SENATE BILL NO. 438
June 28, 2023, Introduced by Senators POLEHANKI, GEISS, WOJNO, KLINEFELT and MOSS
and referred to the Committee on Economic and Community Development.
A bill to amend 1967 PA 281, entitled
"Income tax act of 1967,"
by amending sections 701 and 703 (MCL 206.701 and 206.703), section
701 as amended by 2022 PA 148 and section 703 as amended by 2016 PA
158, and by adding sections 285 and 677.
THE PEOPLE OF THE STATE OF MICHIGAN ENACT:
1 Sec. 285. (1) As used in this section and section 677:
2 (a) "Accredited production certificate" or "APC" means the
3 approval certificate issued by the office certifying that the
4 production proposed in the application is a qualified production.
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1 (b) "Agreed-upon procedures" means the instructions and
2 procedures provided by the office to be performed by a certified
3 public accountant for the determination and attestation of the
4 amount of qualified production expenditures, qualified probationary
5 Michigan vendor expenditures, and qualified personnel expenditures
6 of a qualified production.
7 (c) "Applicant" means a taxpayer that is engaged in the
8 business of producing qualified productions and owns the copyright
9 to the qualified production during the production period or that is
10 authorized by, or has a contract with, another entity or copyright
11 holder that is engaged in the business of producing qualified
12 productions. Applicant does not include an entity that is more than
13 30% owned, affiliated, or controlled by an entity or individual who
14 is in default on a loan made by this state, a loan guaranteed by
15 this state, or a loan made or guaranteed by any other state.
16 (d) "Approved logos" means "Filmed in Michigan", "Pure
17 Michigan", "Michigan Film Industry Association", and "Michigan Film
18 & Digital Media Office" logos approved by the office.
19 (e) "Certified public accountant" means an individual licensed
20 as a certified public accountant under article 7 of the
21 occupational code, 1980 PA 299, MCL 339.720 to 339.736.
22 (f) "Commence work" means the date on which filming, taping,
23 photographing, or any other form of digital capturing for the
24 qualified production begins, including any preparation activity
25 necessary to start filming, taping, photographing, or capturing
26 digitally. For purposes of an animated production, the commence
27 work date is the date the artwork that is to be used in actual
28 frames of the qualified production begins.
29 (g) "Commercial domicile" means a physical place from which
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1 the trade or business of the person is directed or managed.
2 (h) "Economic impact data" means data related to the types of
3 jobs created and retained in this state by the applicant during the
4 qualified production and the amount spent to produce the qualified
5 production in this state during the production period. The economic
6 impact data must be broken down as follows:
7 (i) Number of entry-level positions.
8 (ii) Number of management-related positions.
9 (iii) Number of talent positions.
10 (iv) Number of production staff and crew.
11 (v) Number of qualified Michigan vendor-related positions.
12 (vi) Number of workday hires.
13 (vii) Number of postproduction, including visual effects,
14 vendor-related positions.
15 (viii) The amount of qualified production expenditures,
16 qualified probationary Michigan vendor expenditures, and qualified
17 personnel expenditures attributable to labor and vendors,
18 respectively.
19 (ix) The amount of any other expenditures incurred for the
20 qualified production.
21 (i) "Entry-level position" means the lowest level of a
22 hierarchy in a production, including untrained or unskilled
23 employees.
24 (j) "Full-time employee" means a job performed for 35 hours or
25 more each week by an individual.
26 (k) "Independent contractor" means an individual who is self-
27 employed and whose earnings for services are subject to self-
28 employment tax and the payer of the services has the right only to
29 control or direct the result of the work, not what will be done or
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1 how it will be done.
2 (l) "Inventory" means the stock of goods held for resale in the
3 ordinary course of trade of a business. Inventory includes personal
4 property under lease or principally intended for lease rather than
5 sale or property allowed a deduction or allowance for depreciation
6 or depletion under the internal revenue code.
7 (m) "Loan out company" means a personal service corporation or
8 other entity that is contracted with by the applicant to provide
9 specified individual personnel, such as artists, crew actors,
10 producers, or directors, for the performance of services directly
11 in a qualified production. Loan out company does not include an
12 entity contracted with by the applicant to provide goods or
13 ancillary services for a qualified production such as catering,
14 construction, trailers, equipment, or transportation.
15 (n) "Location fees" means a payment made to an individual or
16 entity for the use of property that is located in this state and
17 subject to the levy of tax under the general property tax act, 1893
18 PA 206, MCL 211.1 to 211.155.
19 (o) "Michigan film and digital media office" or "office" means
20 the office created under section 29a of the Michigan strategic fund
21 act, 1984 PA 270, MCL 125.2029a.
22 (p) "Michigan film promotion fund" means the fund created
23 under section 29d of the Michigan strategic fund act, 1984 PA 270,
24 MCL 125.2029d.
25 (q) "Obscene matter or an obscene performance" means matter
26 described in 1984 PA 343, MCL 752.361 to 752.374.
27 (r) "Personal service corporation" means that term as defined
28 under section 269A of the internal revenue code and includes any
29 other entity, including a sole proprietorship or independent
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1 contractor, that meets the principal activity and ownership
2 requirements established for a personal service corporation under
3 section 269A(b) of the internal revenue code.
4 (s) "Production period" means the time period between the
5 greenlighting of a qualified production and the completion of the
6 qualified production. Production period includes the preproduction,
7 production, and postproduction time frames, but does not include
8 the time to develop or acquire rights to produce the qualified
9 production or the time to market, promote, or distribute the
10 qualified production. As used in this subdivision:
11 (i) "Greenlighting" means the moment at which a studio or
12 producer approves a project to move forward into preproduction and
13 commits to the budgeting process.
14 (ii) "Postproduction" means the phase of production that
15 follows production in which raw footage is edited and assembled
16 into a finished product with sound synchronization, visual effects,
17 color correction, and other miscellaneous edits.
18 (iii) "Preproduction" means the phase of production that
19 precedes the bulk of the actual filming of the project.
20 (iv) "Production" means the phase of production in which the
21 bulk of the filming takes place.
22 (t) "Production staff and crew" means office, production, and
23 postproduction staff, including, but not limited to, accountants,
24 coordinators, secretaries, casting agents, talent agents, model
25 agents, and any other individual involved with cameras, casting,
26 construction, costume, electric, editing, grip, location, hair,
27 makeup, props, swing gang, set decorating, sound, special effects,
28 transportation, and visual effects related to the qualified
29 production.
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1 (u) "Qualified Michigan vendor" means a business that
2 satisfies each of the following:
3 (i) Has commercial domicile in this state or is incorporated or
4 registered to do business in this state, prior to commencing work
5 on the qualified production.
6 (ii) Has at least 1 physical location in this state and has
7 been doing business for at least 6 months before the date of the
8 APC.
9 (iii) For a vendor engaged in the business of selling or renting
10 equipment, maintains inventory in this state on a continuous basis
11 and has at least 1 full-time employee in this state.
12 (iv) Is subject to the levy of taxes under this act, the
13 general property tax act, 1893 PA 206, MCL 211.1 to 211.155, and
14 the general sales tax act, 1933 PA 167, MCL 205.51 to 205.78.
15 (v) "Qualified personnel expenditure" means any payments and
16 compensation up to $500,000.00 for each employee or contractual or
17 salaried employee, per qualified production project, who performs
18 services in this state directly attributable to the qualified
19 production, including all of the following:
20 (i) Payment of wages subject to the withholding requirements of
21 this act.
22 (ii) Payment to a loan out company if the loan out company has
23 complied with the withholding requirements of this act for each
24 employee who performs services in this state directly attributable
25 to the qualified production.
26 (w) "Qualified probationary Michigan vendor" means a Michigan
27 vendor that satisfies each of the requirements to be a qualified
28 Michigan vendor except that the vendor has only been doing business
29 in this state for less than 6 months before the date of the APC and
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1 if that vendor is engaged in the business of selling or renting
2 equipment does not have at least 1 full-time employee in this
3 state.
4 (x) "Qualified probationary Michigan vendor expenditure" means
5 a production expenditure made in this state to a qualified
6 probationary Michigan vendor that would have been a qualified
7 production expenditure if the qualified probationary Michigan
8 vendor was a qualified Michigan vendor.
9 (y) "Qualified production" means single media or multimedia
10 content created in whole or in part in this state for distribution
11 or exhibition by any means and media in any digital media format,
12 film, or videotape, including, but not limited to, a motion
13 picture, a documentary, a television series, a television
14 miniseries, a television special, interstitial television
15 programming, long-form television, interactive television, music
16 videos, advertising commercials, commercial photography,
17 industrials, short films, web-based content, an internet video, a
18 video, motion capture, or animation. Qualified production also
19 includes any trailer, pilot, video teaser, or demo created
20 primarily to stimulate the sale, marketing, promotion, or
21 exploitation of future investment in a production. Qualified
22 production does not include any of the following:
23 (i) A production for which records are required to be
24 maintained with respect to any performer in the production under 18
25 USC 2257.
26 (ii) A production that includes obscene matter or an obscene
27 performance.
28 (iii) A production that primarily consists of televised news or
29 current events.
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1 (iv) A production that primarily consists of a live sporting
2 event.
3 (v) A production that primarily consists of political
4 advertising.
5 (vi) A radio program.
6 (vii) A weather show.
7 (viii) A financial market report.
8 (ix) A talk show.
9 (x) A game show.
10 (xi) An awards show or other gala event production.
11 (xii) A production with the primary purpose of fund-raising.
12 (xiii) A nonscripted reality production that is not a
13 commercial.
14 (z) "Qualified production expenditure" means an expenditure
15 made during the production period in this state to a qualified
16 Michigan vendor that is directly attributable to the qualified
17 production and that is a transaction subject to taxation in this
18 state. Qualified production expenditure does not include any pass-
19 through transactions or purchases made from a qualified Michigan
20 vendor for any goods or services that are not within the ordinary
21 course of business of that qualified Michigan vendor. Qualified
22 production expenditures paid to a qualified Michigan vendor
23 include, but are not limited to, the purchase, lease, or use of
24 tangible personal property in this state during the production
25 period of the qualified production or to acquire services performed
26 in this state that are directly attributable to the qualified
27 production. Qualified production expenditure does not include the
28 purchase of tangible assets if those assets retain residual value
29 or are not fully consumed by the qualified production during the
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1 production period. Qualified production expenditure does not
2 include an expenditure related to the acquisition or licensing of
3 content used in the qualified production. Qualified production
4 expenditure does include, but is not limited to, all of the
5 following:
6 (i) Rental or use of facilities or equipment, use of
7 soundstages or studios, location fees, and related services and
8 materials to the extent those tangible assets are used in this
9 state for the qualified production.
10 (ii) Use of vehicles, which may include chartered aircraft
11 based in this state used for transportation in this state directly
12 attributable to production of a qualified production, but may not
13 include the chartering of aircraft for transportation outside of
14 this state. For purposes of this subparagraph, use of vehicles and
15 chartered aircraft includes fuel costs incurred in this state, and
16 costs attributable to chartered aircraft are limited to 2 roundtrip
17 fares per individual, per qualified production.
18 (iii) Commercial airfare for domestic travel to and from this
19 state or within this state directly attributable to production or
20 distribution of a qualified production. In calculating expenditures
21 under this subparagraph, commercial airfare expenditures are
22 limited to 2 roundtrip fares per individual, per qualified
23 production.
24 (iv) Insurance coverage or bonding if purchased from an
25 insurance agent based in this state.
26 (v) Postproduction costs directly related to the qualified
27 production during the production period for, but not limited to,
28 animation, dailies, digital intermediate color grading, editing,
29 Foley recording, automatic dialogue replacement, sound recording,
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1 sound editing and mixing, special or visual effects including
2 computer-generated imagery or other effects, scoring and music
3 editing, beginning and end credits, negative processing and
4 cutting, soundtrack production, dubbing, subtitling, or addition of
5 sound or visual effects.
6 (vi) Stock footage or stock music.
7 (aa) "Resident" means an individual who is domiciled in this
8 state and has an operator's or chauffeur's license issued under the
9 Michigan vehicle code, 1949 PA 300, MCL 257.1 to 257.923, an
10 enhanced driver license issued under the enhanced driver license
11 and enhanced official state personal identification card act, 2008
12 PA 23, MCL 28.301 to 28.308, an official state personal
13 identification card issued under 1972 PA 222, MCL 28.291 to 28.300,
14 or an enhanced official state personal identification card issued
15 under the enhanced driver license and enhanced official state
16 personal identification card act, 2008 PA 23, MCL 28.301 to 28.308.
17 As used in this subdivision, "domicile" means a place where an
18 individual has the individual's true, fixed, and permanent home and
19 principal establishment, to which, whenever absent therefrom, the
20 individual intends to return, and domicile continues until another
21 permanent establishment is established.
22 (bb) "State-certified qualified production" means a qualified
23 production for which a tax credit certificate has been issued by
24 the office under this section or section 677.
25 (cc) "Talent-related positions" means individuals with any
26 speaking, background, or extra roles that appear on-screen or off-
27 screen.
28 (dd) "Tax credit certificate" or "TCC" means the certificate
29 issued by the office under subsection (8) upon completion of a
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1 qualified pr