OHIO LEGISLATIVE SERVICE COMMISSION
Office of Research Legislative Budget
www.lsc.ohio.gov and Drafting Office
S.B. 37 Bill Analysis
133rd General Assembly
Click here for S.B. 37’s Fiscal Note
Version: As Passed by the Senate
Primary Sponsor: Sen. Schuring
Effective Date:
Michael Hinel, Attorney
SUMMARY
Extends eligibility for the motion picture tax credit to certain live theater productions.
Adds post-production, advertising, and promotional expenses to the kinds of
expenditures for which the credit may be claimed.
Disqualifies motion pictures and live theater productions that do not begin within a
specified period after being certified as eligible for the credit.
Stipulates that tax credit certificates are to be awarded in two rounds – in July and
January – each fiscal year.
Requires each round’s applications to be ranked on the basis of the economic and
workforce development impact of the production and granted tax credits in the order of
the ranking.
DETAILED ANALYSIS
Note: The provisions of this bill were enacted in H.B. 166 of the 133rd General Assembly,
along with the following provisions relating to the tax credit but not included in this bill:
Extending eligibility for the tax credit to contractors of production companies;
Requiring that production companies and their contractors be registered with the
Secretary of State as a condition of receiving the credit;
Terminating a tax credit recipient’s authority to transfer its right to claim the credit to a
third party.
The remainder of this analysis does not reflect the status of the law as it exists on and
after October 17, 2019, the effective date of the H.B. 166 provisions.
January 16, 2020
Office of Research and Drafting LSC Legislative Budget Office
Motion picture tax credit
The bill modifies the motion picture tax credit, which is a refundable credit for
companies that produce all or part of a motion picture in Ohio and incur at least $300,000 in
Ohio-sourced production expenditures. The credit equals 30% of the company’s Ohio-sourced
expenditures for goods, services, and payroll involved in the production. The credit is
transferrable and may be claimed against the commercial activity tax (CAT), the financial
institutions tax (FIT), or the personal income tax. A company seeking the credit must first apply
to the Director of Development Services for certification of the project as a “tax credit-eligible
production.” Then, upon completion of the project, the company must hire an independent
certified public accountant to compile a report of the company’s Ohio-sourced expenditures
and apply to the Director for a tax credit certificate based on that amount (or the amount of
expenditures estimated in the company’s initial application, whichever is less).
Broadway theatrical productions
The bill extends eligibility for the motion picture tax credit to “Broadway theatrical
productions” that are directly associated with New York City’s Broadway Theater District and
are rehearsed or performed by a professional cast and crew at a qualified production facility –
an Ohio facility that is used in the development or presentation to the public of live stage
theater. Such a theatrical production qualifies for the credit if (1) the production is scheduled
for presentation in New York City’s Broadway Theater District after it is performed in Ohio (a
“pre-Broadway production”), (2) the production is scheduled to be performed in Ohio for more
than five weeks with an average of at least six performances per week (a “long run
production”), or (3) the activities comprising the technical period of the production are
conducted in Ohio before the beginning of a performance tour (a “tour launch”).1
The procedures for certifying Broadway theatrical productions as “tax credit-eligible”
and awarding a tax credit certificate upon the completion of the production are mostly the
same as those that apply to motion pictures. However, the bill makes a few adjustments to the
information that is required to be submitted with the application for certification of the project
(see, “Application requirements,” below).2
Eligible expenditures
The bill broadens the types of expenses upon which the credit is based to include post-
production, advertising, and promotional expenditures. Under continuing law, expenditures for
goods, services, and payroll used directly for the production itself may be included in
computing the amount of the credit and in meeting the $300,000 minimum expenditure
1
R.C. 122.85(A)(6) through (10).
2
R.C. 107.036, 5726.98, 5733.98, 5747.98, and 5751.98.
P a g e |2 S.B. 37
As Passed by the Senate
Office of Research and Drafting LSC Legislative Budget Office
threshold. The Director must adopt rules as to the specifics of what constitutes “post-
production” activities.3
Application requirements
The bill makes several adjustments to the information that is required to be submitted
for a motion picture or Broadway theatrical production to be certified as eligible for the credit.
All applicants are required to submit an estimate of the amount of state and local taxes that will
be generated from the project and of the project’s overall economic impact. Furthermore, in
addition to the list of preproduction and production dates required under continuing law, the
application must include a list of the post-production dates associated with the motion picture
or Broadway theatrical production.
If the application concerns a Broadway theatrical production, the application need not
include the percentage of the production “being shot in Ohio” or the shooting script. In lieu of
submitting an address for an Ohio production office, the company may provide the address of
the qualified production facility at which the Broadway theatrical production will be rehearsed
or performed. Lastly, the application must include a list of each scheduled performance of the
production at the qualified production facility.4
Rescinding certification
The bill requires the Director to rescind certification of a production if the production
process does not begin within a specified period. The production process for motion pictures
and Broadway theatrical productions that are certified as credit-eligible on or after the bill’s
effective date must begin within 90 days of such certification unless the production company
demonstrates that the delay is due to unforeseeable circumstances beyond its control or due to
action or inaction by a government agency. The production process for previously certified
motion pictures must begin within one year of such certification or before the bill’s 90-day
effective date, whichever is later.
Continuing law requires production companies to submit “sufficient evidence of
reviewable progress” within 90 days of the eligibility certification and any time thereafter at the
Director’s request. The Director may (but is not required to) revoke a production’s eligibility if a
company fails to report sufficient progress. If eligibility is revoked, the company may reapply for
the eligibility certification.5
Awarding tax credits
The bill requires the Director to award tax credit certificates in two rounds each fiscal
year. The first round of applications would be approved by July 31, and the second round would
be approved by January 31. The amount of credits awarded in the first round of applications is
3
R.C. 122.85(A)(4), (D), and (G).
4
R.C. 122.85(B).
5
R.C. 122.85(B); Section 4 of the bill.
P a g e |3 S.B. 37
As Passed by the Senate
Office of Research and Drafting LSC Legislative Budget Office
limited to $20 million plus any credit allotment that was not used in the previous fiscal year.
Under continuing law, the maximum amount of credits that may be awarded in any fiscal year
is $40 million.
For each round, the Director must rank the applications on the basis of the extent of
positive economic impact a production would have and the effect of the production on
developing a permanent Ohio workforce in the motion picture or live theater industries.
Priority must be given to television series and miniseries. For the purposes of ranking
applications, the “economic impact” of a production is determined based on the production
company’s total expenditures in Ohio that are directly associated with the production. The
production’s impact on developing a permanent Ohio workforce in the motion picture and live
theater industries is determined “first by the number of new jobs created and second by the
amount of payroll added” for Ohio employees.
After ranking the applications, the Director would award tax credits to productions in
the order of their ranking, starting with the productions that had the greatest economic and
workforce development impact. The bill requires the Director to adopt rules prescribing a
schedule and deadlines for applications to be submitted and reviewed.6
Applications concerning television series and miniseries must be prioritized, although no
requirements specify how and when certificates are to be awarded. Based on the Development
Services Agency’s website, it appears that the Director awards credits whenever they are
available (i.e., when the annual credit cap resets) in the order in which applications are
received.7
Effective date
The bill’s modifications to the process of ranking applications and awarding credits –
including the requirement that credits be awarded in two annual cycles – apply to fiscal years
beginning on or after the bill’s effective date. The Director is required to adopt rules necessary
to implement those modifications on or before that date. The other changes made by the bill
apply to productions that are certified as tax credit-eligible productions on or after the bill’s
effective date.8
6
R.C. 122.85(C)(5) and (G)(1).
7
Ohio Development Services Agency, “Ohio Film Office – Tax Credit Overview and Frequently Asked
Questions,” https://development.ohio.gov/filmoffice/Incentives.html.
8
Section 3.
P a g e |4 S.B. 37
As Passed by the Senate
Office of Research and Drafting LSC Legislative Budget Office
HISTORY
Action Date
Introduced 02-12-19
Reported, S. Ways & Means 05-08-19
Passed Senate (32-0) 05-08-19
S0037-PS-133/ts
P a g e |5 S.B. 37
As Passed by the Senate
Statutes affected: As Introduced: 107.036, 122.85, 5726.98, 5733.98, 5747.98, 5751.98
As Reported By Senate Committee: 107.036, 122.85, 5726.98, 5733.98, 5747.98, 5751.98
As Passed By Senate: 107.036, 122.85, 5726.98, 5733.98, 5747.98, 5751.98