Bill Summary – FastDemocracy

General Assembly                      Raised Bill No. 5465
       February Session, 2020               LCO No. 2369
     Referred to Committee on            FINANCE, REVENUE AND
     BONDING
     Introduced by:
       (FIN)
 AN ACT CONCERNING THE APPLICABILITY OF THE FILM
 PRODUCTION TAX CREDIT.
 Be it enacted by the Senate and House of Representatives in General
 Assembly convened:
       Section 1. Section 12-217jj of the 2020 supplement to the general
    statutes is repealed and the following is substituted in lieu thereof
    (Effective January 1, 2021, and applicable to income years commencing on or
    after January 1, 2021):
       (a) As used in this section:
       (1) "Commissioner" means the Commissioner of Revenue Services.
      (2) "Department" means the Department of Economic and
    Community Development.
      (3) (A) "Qualified production" means entertainment content created
   in whole or in part within the state, including motion pictures, except as
   otherwise provided in this subparagraph; documentaries; long-form,
   specials, mini-series, series, sound recordings, videos and music videos
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 and interstitials television programming; interactive television;
 relocated television production; interactive games; videogames;
 commercials; any format of digital media, including an interactive web
 site, created for distribution or exhibition to the general public; and any
 trailer, pilot, video teaser or demo created primarily to stimulate the
 sale, marketing, promotion or exploitation of future investment in either
 a product or a qualified production via any means and media in any
 digital media format, film or videotape, provided such program meets
 all the underlying criteria of a qualified production. For state fiscal years
 ending on or after June 30, 2014, "qualified production" shall not include
 a motion picture that has not been designated as a state-certified
 qualified production prior to July 1, 2013, and no tax credit voucher for
 such motion picture may be issued for such motion picture, except, for
 state fiscal years ending on or after June 30, 2015, "qualified production"
 shall include a motion picture for which twenty-five per cent or more of
 the principal photography shooting days are in this state at a facility that
 receives not less than twenty-five million dollars in private investment
 and opens for business on or after July 1, 2013, and a tax credit voucher
 may be issued for such motion picture.
    (B) "Qualified production" shall not include any ongoing television
 program created primarily as news, weather or financial market reports;
 a production featuring current events, other than a relocated television
 production, sporting events, an awards show or other gala event; a
 production whose sole purpose is fundraising; a long-form production
 that primarily markets a product or service; a production used for
 corporate training or in-house corporate advertising or other similar
 productions; or any production for which records are required to be
 maintained under 18 USC 2257, as amended from time to time, with
 respect to sexually explicit content.
    (4) "Eligible production company" means a corporation, partnership,
 limited liability company, or other business entity engaged in the
 business of producing qualified productions on a one-time or ongoing
 basis, and qualified by the Secretary of the State to engage in business
 in the state.
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   (5) "Production expenses or costs" means all expenditures clearly and
 demonstrably incurred in the state in the preproduction, production or
 postproduction costs of a qualified production, including:
    (A) Expenditures incurred in the state in the form of either
 compensation or purchases including production work, production
 equipment not eligible for the infrastructure tax credit provided in
 section 12-217kk, production software, postproduction work,
 postproduction equipment, postproduction software, set design, set
 construction, props, lighting, wardrobe, makeup, makeup accessories,
 special effects, visual effects, audio effects, film processing, music,
 sound mixing, editing, location fees, soundstages and any and all other
 costs or services directly incurred in connection with a state-certified
 qualified production;
     (B) Expenditures for distribution, including preproduction,
 production or postproduction costs relating to the creation of trailers,
 marketing videos, commercials, point-of-purchase videos and any and
 all content created on film or digital media, including the duplication of
 films, videos, CDs, DVDs and any and all digital files now in existence
 and those yet to be created for mass consumer consumption; the
 purchase, by a company in the state, of any and all equipment relating
 to the duplication or mass market distribution of any content created or
 produced in the state by any digital media format which is now in use
 and those formats yet to be created for mass consumer consumption;
 and
    (C) "Production expenses or costs" does not include the following: (i)
 On and after January 1, 2008, compensation in excess of fifteen million
 dollars paid to any individual or entity representing an individual, for
 services provided in the production of a qualified production and on or
 after January 1, 2010, compensation subject to Connecticut personal
 income tax in excess of twenty million dollars paid in the aggregate to
 any individuals or entities representing individuals, for star talent
 provided in the production of a qualified production; (ii) media buys,
 promotional events or gifts or public relations associated with the
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 promotion or marketing of any qualified production; (iii) deferred,
 leveraged or profit participation costs relating to any and all personnel
 associated with any and all aspects of the production, including, but not
 limited to, producer fees, director fees, talent fees and writer fees; (iv)
 costs relating to the transfer of the production tax credits; (v) any
 amounts paid to persons or businesses as a result of their participation
 in profits from the exploitation of the qualified production; and (vi) any
 expenses or costs relating to an independent certification, as required by
 subsection [(g)] (h) of this section, or as the department may otherwise
 require, pertaining to the amount of production expenses or costs set
 forth by an eligible production company in its application for a
 production tax credit.
    (6) "Sound recording" means a recording of music, poetry or spoken-
 word performance, but does not include the audio portions of dialogue
 or words spoken and recorded as part of a motion picture, video,
 theatrical production, television news coverage or athletic event.
    (7) "State-certified qualified production" means a qualified
 production produced by an eligible production company that (A) is in
 compliance with regulations adopted pursuant to subsection [(k)] (l) of
 this section, (B) is authorized to conduct business in this state, and (C)
 has been approved by the department as qualifying for a production tax
 credit under this section.
    (8) "Interactive web site" means a web site, the production costs of
 which (A) exceed five hundred thousand dollars per income year, and
 (B) is primarily (i) interactive games or end user applications, or (ii)
 animation, simulation, sound, graphics, story lines or video created or
 repurposed for distribution over the Internet. An interactive web site
 does not include a web site primarily used for institutional, private,
 industrial, retail or wholesale marketing or promotional purposes, or
 which contains obscene content.
    (9) "Post-certification remedy" means the recapture, disallowance,
 recovery, reduction, repayment, forfeiture, decertification or any other
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 remedy that would have the effect of reducing or otherwise limiting the
 use of a tax credit provided by this section.
    (10) "Compensation" means base salary or wages and does not
 include bonus pay, stock options, restricted stock units or similar
 arrangements.
   (11) "Relocated television production" means:
   (A) An ongoing television program all of the prior seasons of which
 were filmed outside this state, and may include current events shows,
 except those referenced in subparagraph (B)(i) of this subdivision.
    (B) An eligible production company's television programming in this
 state that (i) is not a general news program, sporting event or game
 broadcast, and (ii) is created at a qualified production facility that has
 had a minimum investment of twenty-five million dollars made by such
 eligible production company on or after January 1, 2012, at which
 facility the eligible production company creates ongoing television
 programming as defined in subparagraph (A) of this subdivision, and
 creates at least two hundred new jobs in Connecticut on or after January
 1, 2012. For purposes of this subdivision, "new job" means a full-time
 job, as defined in section 12-217ii, that did not exist in this state prior to
 January 1, 2012, and is filled by a new employee, and "new employee"
 includes a person who was employed outside this state by the eligible
 production company prior to January 1, 2012, but does not include a
 person who was employed in this state by the eligible production
 company or a related person, as defined in section 12-217ii, with respect
 to the eligible production company during the prior twelve months.
    (C) A relocated television production may be a state-certified
 qualified production for not more than ten successive income years,
 after which period the eligible production company shall be ineligible
 to resubmit an application for certification.
   (b) (1) The Department of Economic and Community Development
 shall administer a system of tax credit vouchers within the resources,
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 requirements and purposes of this section for eligible production
 companies producing a state-certified qualified production in the state.
     (2) Any eligible production company incurring production expenses
 or costs shall be eligible for a credit (A) for income years commencing
 on or after January 1, 2010, but prior to January 1, 2018, against the tax
 imposed under chapter 207 or this chapter, [and] (B) for income years
 commencing on or after January 1, 2018, but prior to January 1, 2021,
 against the tax imposed under chapter 207 or 211 or this chapter, and
 (C) for income years commencing on or after January 1, 2021, against the
 tax imposed under chapter 207, 211, 219 or this chapter, as follows: (i)
 For any such company incurring such expenses or costs of not less than
 one hundred thousand dollars, but not more than five hundred
 thousand dollars, a credit equal to ten per cent of such expenses or costs,
 (ii) for any such company incurring such expenses or costs of more than
 five hundred thousand dollars, but not more than one million dollars, a
 credit equal to fifteen per cent of such expenses or costs, and (iii) for any
 such company incurring such expenses or costs of more than one million
 dollars, a credit equal to thirty per cent of such expenses or costs.
    (c) No eligible production company incurring an amount of
 production expenses or costs that qualifies for such credit shall be
 eligible for such credit unless on or after January 1, 2010, such company
 conducts (1) not less than fifty per cent of principal photography days
 within the state, or (2) expends not less than fifty per cent of
 postproduction costs within the state, or (3) expends not less than one
 million dollars of postproduction costs within the state.
    (d) For income years commencing on or after January 1, 2010, no
 expenses or costs incurred outside the state and used within the state
 shall be eligible for a credit, and one hundred per cent of such expenses
 or costs shall be counted toward such credit when incurred within the
 state and used within the state.
   (e) (1) On and after July 1, 2006, and for income years commencing
 on or after January 1, 2006, any credit allowed pursuant to this section
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 may be sold, assigned or otherwise transferred, in whole or in part, to
 one or more taxpayers, provided (A) no credit, after issuance, may be
 sold, assigned or otherwise transferred, in whole or in part, more than
 three times, (B) in the case of a credit allowed for the income year
 commencing on or after January 1, 2011, and prior to January 1, 2012,
 any entity that is not subject to tax under chapter 207 or this chapter may
 transfer not more than fifty per cent of such credit in any one income
 year, and (C) in the case of a credit allowed for an income year
 commencing on or after January 1, 2012, any entity that is not subject to
 tax under chapter 207 or this chapter may transfer not more than
 twenty-five per cent of such credit in any one income year.
    (2) Notwithstanding the provisions of subdivision (1) of this
 subsection, any entity that is not subject to tax under this chapter or
 chapter 207 shall not be subject to the limitations on the transfer of
 credits provided in subparagraphs (B) and (C) of said subdivision (1),
 provided such entity owns not less than fifty per cent, directly or
 indirectly, of a business entity, as defined in section 12-284b.
    (3) Notwithstanding the provisions of subdivision (1) of this
 subsection, any qualified production that is created in whole or in
 significant part, as determined by the Commissioner of Economic and
 Community Development, at a qualified production facility shall not be
 subject to the limitations of subparagraph (B) or (C) of said subdivision
 (1). For purposes of this subdivision, "qualified production facility"
 means a facility (A) located in this state, (B) intended for film, television
 or digital media production, and (C) that has had a minimum
 investment of three million dollars, or less if the Commissioner of
 Economic and Community Development determines such facility
 otherwise qualifies.
    (4) (A) For the income year commencing January 1, 2018, any credit
 that is sold, assigned or otherwise transferred, in whole or in part, to one
 or more taxpayers pursuant to subdivision (1) of this subsection may be
 claimed against the tax imposed under chapter 211 only if there is
 common ownership of at least fifty per cent between such taxpayer and
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 the eligible production company that sold, assigned or otherwise
 transferred such credit. Such taxpayer may only claim ninety-two per
 cent of the amount of such credit entered by the department on the
 production tax credit voucher.
    (B) For income years commencing on or after January 1, 2019, any
 credit that is sold, assigned or otherwise transferred, in whole or in part,
 to one or more taxpayers pursuant to subdivision (1) of this subsection,
 which credit is claimed against the tax imposed under chapter 211, shall
 be subject to the following limits:
   (i) The taxpayer may only claim ninety-five per cent of the amount of
 such credit entered by the department on the production tax credit
 voucher; and
    (ii) If there is common ownership of at least fifty per cent between
 such taxpayer and the eligible production company that sold, assigned
 or otherwise transferred such credit, such taxpayer may only claim
 ninety-two per cent of the amount of such credit entered by the
 department on the production tax credit voucher.
    (5) For income years commencing on or after January 1, 2021, any
 credit that is claimed against the tax imposed under chapter 219 shall be
 subject to the following limits:
    (A) Any credit that is sold, assigned or otherwise transferred, in
 whole or in part, to one or more taxpayers pursuant to subdivision (1)
 of this subsection may be claimed against the tax imposed under chapter
 219 only if there is common ownership of at least fifty per cent between
 such taxpayer and the eligible production company that sold, assigned
 or otherwise transferred such credit; and
   (B) The eligible production company or taxpayer claiming the credit
 against the tax imposed under chapter 219 may only claim ninety-two<