when they are being operated:

17-24

     (i) The primary purpose is to educate, inform or entertain the user;

17-25

     (ii) They achieve their primary purpose by presenting information in at least two (2) of

17-26

the following forms:

17-27

     (A) Text;

17-28

     (B) Sound; or

17-29

     (C) Images;

17-30

     (iii) They are intended to be used by individuals;

17-31

     (iv) By interacting with them, the user can choose what information is to be presented

17-32

and the form and sequence in which it is to be presented;

17-33

     (v) The product was developed for sale or licensing by the qualifying company to one or

17-34

more arm’s length parties;

18-1

     (vi) The product is not used primarily for interpersonal communication; and

18-2

     (vii) The product is not used primarily to present, promote or sell the products or services

18-3

of the qualifying company or used primarily to present or promote the qualifying company.

18-4

     (5) “Full Time Equivalent Active Employees” means a person who: (i) Works a

18-5

minimum of thirty (30) hours per week within the state of Rhode Island; (ii) Earns healthcare

18-6

insurance benefits, and retirement benefits; and (iii) Earns no less than two hundred percent

18-7

(200%) of the hourly minimum wage prescribed by Rhode Island law.

18-8

     (6) “Primarily” means more than fifty percent (50%).

18-9

     (7) “Qualified Company” means any person, firm, partnership, trust, estate, limited

18-10

liability company, corporation or other business entity that incurs qualified expenditures for the

18-11

development of an eligible product that is domiciled in the state of Rhode Island, qualified to do

18-12

business in the state of Rhode Island and which has at least eighty (80) full-time equivalent active

18-13

employees within one hundred fifty-two (152) days after receipt of the EDC’s written

18-14

determination of the eligibility of the product and as further described herein.

18-15

     (8) “Qualified expenditures” means any amounts incurred in the state of Rhode Island in

18-16

the direct development of the eligible product, including without limitation, one hundred percent

18-17

(100%) of all salaries and wages of its employees fee or service arrangements paid to business

18-18

entities or persons who performed in Rhode Island in an arm’s length transaction and marketing

18-19

and distribution expenditures of the eligible product incurred by the qualified company no more

18-20

than twenty-four (24) months before completion of the eligible product and no more than twelve

18-21

(12) months alter completion of the eligible product.

18-22

     (b) Tax Credit. -- (1) A qualified company that incurs qualified expenditures for the

18-23

development of an eligible product that is not contrary to public policy shall be entitled to a credit

18-24

against the taxes imposed on such person or entity Pursuant to chapter 11, 12. 13, 14, 17 or 30 of

18-25

title 44 (“Taxation”) in an amount equal to twenty-five percent (25%) of the qualified

18-26

expenditures.

18-27

     (2) Tax credits allowed pursuant to this chapter shall be allowed in each tax year that the

18-28

qualified expenditures are incurred; provided, however, if the person, firm, partnership, trust,

18-29

estate, limited liability company, corporation or other, business entity is not yet a qualified

18-30

company then such tax credits will be issued when the taxpayer becomes a qualified company

18-31

and for the tax year that the qualified expenditures were incurred.

18-32

     (3) If the amount of the tax credit exceeds the taxpayer’s total tax liability for the year in

18-33

which the qualified expenditures are incurred, the amount that exceeds the taxpayer’s tax liability

18-34

may be carried forward for credit against the taxes imposed for the succeeding ten (10) years, or

19-1

until the full credit is used, whichever occurs first for the tax credits. Tax credits allowed to a

19-2

partnership, a limited liability company taxed as a partnership or multiple owners of property

19-3

shall be passed through to the persons designated as partners, members or owners respectively

19-4

pro rata or pursuant to an executed agreement among such persons designated as partners,

19-5

members or owners documenting an alternate distribution method without regard to their sharing

19-6

of other tax or economic attributes of such entity.

19-7

     (4) If the taxpayer has not claimed the tax credits in whole or part, taxpayers eligible for

19-8

the tax credits may assign, transferor convey the tax credits, in whole or in part, by sale or

19-9

otherwise to any individual or entity and such assignee of the tax credits that have not claimed the

19-10

tax credits in whole or part may assign, transfer or convey the tax credits, in whole or in part, by

19-11

sale or otherwise to any individual or entity. The assignee of the tax credits may use acquired

19-12

credits to offset up to one hundred percent (100%) of the tax liabilities otherwise imposed

19-13

pursuant to chapter 11, 12. 13, (other than the tax imposed under 44-13-13), 14, 17 or 30 of title

19-14

44 (“Taxation”). The assignee may apply the tax credit against taxes imposed on the assignee

19-15

until the end of the tenth (10th) calendar year after the year in which the qualified expenditures are

19-16

incurred or until the full credit assigned is used, whichever occurs first. Fiscal year assignees may

19-17

claim the credit until the expiration of the fiscal year that ends within the tenth (10th) year after

19-18

the year in which the qualified expenditures are incurred. The assignor shall perfect the transfer

19-19

by notifying the state of Rhode Island division of taxation, in writing, within thirty (30) calendar

19-20

days following the effective date of the transfer and shall provide any information as may be

19-21

required by the division of taxation to administer and carry out the provisions of this section.

19-22

     (5) For purposes of this chapter, any assignment or sales proceeds received by the

19-23

assignor for its assignment or sale of the tax credits allowed pursuant to this section shall be

19-24

exempt from this title.

19-25

     (6) In the case of a corporation, this credit is only allowed against the tax of a corporation

19-26

included in a consolidated return that qualifies for the credit and not against the tax of other

19-27

corporations that may join in the filing of a consolidated tax return.

19-28

     (c) Tax credit administration. -- (1) Prior to completion of the eligible product, the

19-29

qualified company shall apply to the EDC for a written certification of its product eligibility,

19-30

certification of its projected qualified expenditures and certification that the product is not

19-31

contrary to public policy. Within fifteen (15) days of receipt of the information required by the

19-32

EDC for the written certification. The EDC shall issue a denial or written certification of its

19-33

eligible product and of its projected qualified expenditures. The qualified company shall file with

19-34

the EDC for each tax year of development of the eligible product a cost certification by a certified

20-1

public accountant licensed in the state of Rhode Island certifying the qualified expenditures, the

20-2

amount of the tax credits for the particular tax year to be claimed and of number of full-time

20-3

equivalent active employees.

20-4

     (2) Within thirty (30) days after the EDC’s receipt of the qualified company’s application

20-5

requesting certification for the qualified expenditures for the applicable tax year, the EDC shall

20-6

issue the qualified company a written determination either denying or certifying the expenditures,

20-7

in whole or in part, and the division of taxation shall issue a certification of the amount of credit

20-8

for the qualified expenditures and the tax credit certificates in any such denomination as

20-9

requested by the taxpayer or assignee. To claim the tax credit, the certification as to the amount of

20-10

the tax credit shall be attached to all state tax returns on which the credit is claimed.

20-11

     (3) The EDC shall charge an administration fee in an amount equal to five-hundredths

20-12

(.005) multiplied by tax credits allowed, which fee is payable upon delivery of a fully executed

20-13

contract guarantying the tax credits as set forth herein.

20-14

     (4) Notwithstanding any provisions of the general laws or regulations adopted thereunder

20-15

to the contrary, the EDC and the division of taxation are hereby expressly authorized and

20-16

empowered to enter into contracts with persons, firms. partnerships, trusts, estates, limited

20-17

liability companies, corporations or other business entities that incur qualified expenditures for

20-18

development of eligible products.

20-19

     (5) Simultaneously with payment of the fee, the EDC shall, on behalf of the state of

20-20

Rhode Island, guaranty the delivery of one hundred percent (100%) of the tax credit and use of

20-21

one hundred percent (100%) of the tax credit in the tax year the qualified expenditures are

20-22

incurred by the qualified company for development of the eligible product.

20-23

     (6) Any contract executed pursuant to this chapter by a qualified company that incurs

20-24

qualified expenditures for the development of an eligible product shall be assignable to: (i) An

20-25

affiliate thereof without any consent from the division of taxation or the EDC; (ii) A banking or

20-26

other financial institution as defined by title 19 (“Financial Institutions”) or credit union as

20-27

defined in chapter 19-1 (“Definitions and Establishment of Financial Situations”) a person, firm,

20-28

partnership. trust, estate, limited liability company, corporation (whether for profit or nonprofit)

20-29

or other business entity approved by the EDC, which approval shall not be unreasonably

20-30

withheld. For purposes of this subsection, affiliate shall be defined as any entity controlling,

20-31

controlled by or under common control with such person, firm, partnership, trust, estate, limited

20-32

liability company, corporation (whether for profit or nonprofit) or other business entity.

20-33

     (7) If information comes to the attention of the EDC that is materially inconsistent with

20-34

representations made in an application, the EDC may deny the requested certification. In the

21-1

event that tax credits or a portion of tax credits are subject to recapture for ineligible costs and

21-2

such tax credits have been transferred, assigned and/or allocated, the state will pursue its

21-3

recapture remedies and rights against the qualified company of the tax credits. No redress shall be

21-4

sought against assignees, sellers, transferees or allocates of such credits.

21-5

     (d) Information Requests. The tax administrator and his or her agents, for the purpose of

21-6

ascertaining the correctness of any credit claimed under the provisions of this chapter, may

21-7

examine any books, papers, records, or memoranda bearing upon the matters required to be

21-8

included in the return, report, or other statement, and may require the attendance of the person

21-9

executing the return, report, or other statement, or of any officer or employee of any taxpayer, or

21-10

the attendance of any other person, and may examine the person under oath respecting any matter

21-11

which the tax administrator or his or her agent deems pertinent or material in determining the

21-12

eligibility for credits claimed.

21-13

     44-31.3-4. Musical and theatrical production tax credits. -- (a) Definitions as used in

21-14

this chapter: (1) “Accredited theater production” means a for-profit live-stage presentation in a

21-15

qualified production facility, as defined in this chapter, that is either: (i) A pre-Broadway

21-16

production; or (ii) A post-Broadway production.

21-17

     (2) “Accredited theater production certificate” means a certificate issued by the EDC

21-18

certifying that the production is an accredited theater production that meets the guidelines of this

21-19

chapter.

21-20

     (3) “Advertising and public relations expenditure” means costs incurred within the state

21-21

by the accredited theater productions for goods or services related to the national marketing,

21-22

public relations, creation and placement of print, electronic, television, billboards and other forms

21-23

of advertising to promote the accredited theater production.

21-24

     (4) “EDC” means the Rhode Island economic development corporation.

21-25

     (5) “Payroll” means all salaries, wages, fees, and other compensation including related

21-26

benefits for services performed and costs incurred within Rhode Island.

21-27

     (6) “Pre-Broadway Production” means a live-stage production that, in its original or

21-28

adaptive version, is performed in a qualified production facility having a presentation scheduled

21-29

for Broadway’s theater district in New York City with in twelve (12) months after its Rhode

21-30

Island presentation.

21-31

     (7) “Post-Broadway production” means a live-stage production that, in its original or

21-32

adaptive version, is performed in a qualified production facility and opens its US tour in Rhode

21-33

Island after a presentation scheduled for Broadway’s theater district in New York City.

22-34

     (8) “Production and Performance Expenditures” means a contemporaneous exchange of

22-35

cash or cash equivalent for goods or services related to the development, production, performance

22-36

or operating expenditures incurred in this state for a qualified theater production, including but

22-37

not limited to expenditures for design, construction and operation, including sets, special and

22-38

visual effects, costumes, wardrobes, make-up, accessories, costs associated with sound, lighting,

22-39

staging, payroll, transportation expenditures, advertising and public relations expenditures,

22-40

facility expenses, rentals, per diems, accommodations and other related costs.

22-41

     (9) “Qualified Production Facility” means a facility located in the state of Rhode Island in

22-42

which live theatrical productions are, or are intended to be, exclusively presented that contains at

22-43

least one stage, a seating capacity of one thousand five hundred (1,500) or more seats, and

22-44

dressing rooms, storage areas, and other ancillary amenities necessary for the accredited theater

22-45

production.

22-46

     (10) “Resident” or “Rhode Island resident” means for the purpose of determination of

22-47

eligibility for the tax incentives provided by this chapter, a individual who is domiciled in the

22-48

state of Rhode Island or who is not domiciled in this state but maintains a permanent place of

22-49

abode in this state and is in this state for an aggregate of more than one hundred eighty-three

22-50

(183) days of the taxable year, unless the individual is in the armed forces of the United States.

22-51

     (11)(i) “Transportation expenditures” means expenditures for the packaging, crating, and

22-52

transportation both to the state for use in a qualified theater production of sets, costumes, or other

22-53

tangible property constructed or manufactured out-of-state, and/or from the state after use in a

22-54

qualified theater production of sets, costumes, or other tangible property constructed or

22-55

manufactured in this state and transportation of the cast and crew to and from the state. Such term

22-56

shall include the packaging, crating, and transporting of property and equipment used for special

22-57

and visual effects, sound, lighting, and staging, costumes, wardrobes, make-up and related

22-58

accessories and materials, as well as any other performance or production-related property and

22-59

equipment.

22-60

     (ii) Transportation expenditures shall not include any costs to transport property and

22-61

equipment to be used only for filming and not in a qualified theater production, any indirect costs,

22-62

and expenditures that are later reimbursed by a third party, or any amounts that are paid to

22-63

persons or entities as a result of their participation in profits from the exploitation of the

22-64

production.

22-65

     (b) Tax Credit. -- (1) Any person, firm, partnership, trust, estate or other entity that

22-66

receives an accredited theater production certificate shall be allowed a tax credit equal to twenty

22-67

percent (20%) of the total production and performance expenditures and transportation

22-68

expenditures for the accredited theater production and to be computed as provided in this chapter

23-1

against a tax imposed by chapters 11, 12, 13, 14, 17 and/or 30 of title 44 (“Taxation”). To the

23-2

extent that such person, firm, partnership, trust, estate or other entity incurs any costs on payroll

23-3

for a Rhode Island resident employed for such accredited theater production. such person, firm,

23-4

partnership, trust, estate or other entity shall be allowed an additional tax credit of five percent

23-5

(5%) of such payroll.

23-6

     (2) In no event shall the EDC allow the collective total tax credit award(s) in any calendar

23-7

year to exceed a maximum of two million five hundred thousand dollars ($2,500,000).

23-8

     (3) The tax credit shall be allowed against the tax for the taxable period in which the

23-9

credit is earned and can be carried forward for not more than three (3) succeeding tax years.

23-10

     (4) Credits allowed to a company, which is a subchapter S corporation, partnership, or a

23-11

limited liability company that is taxed as a partnership, shall be passed through respectively to

23-12

persons designated as partners, members or owners on a pro rata basis or pursuant to an executed

23-13

agreement among such persons designated as subchapter S corporation shareholders, partners, or

23-14

members documenting an alternate distribution method without regard to their sharing of other

23-15

tax or economic attributes of such entity.

23-16

     (5) If the company has not claimed the tax credits in whole or part, taxpayers eligible for

23-17

the tax credits may assign, transfer or convey the tax credits, in whole or in part, by sale or

23-18

otherwise to any individual or entity and such assignee of the tax credits that have not claimed the

23-19

tax credits in whole or part may assign, transfer or convey the tax credits, in whole or in part, by

23-20

sale or otherwise to any individual or entity. The assignee of the tax credits may use acquired

23-21

credits to offset up to one hundred percent (100%) of the tax liabilities otherwise imposed

23-22

pursuant to chapter 11, 12, 13, (other than the tax imposed under section 44-13-13), 14, 17 or 30

23-23

of title 44 (“Taxation”). The assignee may apply the tax credit against taxes imposed on the

23-24

assignee until the end of the tenth (10th) calendar year after the year in which the qualified

23-25

expenditures are incurred or until the full credit assigned is used, whichever occurs first. Fiscal

23-26

year assignees may claim the credit until the expiration of the fiscal year that ends within the third

23-27

(3rd) year after the year in which the production and performance expenditures are incurred. The

23-28

assignor shall perfect the transfer by notifying the state of Rhode Island division of taxation, in

23-29

writing, within thirty (30) calendar days following the effective date of the transfer and shall

23-30

provide any information as may be required by the division of taxation to administer and carry

23-31

out the provisions of this section.

23-32

     (6) For purposes of this chapter, any assignment or sales proceeds received by the

23-33

assignor for its assignment or sale of the tax credits allowed pursuant to this section shall be

23-34

exempt from title 44 (“Taxation”).

24-1

     (7) In the case of a corporation, this credit is only allowed against the tax of a corporation

24-2

included in a consolidated return that qualifies for the credit and not against the tax of other

24-3

corporations that may join in the filing of a consolidated tax return.

24-4

     (c) Certification and administration. -- (1) The applicant shall properly prepare, sign and

24-5

submit to the EDC an application for initial certification of the theater production. The

24-6

application shall include such information and data as the EDC deems reasonably necessary for

24-7

the proper evaluation and administration of said application, including, but not limited to, any

24-8

information about the theater production company and a specific Rhode Island live theater or

24-9

musical production. The EDC shall review the completed application and determine whether it

24-10

meets the requisite criteria and qualifications for the initial certification for the production. If the

24-11

initial certification is granted, the EDC shall issue a notice of initial certification of the accredited

24-12

theater production to the theater production company and to the tax administrator. The notice

24-13

shall state that, after appropriate review, the initial application meets the appropriate criteria for

24-14

conditional eligibility. The notice of initial certification will provide a unique identification

24-15

number for the production and is only a statement of conditional eligibility for the production

24-16

and, as such, does not grant or convey any Rhode Island tax benefits.

24-17

     (2) Upon completion of an accredited theater production, the applicant shall properly

24-18

prepare, sign and submit to the EDC an application for final certification of the accredited theater

24-19

production. The final application shall also contain a cost report and an “accountant’s

24-20

certification.” The EDC and tax administrator may rely without independent investigation, upon

24-21

the accountant’s certification, in the form of an opinion, confirming the accuracy of the

24-22

information included in the cost report. Upon review of a duly completed and filed application

24-23

and upon no later than thirty (30) days of submission thereof, EDC will make a determination

24-24

pertaining to the final certification of the accredited theater production and the resultant tax

24-25

credits.

24-26

     (3) Upon determination that the company qualifies for final certification and the resultant

24-27

tax credits, the EDC shall issue to the company: (i) An accredited theater production certificate;

24-28

and (ii) A tax credit certificate in an amount in accordance with this subsection (b) hereof. All

24-29

documents that are issued by the EDC pursuant to this section shall reference the identification

24-30

number that was issued to the production as part of its initial certification.

24-31

     (4) The director of the EDC, in consultation as needed with the tax administrator, shall

24-32

promulgate such rules and regulations as are necessary to carry out the intent and purposes of this

24-33

chapter in accordance with the general guidelines provided herein for the certification of the

24-34

production and the resultant production credit.

25-1

     (5) The EDC shall charge an administration fee in an amount equal to five-thousandths

25-2

(.005) multiplied by the tax credits allowed, which fee shall be payable upon delivery of a fully

25-3

executed contract guarantying the tax credits as set forth herein.

25-4

     (6) Notwithstanding any provisions of the general laws or regulations adopted thereunder

25-5

to the contrary, the EDC and the division of taxation are hereby expressly authorized and

25-6

empowered to enter into contracts with persons, firms, partnerships, trusts, estates, limited

25-7

liability companies, corporations or other business entities that incur production and performance

25-8

expenditures and transportation expenditures for accredited theater productions.

25-9

     (7) Simultaneously with payment of the fee, the EDC shall, on behalf of the state of

25-10

Rhode Island, guaranty the deliver of one hundred percent (100%) of the tax credit and use of one

25-11

hundred percent (100%) of the tax credit in the tax year the last production and performance

25-12

expenditures and transportation expenditures for accredited theater productions.

25-13

     (8) Any contract executed pursuant to this chapter by a company that incurs production

25-14

and performance expenditures and transportation expenditures for accredited theater productions

25-15

small be assignable to: (i) An affiliate thereof without any consent from the division of taxation or

25-16

the EDC; or (ii) A person, firm, partnership, trust, estate, limited liability company, corporation

25-17

(whether for profit or nonprofit) or other business entity approved by the EDC, which approval

25-18

shall not be unreasonably withheld. For purposes of this subsection, “affiliate” shall be defined as

25-19

any entity controlling, controlled by or under common control with such person, firm,

25-20

partnership, trust, estate, limited liability company, corporation (whether for profit or nonprofit)

25-21

or other business entity.

25-22

     (9) If information comes to the attention of the EDC that is materially inconsistent with

25-23

representations made in an application, the EDC may deny the requested certification. In the

25-24

event that tax credits or a portion of tax credits are subject to recapture for ineligible costs and

25-25

such tax credits have been transferred, assigned and/or allocated, the state will pursue its

25-26

recapture remedies and rights against the applicant of the theater production tax credits. No

25-27

redress shall be sought against assignees, sellers, transferees or allocates of such credits.

25-28

     (d) Information Requests. The tax administrator and his or her agents, for the purpose of

25-29

ascertaining the correctness of any credit claimed under the provisions of this chapter, may

25-30

examine any books, papers, records, or memoranda bearing upon the matters required to be

25-31

included in the return, report, or other statement, and may require the attendance of the person

25-32

executing the return, report, or other statement, or of any officer or employee of any taxpayer, or

25-33

the attendance of any other person, and may examine the person under oath respecting any matter

25-34

which the tax administrator or his or her agent deems pertinent or material in determining the

26-1

eligibility for credits claimed.

26-2

     44-31.3-5. Infrastructure tax credits. – (a) Definitions as used in this section:

26-3

     (1) “EDC” means the Rhode Island economic development corporation created pursuant

26-4

to chapter 42-64 (“Rhode Island Economic Development Corporation”).

26-5

     (2) “Placed in service” means that substantial work has been completed which would

26-6

allow for occupancy of the entire structure or some identifiable portion of the structure.

26-7

     (3) “Qualified infrastructure costs” means the cost incurred for the development of a state

26-8

certified infrastructure project paid or accrued in the taxable year of tangible assets of a type that

26-9

are, or under the internal revenue code will become, eligible for depreciation, amortization, or

26-10

accelerated capital cost recovery for federal income tax purposes, provided that the assets are

26-11

physically located in this state for use in a state certified infrastructure project.

26-12

     (4) “State-certified infrastructure project” or “project” means a film, video, television, or

26-13

digital production and post production facility located in this state, movable and immovable

26-14

property and equipment related to the facility, and any other facility that is a necessary

26-15

component of such state certified infrastructure project, as determined by the EDC. A state

26-16

certified infrastructure project does not include a movie theater or other commercial exhibition

26-17

facility, a facility used to produce obscene matter or an obscene performance, or a facility used

26-18

for a production for which records are required to be maintained with respect to any performer in

26-19

the production under18 USC 2257.

26-20

     (b) Tax Credit. (1) Any person, firm, partnership, trust, estate, limited liability company,

26-21

corporation (whether for profit or nonprofit) or other business entity that incurs qualified

26-22

infrastructure costs for a state certified infrastructure project shall be allowed a tax credit in an

26-23

amount equal to thirty percent (30%) of the qualified infrastructure costs against the taxes

26-24

imposed on such person or entity pursuant to Chapter 11, 12, 13, 14, 17 or 30 of title 44

26-25

(“Taxation”). Said credit shall be allowed for qualified infrastructure projects placed in service

26-26

after December 31, 2011. Notwithstanding any provisions of the general laws or regulations

26-27

adopted thereunder to the contrary, including, but not limited to, the provisions of chapter 2 of

26-28

title 37, the division of taxation is hereby expressly authorized and empowered to enter into

26-29

contracts with persons, firms, partnerships, trusts, estates, limited liability companies,

26-30

corporations (whether for profit or nonprofit) or other business entities that incur qualified

26-31

infrastructure costs for the following purposes, all of which shall be set forth in more particular

26-32

detail as follows:

26-33

     (i) Upon payment of the fees as set forth in this section, the division of taxation shall, on

26-34

behalf of the state of Rhode Island, guaranty through a contract with persons, firms, partnerships,

27-1

trusts, estates, limited liability companies, corporations (whether for profit or nonprofit) or other

27-2

business entities that will incur qualified infrastructure costs, the delivery of one hundred percent

27-3

(100%) of the tax credit in an amount which is the lesser of: (A) The amount of the tax credit

27-4

identified in the contract with the division of taxation in consideration of any processing fees; or

27-5

(B) The actual qualified infrastructure costs multiplied by thirty percent (30%).

27-6

     (ii) Any contract executed pursuant to this chapter by a person, firm, partnership, trust,

27-7

estate, limited liability company, corporation (whether for profit or nonprofit) or other business

27-8

entity that incurs qualified infrastructure costs shall be assignable to: (A) An affiliate thereof

27-9

without any consent from the division of taxation; or (B) A person, firm, partnership, trust, estate,

27-10

limited liability company, corporation (whether for profit or nonprofit) approved by the division

27-11

of taxation, which approval shall not be unreasonably withheld. For purposes of this subsection,

27-12

“affiliate” shall be defined as any entity controlling, controlled by or under common control with

27-13

such person, firm, partnership, trust, estate, limited liability company, corporation (whether for

27-14

profit or nonprofit) or other business entity.

27-15

     (c) Tax credits allowed pursuant to this chapter shall be allowed for the taxable year in

27-16

which such state certified infrastructure project or an identifiable portion of the structure is placed

27-17

in service.

27-18

     (d) If the amount of the tax credit exceeds the taxpayer’s total tax liability for the year in

27-19

which the state certified infrastructure project is placed in service, the amount that exceeds the

27-20

taxpayer’s tax liability may be carried forward for credit against the taxes imposed for the

27-21

succeeding ten (10) years, or until the full credit is used, whichever occurs first for the tax credits.

27-22

Credits allowed to a partnership, a limited liability company taxed as a partnership or multiple

27-23

owners of property shall be passed through to the persons designated as partners, members or

27-24

owners respectively pro rata or pursuant to an executed agreement among such persons

27-25

designated as partners, members or owners documenting an alternate distribution method without

27-26

regard to their sharing of other tax or economic attributes of such entity.

27-27

     (e) If the taxpayer has not claimed the tax credits in whole or part, taxpayers eligible for

27-28

the tax credits may assign, transfer or convey the credits, in whole or in part, by sale or otherwise

27-29

to any individual or entity, including, but not limited to, condominium owners in the event the

27-30

certified historic structure is converted into condominiums. The assignee of the tax credits may

27-31

use acquired credits to offset up to one hundred percent (100%) of the tax liabilities otherwise

27-32

imposed pursuant to chapter 11, 12, 13, (other than the tax imposed under section 44- 13-13), 14.

27-33

17 or 30 of title 44 (“Taxation”). The assignee may apply the tax credit against taxes imposed on

27-34

the assignee until the end of the tenth (10th) calendar year after the year in which the substantially

28-1

rehabilitated property is placed in service or until the full credit assigned is used, whichever

28-2

occurs first. The assignor shall perfect the transfer by notifying the state of Rhode Island division

28-3

of taxation, in writing, within thirty (30) calendar days following the effective date of the transfer

28-4

and shall provide any information as may be required by the division of taxation to administer

28-5

and carry out the provisions of this section.

28-6

     (4) For purposes of this chapter, any assignment or sales proceeds received by the

28-7

assignor for its assignment or sale of the tax credits allowed pursuant to this section shall be

28-8

exempt from this title.

28-9

     (5) In the case of a corporation, this credit is only allowed against the tax of a corporation

28-10

included in a consolidated return that qualifies for the credit and not against the tax of other

28-11

corporations that may join in the filing of a consolidated tax return.

28-12

     (6) No more than fifteen million dollars ($15,000,000) in tax credits in the aggregate may

28-13

be issued under this chapter for any tax year beginning after December 31, 2011.

28-14

     (c) Certification and administration. (1) Initial certification of a qualified infrastructure

28-15

cost on a state-certified infrastructure project. The applicant shall properly prepare, sign and

28-16

submit to the EDC an application for initial certification of the qualified infrastructure costs for a

28-17

state-certified infrastructure project. The application shall include such information and data as

28-18

the EDC deems reasonably necessary for the proper evaluation and administration of said

28-19

application. The EDC shall review the completed application and determine whether it meets the

28-20

requisite criteria and qualifications for the initial certification for the project. If the initial

28-21

certification is granted, the EDC shall issue a notice of initial certification of the project to the

28-22

applicant and to the tax administrator. The notice shall state that, after appropriate review, the

28-23

initial application meets the appropriate criteria for conditional eligibility. The notice of initial

28-24

certification will provide a unique identification number for the project and is only a statement of

28-25

conditional eligibility for the project and, as such, does not grant or convey any Rhode Island tax

28-26

benefits.

28-27

     (2) Final certification of a project. Upon completion of the project activities, the applicant

28-28

shall request a certificate of good standing from the Rhode Island division of taxation. The

28-29

division shall expedite the process for reviewing the issuance of such certificates. The applicant

28-30

shall properly prepare, sign and submit to the EDC an application for final certification of the

28-31

project and which must include the certificate of good standing from the division of taxation. The

28-32

final application shall contain a cost report and an “accountant’s certification”. The EDC may

28-33

rely without independent investigation, upon the accountant’s certification, in the form of an

28-34

opinion, confirming the accuracy of the information included in the cost report. Within thirty (30)

29-1

days of a duly completed and filed application, the EDC will make a determination pertaining to

29-2

the final certification of the project and the resultant tax credits.

29-3

     (3) Final certification and credits. (i) Upon determination that the project qualifies for

29-4

final certification and the resultant tax credits, the film office shall issue a letter to the applicant

29-5

indicating “certificate of completion of a state certified project” and shall provide specifically

29-6

designed tax credit certificates to the applicant. All documents that are issued by the EDC

29-7

pursuant to this section shall reference the identification number that was issued to the project as

29-8

part of its initial certification.

29-9

     (ii) The director of the EDC, in consultation as needed with the tax administrator, shall

29-10

promulgate such rules and regulations as are necessary to carry out the intent and purposes of this

29-11

chapter in accordance with the general guidelines provided herein for the certification of the

29-12

project and the resultant tax credit.

29-13

     (iii) Any applicant applying for the credit shall be required to reimburse the division of

29-14

taxation for any audits required in relation to granting the credit.

29-15

     (4) Notwithstanding any provisions of the general laws or regulations adopted thereunder

29-16

to the contrary, the EDC and the division of taxation are hereby expressly authorized and

29-17

empowered to enter into contracts with companies that incur qualified infrastructure costs on

29-18

state-certified infrastructure projects.

29-19

     (5) The EDC shall charge an administration fee in an amount equal to five-thousandths

29-20

(.005) multiplied by tax credits allowed, which fee is payable upon delivery of a fully executed

29-21

contract guarantying the tax credits as set forth herein.

29-22

     (6) Simultaneously with payment of the fee, the EDC shall, on behalf of the state of

29-23

Rhode Island, guaranty the deliver of one hundred percent (100%) of the tax credit and use of one

29-24

hundred percent (100%) of the tax credit in the tax year the qualified infrastructure costs are

29-25

incurred by the applicant.

29-26

     (7) Any contract executed pursuant to this chapter by an applicant that incurs qualified

29-27

infrastructure costs on a state-certified infrastructure project shall be assignable to: (i) An affiliate

29-28

thereof without any consent from the division of taxation or the EDC; or (ii) A person, firm,

29-29

partnership, trust, estate, limited liability company, corporation (whether for profit or nonprofit)

29-30

or other business entity approved by the EDC, which approval shall not be unreasonably

29-31

withheld. For purposes of this subsection, “affiliate” shall be defined as any entity controlling,

29-32

controlled by or under common control with such person, firm, partnership, trust, estate, limited

29-33

liability company, corporation (whether for profit or nonprofit) or other business entity.

30-34

     (8) If information comes to the attention of the EDC that is materially inconsistent with

30-35

representations made in an application, the EDC may deny the requested certification. In the

30-36

event that tax credits or a portion of tax credits are subject to recapture for ineligible costs and

30-37

such tax credits have been transferred, assigned and/or allocated, the state will pursue its

30-38

recapture remedies and rights against the motion picture production company. No redress shall be

30-39

sought against assignees, sellers, transferees or allocates of such credits.

30-40

     (d) Information Requests. The tax administrator and his or her agents, for the purpose of

30-41

ascertaining the correctness of any credit claimed under the provisions of this chapter, may

30-42

examine any books, papers, records, or memoranda bearing upon the matters required to be

30-43

included in the return, report, or other statement, and may require the attendance of the person

30-44

executing the return, report, or other statement, or of any officer or employee of any taxpayer, or

30-45

the attendance of any other person, and may examine the person under oath respecting any matter

30-46

which the tax administrator or his or her agent deems pertinent or material in determining the

30-47

eligibility for credits claimed.

30-48

     SECTION 3. This act shall take effect upon passage.

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LC00668

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EXPLANATION

BY THE LEGISLATIVE COUNCIL

OF

A N A C T

RELATING TO TAXATION -- ARTS AND ENTERTAINMENT--JOB STIMULUS

INCENTIVES

***

31-1

     This act would repeal the provisions of chapter 44-31.2, entitled “Motion Picture

31-2

Production Tax Credits,” and establish a new chapter 44-31.3, entitled “The Arts and

31-3

Entertainment Job Stimulus Incentives Act of 2012.” The new chapter would provide new tax

31-4

credits for motion picture production in Rhode Island.

31-5

     This act would take effect upon passage.

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LC00668

=======