2012 -- H 8051

=======

LC02064

=======

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: Representatives Blazejewski, Ucci, Petrarca, Bennett, and Hull

     Date Introduced: April 05, 2012

     Referred To: House Finance

It is enacted by the General Assembly as follows:

1-1

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

1-2

Tax Credits" is hereby repealed in its entirety.

1-3

     CHAPTER 44-31.2

1-4

Motion Picture Production Tax Credits

1-5

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

1-6

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

1-7

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

1-8

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

1-9

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

1-10

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

1-11

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

1-12

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

1-13

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

1-14

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

1-15

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

1-16

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

1-17

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

1-18

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

1-19

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

2-1

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

2-2

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

2-3

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

2-4

immediate and long-term objectives as follows:

2-5

      (1) Immediate objectives are to:

2-6

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

2-7

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

2-8

herein.

2-9

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

2-10

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

2-11

certified productions.

2-12

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

2-13

multiple state-certified production projects.

2-14

      (2) Long-term objectives are to:

2-15

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

2-16

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

2-17

and video industry.

2-18

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

2-19

aspects of film production.

2-20

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

2-21

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

2-22

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

2-23

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

2-24

certified production in the state as production-related costs.

2-25

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

2-26

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

2-27

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

2-28

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

2-29

title.

2-30

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

2-31

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

2-32

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

2-33

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

2-34

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

3-1

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

3-2

etc. with respect to sexually explicit conduct.

3-3

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

3-4

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

3-5

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

3-6

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

3-7

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

3-8

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

3-9

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

3-10

monies was discharged as a part of such bankruptcy.

3-11

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

3-12

of the motion picture principal photography days are filmed.

3-13

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

3-14

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

3-15

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

3-16

within as the "film office".

3-17

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

3-18

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

3-19

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

3-20

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

3-21

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

3-22

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

3-23

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

3-24

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

3-25

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

3-26

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

3-27

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

3-28

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

3-29

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

3-30

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

3-31

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

3-32

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

3-33

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

3-34

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

4-1

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

4-2

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

4-3

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

4-4

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

4-5

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

4-6

licensed attorneys or accountants.

4-7

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

4-8

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

4-9

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

4-10

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

4-11

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

4-12

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

4-13

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

4-14

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

4-15

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

4-16

6(c).

4-17

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

4-18

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

4-19

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

4-20

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

4-21

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

4-22

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

4-23

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

4-24

more than three (3) succeeding tax years.

4-25

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

4-26

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

4-27

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

4-28

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

4-29

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

4-30

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

4-31

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

4-32

beginning after December 31, 2007.

4-33

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

4-34

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

5-1

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

5-2

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

5-3

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

5-4

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

5-5

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

5-6

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

5-7

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

5-8

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

5-9

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

5-10

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

5-11

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

5-12

Rhode Island tax benefits.

5-13

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

5-14

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

5-15

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

5-16

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

5-17

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

5-18

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

5-19

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

5-20

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

5-21

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

5-22

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

5-23

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

5-24

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

5-25

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

5-26

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

5-27

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

5-28

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

5-29

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

5-30

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

5-31

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

5-32

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

5-33

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

5-34

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

6-1

of its initial certification.

6-2

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

6-3

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

6-4

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

6-5

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

6-6

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

6-7

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

6-8

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

6-9

guidelines for the tax credit provided herein.

6-10

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

6-11

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

6-12

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

6-13

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

6-14

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

6-15

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

6-16

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

6-17

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

6-18

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

6-19

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

6-20

investment and negative foreseeable contingencies that may arise therefrom;

6-21

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

6-22

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

6-23

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

6-24

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

6-25

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

6-26

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

6-27

healthcare insurance and any retirement benefits;

6-28

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

6-29

Island; and

6-30

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

6-31

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

6-32

applicants and minority businesses.

6-33

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

6-34

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

7-1

public on the:

7-2

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

7-3

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

7-4

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

7-5

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

7-6

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

7-7

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

7-8

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

7-9

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

7-10

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

7-11

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

7-12

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

7-13

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

7-14

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

7-15

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

7-16

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

7-17

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

7-18

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

7-19

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

7-20

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

7-21

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

7-22

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

7-23

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

7-24

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

7-25

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

7-26

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

7-27

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

7-28

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

7-29

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

7-30

website.

7-31

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

7-32

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

7-33

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

7-34

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

8-1

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

8-2

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

8-3

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

8-4

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

8-5

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

8-6

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

8-7

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

8-8

credit reporting requirement.

8-9

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

8-10

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

8-11

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

8-12

website.

8-13

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

8-14

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

8-15

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

8-16

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

8-17

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

8-18

published by the tax administrator on the tax division website.

8-19

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

8-20

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

8-21

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

8-22

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

8-23

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

8-24

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

8-25

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

8-26

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

8-27

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

8-28

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

8-29

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

8-30

administrator.

8-31

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

8-32

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

8-33

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

8-34

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

9-1

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

9-2

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

9-3

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

9-4

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

9-5

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

9-6

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

9-7

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

9-8

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

9-9

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

9-10

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

9-11

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

9-12

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

9-13

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

9-14

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

9-15

information in all cases to the tax administrator.

9-16

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

9-17

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

9-18

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

9-19

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

9-20

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

9-21

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

9-22

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

9-23

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

9-24

laws.

9-25

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

9-26

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

9-27

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

9-28

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

9-29

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

9-30

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

9-31

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

9-32

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

9-33

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

9-34

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

10-1

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

10-2

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

10-3

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

10-4

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

10-5

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

10-6

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

10-7

taxpayer, subject to the following conditions:

10-8

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

10-9

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

10-10

transferees, assignees or purchasers.

10-11

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

10-12

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

10-13

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

10-14

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

10-15

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

10-16

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

10-17

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

10-18

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

10-19

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

10-20

deposited as general revenues.

10-21

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

10-22

until the taxpayers are in full compliance.

10-23

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

10-24

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

10-25

the credit was originally granted by the film office.

10-26

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

10-27

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

10-28

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

10-29

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

10-30

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

10-31

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

10-32

tax credit certificates or for reissuing certificates.

10-33

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

10-34

the motion picture production company originally awarded the credit.

11-1

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

11-2

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

11-3

section shall be exempt from this title.

11-4

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

11-5

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

11-6

in the state.

11-7

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

11-8

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

11-9

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

11-10

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. – Definitions.-- As used in this

11-22

chapter:

11-23

     (1) “Accountant’s certification” means a certified audit by a Rhode Island certified public

11-24

accountant licensed in accordance with the provisions of chapter 5-3.1 (“Public Accountancy”).

11-25

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

11-26

certified production in the state as production-related costs.

11-27

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

11-28

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

11-29

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

11-30

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

11-31

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

11-32

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

11-33

individual is in the armed forces of the United States.

12-34

     (4) “Documentary” means a non-fiction production intended for educational or

12-35

commercial distribution that may require out-of-state principal photography.

12-36

     (5) “Full-time equivalent employee” means a person who works a minimum of thirty (30)

12-37

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

12-38

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

12-39

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

12-40

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

12-41

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

12-42

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

12-43

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

12-44

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

12-45

etc. with respect to sexually explicit conduct.

12-46

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

12-47

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

12-48

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

12-49

production company shall not mean or include: (i) Any company owned, affiliated, or controlled,

12-50

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

12-51

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

12-52

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

12-53

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

12-54

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

12-55

of the motion picture principal photography days are filmed.

12-56

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

12-57

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

12-58

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

12-59

within as the “film office.”

12-60

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

12-61

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

12-62

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

12-63

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

12-64

taxable year, unless the individual is in the armed forces of the United States, and has been a

12-65

Rhode Island resident for one hundred eighty-three (183) days of taxable year prior to initial

12-66

certification by the film office.

12-67

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

12-68

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

13-1

or not such company owns or controls the copyright and distribution rights in the motion picture;

13-2

provided, that such company has either: (i) Signed a viable distribution plan; or (ii) Is producing

13-3

the motion picture for: (A) A major motion picture distributor; (B) A major theatrical exhibitor;

13-4

(C) Television network; or (D) Cable television programmer.

13-5

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

13-6

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

13-7

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

13-8

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

13-9

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

13-10

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

13-11

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

13-12

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

13-13

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

13-14

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

13-15

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

13-16

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

13-17

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

13-18

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

13-19

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

13-20

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

13-21

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

13-22

production’s activities in Rhode Island, provided such services are provided by Rhode Island

13-23

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

13-24

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

13-25

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

13-26

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

13-27

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

13-28

and 30 of this title in the amount of thirty percent (30%) of the state certified production costs,

13-29

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

13-30

certified production costs are a minimum of one hundred thousand dollars ($100,000).

13-31

Notwithstanding the foregoing, in the event that the motion picture production company is

13-32

producing a documentary, such motion picture production company shall be allowed a tax credit

13-33

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

13-34

and 30 of this title in the amount of twenty-five percent (25%) of the state certified production

14-1

costs, provided that: (A) The primary locations are within the state of Rhode Island or at least

14-2

fifty-one percent (51%) of the final production budget, which includes without limitation,

14-3

preproduction and post-production that is incurred and paid in Rhode Island; (B) The state

14-4

certified production costs are a minimum of one hundred thousand dollars ($100,000); and (C)

14-5

The motion picture production company has at least four (4) full-time equivalent employees in

14-6

Rhode Island during the duration of the production.

14-7

     The tax credit shall be earned in the taxable year in which the motion picture production

14-8

in Rhode Island is completed, as determined by the film office in final certification pursuant this

14-9

chapter and can be carried forward for not more than three (3) succeeding years. To the extent

14-10

that the motion picture production company incurs any costs and pays for payroll for a Rhode

14-11

Island resident employed for such motion picture, the motion picture production company shall

14-12

be allowed an additional tax credit of five percent (5%) of such payroll.

14-13

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

14-14

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

14-15

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

14-16

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

14-17

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

14-18

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

14-19

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

14-20

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

14-21

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

14-22

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

14-23

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

14-24

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

14-25

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

14-26

(other than the tax imposed under section 44-13-13), 14, 17 or 30 of this title. The assignee may

14-27

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

14-28

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

14-29

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

14-30

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

14-31

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

14-32

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

14-33

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

14-34

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

15-1

exempt from this title.

15-2

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

15-3

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

15-4

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

15-5

     (6) No more than forty million dollars ($40,000,000.) in tax credits in the aggregate may

15-6

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

15-7

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

15-8

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

15-9

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

15-10

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

15-11

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

15-12

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

15-13

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

15-14

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

15-15

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

15-16

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

15-17

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

15-18

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

15-19

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

15-20

Rhode Island tax benefits.

15-21

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

15-22

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

15-23

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

15-24

The applicant shall properly prepare, sign and submit to the film office and division of taxation an

15-25

application for final certification of the production and which must include the certificate of good

15-26

standing from the division of taxation. The final application shall contain a cost report and an

15-27

“accountant’s certification.” The film office and tax administrator may rely without independent

15-28

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

15-29

accuracy of the information included in the cost report. Within sixty (60) days of a duly

15-30

completed and filed application, the film office, in consultation with the tax administrator, will

15-31

make a determination pertaining to the final certification of the production and the resultant tax

15-32

credits.

15-33

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

15-34

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 Rhode Island film and television office, in consultation as needed with the tax

16-7

administrator, shall promulgate such rules and regulations as are necessary to carry out the intent

16-8

and purposes of this chapter in accordance with the general guidelines provided herein for the

16-9

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 and pay

16-15

state certified production costs.

16-16

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

16-17

hundred fifty dollars ($750), which fee is non-refundable and payable upon delivery of the initial

16-18

application. Upon approval of initial certification a fully executed contract guarantying the

16-19

availability tax credits pursuant to this chapter shall be entered into with the film office and the

16-20

motion picture production company.

16-21

     (6) Simultaneously with payment of the fee and approval of the initial application, the

16-22

film office shall, on behalf of the state of Rhode Island guaranty the delivery of one hundred

16-23

percent (100%) of the tax credit and use of one hundred percent of the tax credit in the tax year

16-24

the state certified production costs are incurred and paid by the motion picture production

16-25

company.

16-26

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

16-27

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

16-28

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

16-29

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

16-30

or non-profit) or other business entity approved by the film office, which approval shall not be

16-31

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

16-32

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

16-33

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

16-34

entity.

17-1

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

17-2

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

17-3

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

17-4

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

17-5

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

17-6

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

17-7

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

17-8

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

17-9

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

17-10

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

17-11

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

17-12

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

17-13

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

17-14

eligibility for credits claimed.

17-15

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

17-16

     (1) “Contrary to Public Policy” means titles of products that receive or would receive a

17-17

rating symbol from the Entertainment Software Rating Board of AO (adult only).

17-18

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

17-19

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

17-20

design, planning, and production; provided, however, development shall also include any ongoing

17-21

customer service and game operations following production launch, any development of any

17-22

content after product launch of an eligible product.

17-23

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

17-24

more data files, all in a digital media format, that is not contrary to public policy and are

17-25

integrated and are intended to be operated together and that have the following characteristics

17-26

when they are being operated:

17-27

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

17-28

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

17-29

the following forms:

17-30

     (A) Text;

17-31

     (B) Sound; or

17-32

     (C) Images;

17-33

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

18-34

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

18-35

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

18-36

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

18-37

more arm’s length parties;

18-38

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

18-39

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

18-40

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

18-41

     (4) “Full-time Equivalent Active Employees” means a person who: (i) Works a minimum

18-42

of thirty (30) hours per week within the state of Rhode Island; and (ii) Earns no less than two

18-43

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

18-44

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

18-45

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

18-46

liability company, corporation or other business entity that incurs and pays qualified expenditures

18-47

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

18-48

to do business in the state of Rhode Island and which has at least twenty-five (25) full-time

18-49

equivalent active employees.

18-50

     (7) “Qualified expenditures” means any amounts incurred by a qualified company for the

18-51

development, as defined in section 44.31.3-3(a)(2) of this chapter, of an eligible product, to the

18-52

extent it is paid and incurred within the state of Rhode Island, but specifically excluding any

18-53

expenses of a completion bond or insurance and costs associated with the promotion or marketing

18-54

of the eligible product.

18-55

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

18-56

the development of an eligible product shall be entitled to a credit against the taxes imposed on

18-57

such person or entity pursuant to chapters 11, 12, 13, 14, 17 or 30 of this title in an amount equal

18-58

to thirty percent (30%) of the qualified expenditures incurred in each calendar year, which tax

18-59

credit may be issued, at the qualified company’s option, either on an annual or semi-annual basis.

18-60

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

18-61

which the qualified expenditures are incurred and paid, the amount that exceeds the taxpayer’s

18-62

tax liability may be carried forward for credit against the taxes imposed for the succeeding three

18-63

(3) years, or until the full credit is used, whichever occurs first for the tax credits. Tax credits

18-64

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

18-65

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

18-66

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

18-67

partners, members or owners documenting an alternate distribution method without regard to

18-68

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

19-1

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

19-2

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

19-3

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

19-4

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

19-5

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

19-6

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

19-7

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

19-8

of this title. The assignee may apply the tax credit against taxes imposed on the assignee until the

19-9

end of the third (3rd) calendar year after the year in which the qualified expenditures are incurred

19-10

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

19-11

the credit until the expiration of the fiscal year that ends within the third (3rd) year after the year

19-12

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

19-13

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

19-14

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

19-15

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

19-16

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

19-17

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

19-18

exempt from this title.

19-19

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

19-20

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

19-21

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

19-22

     (c)(1) Tax credit administration. -- As set forth in this paragraph, the qualified company

19-23

shall apply to the film office for a written certification of its product eligibility, certification of its

19-24

projected qualified expenditures and certification that the product is not contrary to public policy.

19-25

Within thirty (30) days of receipt of the information required by the film office for the written

19-26

certification, the film office shall issue a denial or written certification of its eligible product and

19-27

of its projected qualified expenditures. The qualified company shall file with the film office and

19-28

division of taxation, at the qualified company’s option, either on a semi-annual or annual basis for

19-29

each year of development of the eligible product a cost certification by a certified public

19-30

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

19-31

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

19-32

active employees.

19-33

     (2) Within sixty (60) days after the film office’s receipt of the qualified company’s

19-34

application requesting certification for the qualified expenditures for the applicable tax year, the

20-1

film office in consultation with the tax administrator shall issue the qualified company a written

20-2

determination either denying or certifying the expenditures, in whole or in part, and shall issue a

20-3

certification of the amount of credit for the qualified expenditures and the tax credit certificates in

20-4

any such denomination as requested by the taxpayer or assignee. To claim the tax credit, the

20-5

certification as to the amount of the tax credit shall be attached to all state tax returns on which

20-6

the credit is claimed.

20-7

     (3) The film office shall charge an administration fee in an amount equal to seven

20-8

hundred fifty dollars ($750), which fee is non-refundable and payable upon delivery of the initial

20-9

application. Upon approval of initial certification a fully executed contract guarantying the

20-10

availability of the tax credits pursuant to this chapter shall be entered into with the film office and

20-11

the qualified company.

20-12

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

20-13

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

20-14

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

20-15

liability companies, corporations or other business entities that incur and pay qualified

20-16

expenditures for the development of eligible products.

20-17

     (5) Simultaneously with payment of the fee and upon initial certification, the film office

20-18

shall, on behalf of the state of Rhode Island, guaranty the delivery of one hundred percent (100%)

20-19

of the tax credit and use of one hundred percent (100%) of the tax credit in the tax year the

20-20

qualified expenditures are incurred by the qualified company for development of the eligible

20-21

product.

20-22

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

20-23

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

20-24

An affiliate thereof without any consent from the division of taxation or film office; (ii) A

20-25

banking institution or credit union as defined in title 19; (iii) A person, firm, partnership, trust,

20-26

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

20-27

entity approved by film office, which approval shall not be unreasonably withheld. For purposes

20-28

of this subsection, “affiliate” shall be defined as any entity controlling, controlled by or under

20-29

common control with such person, firm, partnership, trust, estate, limited liability company,

20-30

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

20-31

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

20-32

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

20-33

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

20-34

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

21-1

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

21-2

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

21-3

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

21-4

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

21-5

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

21-6

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

21-7

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

21-8

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

21-9

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

21-10

eligibility for credits claimed.

21-11

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

21-12

this chapter:

21-13

     (1) “Accredited theater production” means a live stage presentation in a qualified

21-14

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

21-15

A post-Broadway production; or (iii) A national tour to be produced and performed with its first

21-16

public appearance in Rhode Island before a paying audience.

21-17

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

21-18

office certifying that the production is an accredited theater production that meets the guidelines

21-19

of this chapter.

21-20

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

21-21

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

21-22

marketing, public relations, creation and placement of print, electronic, television, billboards and

21-23

other forms of advertising to promote the accredited theater production.

21-24

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

21-25

benefits for services performed and costs incurred and paid within Rhode Island.

21-26

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

21-27

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

21-28

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

21-29

Island presentation.

21-30

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

21-31

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

21-32

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

21-33

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

21-34

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

22-1

or operating expenditures incurred and paid in this state for a qualified theater production,

22-2

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

22-3

special and visual effects, costumes, wardrobes, make-up, accessories, costs associated with

22-4

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

22-5

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

22-6

     (8) “Qualified production facility” means a facility owned by a not-for-profit entity or

22-7

state-owned facility located in the state of Rhode Island in which live theatrical or music

22-8

productions are, or are intended to be, exclusively presented that contains at least one stage, a

22-9

seating capacity of five hundred (500) or more seats, and dressing rooms, storage areas, and other

22-10

ancillary amenities necessary for the accredited theater production.

22-11

     (9) “National Tour” means a performer or group of performers with a scheduled tour of a

22-12

minimum of twenty (20) concerts and/or performances in other cities throughout the United

22-13

States following its first appearance in Rhode Island, which performance relates to a particular

22-14

album, theme, or product and which Rhode Island production and performance expenditures

22-15

exceed one hundred thousand dollars ($100,000) .

22-16

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

22-17

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

22-18

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

22-19

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

22-20

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

22-21

and has been a Rhode Island resident for one hundred eighty-three (183) days of taxable year

22-22

prior to initial certification by the film office.

22-23

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

22-24

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

22-25

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

22-26

within as the "film office."

22-27

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

22-28

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

22-29

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

22-30

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

22-31

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

22-32

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

22-33

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

22-34

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

23-1

equipment.

23-2

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

23-3

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

23-4

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

23-5

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

23-6

production.

23-7

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

23-8

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

23-9

percent (30%) of the total production and performance expenditures and transportation

23-10

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

23-11

against a tax imposed by chapters 11, 12, 13, 14, 17 and 30 of this title, provided that the total

23-12

production and performance expenditure and transportation expenditure exceeds one hundred

23-13

thousand dollars ($100,000). To the extent that such person, firm, partnership, trust, estate or

23-14

other entity incurs and pays any costs on payroll for a Rhode Island resident employed for such

23-15

accredited theater production, such person, firm, partnership, trust, estate or other entity shall be

23-16

allowed an additional tax credit of five percent (5%) of such payroll.

23-17

     (2) The film office shall set aside a maximum of two million five hundred thousand

23-18

dollars ($2,500,000) in tax credits under this chapter in each calendar year for accredited theater

23-19

productions producing pre-Broadway productions and post-Broadway productions; a maximum

23-20

of one million dollars ($1,000,000) in tax credits under this chapter in each calendar year for

23-21

accredited theater productions producing national tours produced and performed with its first

23-22

public appearance in Rhode Island before a paying audience; and a maximum of five hundred

23-23

thousand dollars ($500,000) in tax credits under this chapter in each calendar year for accredited

23-24

theater productions that are a collaboration between a nonprofit professional theater company

23-25

with under five hundred (500) seats operating under agreement with Actor’s Equity that is

23-26

organized, produced and debuted in Rhode Island. In the event that the film office determines

23-27

after reasonable due diligence that the entire three million five hundred dollars ($3,500,000) will

23-28

not be used for accredited theater productions in a calendar year, the film office shall be permitted

23-29

to use the remaining balance for other tax credit awards under this chapter.

23-30

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

23-31

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

23-32

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

23-33

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

23-34

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

24-1

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

24-2

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

24-3

tax or economic attributes of such entity.

24-4

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

24-5

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

24-6

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

24-7

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

24-8

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

24-9

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

24-10

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

24-11

of this title. The assignee may apply the tax credit against taxes imposed on the assignee until the

24-12

end of the third (3rd) calendar year after the year in which the qualified expenditures are incurred

24-13

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

24-14

the credit until the expiration of the fiscal year that ends within the third (3rd) year after the year

24-15

in which the production and performance expenditures are incurred. The assignor shall perfect the

24-16

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

24-17

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

24-18

may be required by the division of taxation to administer and carry out the provisions of this

24-19

section.

24-20

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

24-21

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

24-22

exempt from this title.

24-23

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

24-24

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

24-25

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

24-26

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

24-27

submit to the film office and the division of taxation an application for initial certification of the

24-28

theater production. The application shall include such information and data as the film office

24-29

deems reasonably necessary for the proper evaluation and administration of said application,

24-30

including, but not limited to, any information about the theater production company and a specific

24-31

Rhode Island live theater or musical production. The film office shall review the completed

24-32

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

24-33

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

24-34

notice of initial certification of the accredited theater production to the theater production

25-1

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

25-2

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

25-3

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

25-4

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

25-5

Rhode Island tax benefits.

25-6

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

25-7

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

25-8

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

25-9

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

25-10

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

25-11

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

25-12

and upon no later than sixty (60) days of submission thereof, the film office in consultation with

25-13

the tax administrator will make a determination pertaining to the final certification of the

25-14

accredited theater production and the resultant tax credits.

25-15

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

25-16

tax credits, the film office shall issue to the company: (i) An accredited theater production

25-17

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

25-18

hereof. All documents that are issued by the film office pursuant to this section shall reference the

25-19

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

25-20

     (4) The film office, in consultation as needed with the tax administrator, shall promulgate

25-21

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

25-22

accordance with the general guidelines provided herein for the certification of the production and

25-23

the resultant production credit.

25-24

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

25-25

hundred fifty dollars ($750), which fee is non-refundable and payable upon delivery of the initial

25-26

application. Upon approval of initial certification a fully executed contract guarantying the

25-27

availability of the tax credits pursuant to this chapter shall be entered into with the film office and

25-28

the company.

25-29

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

25-30

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

25-31

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

25-32

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

25-33

performance expenditures and transportation expenditures for accredited theater productions.

26-34

     (7) Simultaneously with approval of the initial application, the film office shall, on behalf

26-35

of the state of Rhode Island, guaranty the delivery of one hundred percent (100%) of the tax

26-36

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

26-37

and performance expenditures and transportation expenditures for accredited theater productions.

26-38

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

26-39

production and performance expenditures and transportation expenditures for accredited theater

26-40

productions shall be assignable to: (i) An affiliate thereof without any consent from the division

26-41

of taxation or the film office; or (ii) A person, firm, partnership, trust, estate, limited liability

26-42

company, corporation (whether for profit or nonprofit) or other business entity approved by the

26-43

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

26-44

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

26-45

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

26-46

profit or non-profit) or other business entity.

26-47

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

26-48

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

26-49

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

26-50

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

26-51

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

26-52

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

26-53

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

26-54

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

26-55

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

26-56

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

26-57

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

26-58

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

26-59

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

26-60

eligibility for credits claimed.

26-61

     SECTION 3. This act shall take effect upon passage.

=======

LC02064

=======

EXPLANATION

BY THE LEGISLATIVE COUNCIL

OF

A N A C T

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

INCENTIVES

***

27-1

     This act would repeal the provisions of chapter 44-31.2, entitled “Motion Picture

27-2

Production Tax Credits,” and establish a new chapter 44-31.3, entitled “The Arts and

27-3

Entertainment Job Stimulus Incentives Act of 2012.” The new chapter would provide new tax

27-4

credits for motion picture and theater productions in Rhode Island.

27-5

     This act would take effect upon passage.

=======

LC02064

=======