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S.F. No. 1434 - Film Production Investment Credit
 
Author: Senator Richard Cohen
 
Prepared By: Nora Pollock, Senate Counsel (651/297-8066)
 
Date: April 4, 2013



 

Section 1, subdivision 1.  [Definitions]  Provides the following definitions:

“Qualifying film production” is a motion picture certified by the Commissioner of Revenue as made wholly in Minnesota.

“Qualified investment” is an amount used to pay qualified production expenses provided by an investor who does not have any financial interest in the motion picture or its production company.

“Motion picture” is a feature-length film, video, digital media project, a television series not exceeding 27 episodes or television pilot, or a commercial made in whole or in part in the state for theatrical or television viewing.  News, sports, weather, and financial market reports; and talk shows, game shows, award shows, fundraising programs, infomercials, and productions containing obscene material are excluded from the definition.

“Motion picture production company” is a company and its subsidiaries engaged in motion picture, television series, video, or commercial production for television release or theatrical viewing, excluding any company that is more than 25 percent owned or controlled by or affiliated with any company or person in default on a state loan or loan guaranteed by the state.

“Principal photography” is the actual filming of the production, excluding preproduction and postproduction. 

“Production expense” or “production cost” means the expenditures directly incurred in the production of a motion picture, including production, preproduction, and postproduction.  Eligible expenditures include wages for those employed in the production, set construction and operation, editing, photography, sound synchronization, lighting, wardrobe, makeup, and accessories; film processing, transfer, sound mixing, special and visual effects; music; location fees; and the cost of purchase or rental of facilities and equipment; or any other production expense as may be determined by the commissioner to be a qualified production expense.  Marketing, advertising, and royalties costs, and any costs related to the transfer of tax credits, are not eligible expenditures. 

Subdivision 2.  [Credit allowed]  Paragraph (a) authorizes a payroll tax credit equal to 25 percent of total aggregate payroll paid by a motion picture company that is attributable to Minnesota income.  Total production costs must equal or exceed $100,000 to be eligible for the payroll tax credit.  The salary of any employee whose salary is greater than or equal to $1 million may not be included in the total aggregate payroll. 

Paragraph (b) authorizes an income tax credit equal to 25 percent of Minnesota production expenses when the motion picture is eligible for a credit under paragraph (a), and the Minnesota production expenses exceed 50 percent of total production expenses, or at least 50 percent of total principal photography days of the film take place in the state. 

Subdivision 3.  [Certification of credits]  Requires taxpayers to apply to the Department of Revenue for a credit certificate, which may only be issued for qualifying investments in a qualifying film production.  No more than $10 million in credit certificates may be issued in a year.

Subdivision 4.  [Carryover; transfers; refunds]  Allows 90 percent of the credit amount to be refundable, or a carry forward of the full amount of tax credits to any of the subsequent five tax years.  A taxpayer may not transfer a credit more than once in a 12-month period.

Allows tax credits or portions of tax credits to be transferred, sold, or assigned to other taxpayers with tax liabilities.  The credit is not refundable to the transferee, buyer, or assignee but may be carried forward to any of the five subsequent tax years.  Requires a taxpayer wishing to sell, transfer, or assign credits to submit a statement describing the amount of tax credit for which the transfer, sale, or assignment is eligible.  The commissioner must provide the taxpayer with a certificate of eligibility to transfer, sell, or assign tax credits, and no transfer, sale, or assignment may be made without a certificate.  The commissioner must not issue a certificate to a taxpayer with an outstanding tax obligation with the state in connection with a motion picture production for any prior year.

Subdivision 5.  [Limitation]  Limits credits for productions in which the aggregate salary and other compensation amounts paid for the services of one individual, to the extent those amounts exceed $2 million.

Section 1 is effective beginning tax year 2013. 

Section 2.  [Sales tax exemption]  Authorizes an upfront sales tax exemption for purchases of tangible personal property to a qualifying motion picture company that spends at least $50,000 in the state in connection with filming or motion picture production in the state within a consecutive 12-month period.  Requires a motion picture production company to submit an estimate of total expenditures to be made in the state to the Commissioner of Revenue in order to receive an exemption certificate.  Provides a clawback for sales tax that would have been paid in cases where a motion picture production company does not satisfy the expenditure requirement.  Effective for sales and purchases made after June 30, 2013.

NBP:dv 

 

 

 
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