| 47 | | - | SECTION 1. Chapter 235, Hawaii Revised Statutes, is amended by adding a new section to be appropriately designated and to read as follows: "§235- Motion picture, digital media, and film infrastructure tax credit. (a) There shall be allowed to each taxpayer who: (1) Is subject to the taxes imposed by this chapter; and (2) Invests $ or more in a qualified film infrastructure project, a nonrefundable tax credit that shall be deductible from the taxpayer's net income tax liability, if any, imposed by this chapter for the taxable year in which the credit is properly claimed. The amount of the credit shall be per cent of the eligible infrastructure costs made by the taxpayer in any county of the State. A qualified film infrastructure project occurring in more than one county may prorate its expenditures based upon the amounts spent in each county, if the population bases differ enough to change the percentage of tax credit. In the case of a partnership, S corporation, estate, or trust, the tax credit allowable is for eligible infrastructure costs incurred by the entity for the taxable year. The cost upon which the tax credit is computed shall be determined at the entity level. Distribution and share of credit shall be determined by rule. If a deduction is taken under section 179 (with respect to election to expense depreciable business assets) of the Internal Revenue Code of 1986, as amended, no tax credit shall be allowed for those costs for which the deduction is taken. The basis for eligible property for depreciation of accelerated cost recovery system purposes for state income taxes shall be reduced by the amount of credit allowable and claimed. (b) The credit allowed under this section shall be claimed against the net income tax liability for the taxable year. (c) All claims, including any amended claims, for tax credits under this section shall be filed on or before the end of the twelfth month following the close of the taxable year for which the credit may be claimed. Failure to comply with the foregoing provision shall constitute a waiver of the right to claim the credit. (d) If a taxpayer sells, assigns, or otherwise transfers a credit under this section to another taxpayer, the transferor and transferee shall jointly submit written notification of the transfer to the department of business, economic development, and tourism no later than thirty days after the transfer. The notification shall include the credit certificate number, date of transfer, amount of the credit transferred, tax credit balance before and after the transfer, tax identification numbers for the transferor and transferee, and any other information required by the director of taxation. After the initial issuance of a tax credit, the credit may be sold, assigned, or otherwise transferred not more than three times. Failure to comply with this subsection will result in a disallowance of the tax credit until there is full compliance on both the part of the transferor and the transferee, and all subsequent transferors and transferees. The department of business, economic development, and tourism shall provide a copy of the notification of assignment to the director of taxation upon request. No tax credits transferred pursuant to this subsection shall be subject to a post-certification remedy; and the department of business, economic development, and tourism and director of taxation shall have no right, except in the case of possible material misrepresentation or fraud, to conduct any further or additional review, examination or audit of the expenditures or costs for which the tax credits were issued. (e) Before claiming a tax credit under this section, each taxpayer shall prequalify for the credit by registering with the department of business, economic development, and tourism during the development or preproduction stage. The taxpayer undertaking a qualified film infrastructure project shall apply to the department of business, economic development, and tourism for a film infrastructure tax credit certificate no later than ninety days after the first expenses or costs are incurred, and shall provide with the application the information as the department of business, economic development, and tourism may require to determine the project's eligibility as a qualified film infrastructure project. Each application for a film infrastructure tax credit certificate shall include: (1) A detailed description of the film infrastructure project; (2) A preliminary budget; (3) Estimated completion date; and (4) Other information as the department of business, economic development, and tourism may require. (f) The department of business, economic development, and tourism may require an independent audit of all project costs and expenditures before issuing a film infrastructure tax credit certificate. If the department of business, economic development, and tourism determines that the project has eligible infrastructure costs, the department shall indicate the amount of costs or expenditures that have been established to the satisfaction of the department, and issue to the taxpayer a film infrastructure tax credit certificate for investors indicating the amount of tax credits available under this section. The department of business, economic development, and tourism shall provide a copy of the film infrastructure tax credit certificate to the director of taxation, upon request. (g) Before the issuance of a film infrastructure project tax credit voucher to a taxpayer based upon the film infrastructure tax credit certificate issued by the department of business, economic development, and tourism, the taxpayer undertaking the qualified film infrastructure project shall provide the department with a description of the progress on the project and an estimated completion date. The department of business, economic development, and tourism may require an independent audit of all project costs and expenditures before the issuance of the film infrastructure tax credit voucher to a taxpayer. No film infrastructure tax credit voucher shall be issued before the qualified film infrastructure project is shown to be one hundred per cent complete. (h) No later than ninety days following the end of each taxable year in which eligible infrastructure costs were expended, each taxpayer claiming a tax credit pursuant to this section shall submit a written, sworn statement to the department of business, economic development, and tourism, together with a verification review by a qualified certified public accountant using procedures prescribed by the department, identifying: (1) All eligible infrastructure costs, if any, incurred in the previous taxable year; (2) The amount of tax credits claimed pursuant to this section, if any, in the previous taxable year; and (3) The number of total hires versus the number of local hires by category and by county. This information may be reported from the department of business, economic development, and tourism to the legislature in a redacted format pursuant to subsection (j)(5). (i) The director of taxation shall prepare forms as may be necessary to claim a credit under this section. The director of taxation may also require the taxpayer to furnish information to ascertain the validity of the claim for credit made under this section and may adopt rules necessary to effectuate the purposes of this section pursuant to chapter 91. (j) The department of business, economic development, and tourism shall: (1) Charge a reasonable administrative fee sufficient to cover the department's costs to analyze applications submitted under this section; (2) Maintain records of the names of the taxpayers and qualified film infrastructure project thereof claiming the tax credits under this section; (3) Obtain and total the aggregate amounts of all eligible infrastructure costs per qualified film infrastructure project and per qualified film infrastructure project per taxable year; (4) Provide a letter to the director of taxation specifying the amount of the tax credit per qualified film infrastructure project for each taxable year that a tax credit is claimed and the cumulative amount of the tax credit for all years claimed; and (5) Submit a report to the legislature no later than twenty days prior to the convening of each regular session detailing the non-aggregated eligible infrastructure costs that form the basis of the tax credit claims and expenditures, itemized by taxpayer, in a redacted format to preserve the confidentiality of the taxpayers claiming the credit. Upon each determination required under this subsection, the department of business, economic development, and tourism shall issue a letter to the taxpayer, regarding the qualified film infrastructure project, specifying the eligible infrastructure costs and tax credit amount qualified for in each taxable year a tax credit is claimed. The taxpayer for each qualified film infrastructure project shall file the letter with the taxpayer's tax return for the qualified film infrastructure project to the department of taxation. Notwithstanding the authority of the department of business, economic development, and tourism under this section, the director of taxation may audit and adjust the tax credit amount to conform to the information filed by the taxpayer. (k) The total amount of tax credits allowed under this section in any particular year shall be $ ; however, if the total amount of credits applied for in any year exceeds the aggregate amount of credits allowed for that year under this section, the excess shall be treated as having been applied for in the three immediately subsequent taxable years and may be claimed in those years. (l) For the purposes of this section: "Eligible infrastructure costs" means costs incurred by a qualified film infrastructure project within the State that are subject to the general excise tax under chapter 237 or income tax under this chapter and that have not been financed by any investments for which a credit was or will be claimed under this chapter. "Eligible infrastructure costs" include but are not limited to include: (1) All expenditures to provide buildings, facilities, or installations, whether a capital lease or purchase, together with necessary equipment for a film, video, television, digital production facility, or digital animation production facility; (2) Project development, including design, professional consulting fees and transaction costs; (3) Development, preproduction, production, post-production and distribution equipment, and system access; and (4) Fixtures and other equipment. "Qualified film infrastructure project" means an infrastructure project undertaken in the State by an entity that: (1) Meets the definition of a "qualified production" under section 235-17; (2) Is authorized to conduct business in the State; (3) Is not in default on a loan made by the State or a loan guaranteed by the State, or has ever declared bankruptcy under which an obligation of the entity to pay or repay public funds was discharged as a part of the bankruptcy; and (4) Has been approved by the department of business, economic development, and tourism as qualifying for a film infrastructure tax credit under this section. "Infrastructure project" means a capital project to provide one or more building, facility, or installation needed for the digital media and motion picture industry to function in the State. "Net income tax liability" means net income tax liability reduced by all other credits allowed under this chapter. "Post-certification remedy" means the recapture, disallowance, recovery, reduction, repayment, forfeiture, decertification or any other remedy that would have the effect of reducing or otherwise limiting the use of a tax credit provided by this section." SECTION 2. New statutory material is underscored. SECTION 3. This Act shall take effect on October 18, 2050, and shall apply to taxable years beginning after December 31, 2021. |
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| 47 | + | SECTION 1. Chapter 235, Hawaii Revised Statutes, is amended by adding a new section to be appropriately designated and to read as follows: "§235- Motion picture, digital media, and film infrastructure tax credit. (a) For taxable years beginning after December 31, 2021, there shall be allowed to each taxpayer that invests $3,000,000 or more in a film infrastructure project, subject to the taxes imposed by this chapter, a nonrefundable tax credit that shall be deductible from the taxpayer's net income tax liability, if any, imposed by this chapter for the taxable year in which the credit is properly claimed. The amount of the credit shall be twenty per cent of the eligible infrastructure costs made by the taxpayer in any county of the State. A film infrastructure project occurring in more than one county may prorate its expenditures based upon the amounts spent in each county, if the population bases differ enough to change the percentage of tax credit. In the case of a partnership, S corporation, estate, or trust, the tax credit allowable is for eligible infrastructure costs incurred by the entity for the taxable year. The cost upon which the tax credit is computed shall be determined at the entity level. Distribution and share of credit shall be determined by rule. If a deduction is taken under section 179 (with respect to election to expense depreciable business assets) of the Internal Revenue Code of 1986, as amended, no tax credit shall be allowed for those costs for which the deduction is taken. The basis for eligible property for depreciation of accelerated cost recovery system purposes for state income taxes shall be reduced by the amount of credit allowable and claimed. (b) The credit allowed under this section shall be claimed against the net income tax liability for the taxable year. (c) All claims, including any amended claims, for tax credits under this section shall be filed on or before the end of the twelfth month following the close of the taxable year for which the credit may be claimed. Failure to comply with the foregoing provision shall constitute a waiver of the right to claim the credit. (d) The total amount of tax credits allowed under this section in any particular year shall be $10,000,000; however, if the total amount of credits applied for in any year exceeds the aggregate amount of credits allowed for that year under this section, the excess shall be treated as having been applied for and claimed in the three immediately succeeding taxable years and may be claimed in those years. If a taxpayer sells, assigns, or otherwise transfers a credit under this section to another taxpayer, the transferor and transferee shall jointly submit written notification of the transfer to the department no later than thirty days after the transfer. The notification shall include the credit certificate number, the date of transfer, the amount of the credit transferred, the tax credit balance before and after the transfer, the tax identification numbers for both the transferor and the transferee and any other information required by the director. After the initial issuance of a tax credit, the credit may be sold, assigned, or otherwise transferred not more than three times. Failure to comply with this subsection will result in a disallowance of the tax credit until there is full compliance on both the part of the transferor and the transferee, and all subsequent transferors and transferees. The department shall provide a copy of the notification of assignment to the director upon request. No tax credits transferred pursuant to this section shall be subject to a post-certification remedy; and the department of business, economic development, and tourism and the director of taxation shall have no right, except in the case of possible material misrepresentation or fraud, to conduct any further or additional review, examination or audit of the expenditures or costs for which the tax credits were issued. The sole and exclusive remedy of the department and the director shall be to seek collection of the amount of the tax credits from the taxpayer that committed the fraud or misrepresentation. (e) Each taxpayer claiming a tax credit under this section shall: (1) First prequalify for the credit by registering the film infrastructure project with the department during the development or preproduction stage. The taxpayer undertaking a film infrastructure project shall apply to the department for a film infrastructure tax credit certificate no later than ninety days after the first expenses or costs are incurred, and shall provide with the application the information as the department may require to determine the project's eligibility as a film infrastructure project. Each application for a film infrastructure tax credit certificate shall include: (A) A detailed description of the film infrastructure project; (B) A preliminary budget; (C) Estimated completion date; and (D) Other information as the department may require. The department may require an independent audit of all project costs and expenditures before issuing a film infrastructure tax credit certificate. If the department determines that the project has eligible infrastructure costs, the department shall indicate the amount of costs or expenditures that has been established to the satisfaction of the department, and issue to the taxpayer a film infrastructure tax credit certificate for investors indicating the amount of tax credits available under this section. The department shall provide a copy of the film infrastructure tax credit certificate to the director, upon request. Before the issuance of a film infrastructure project tax credit voucher to a taxpayer based upon the film infrastructure tax credit certificate issued by the department, the taxpayer undertaking the film infrastructure project shall provide the department with a description of the progress on the project and an estimated completion date. The department may require an independent audit of all project costs and expenditures before the issuance of the film infrastructure tax credit voucher to a taxpayer. No film infrastructure tax credit voucher may be issued before the film infrastructure project is shown to be one hundred per cent complete; and (2) No later than ninety days following the end of each taxable year in which eligible infrastructure costs were expended, submit a written, sworn statement to the department, together with a verification review by a qualified certified public accountant using procedures prescribed by the department, identifying: (A) All eligible infrastructure costs, if any, incurred in the previous taxable year; (B) The amount of tax credits claimed pursuant to this section, if any, in the previous taxable year; and (C) The number of total hires versus the number of local hires by category and by county. This information may be reported from the department to the legislature in a redacted format pursuant to subsection (g)(5). (f) The director shall prepare forms as may be necessary to claim a credit under this section. The director may also require the taxpayer to furnish information to ascertain the validity of the claim for credit made under this section and may adopt rules necessary to effectuate the purposes of this section pursuant to chapter 91. (g) The department shall: (1) Charge a reasonable administrative fee sufficient to cover the department's costs to analyze applications submitted under this section; (2) Maintain records of the names of the taxpayers and qualified productions thereof claiming the tax credits under this section; (3) Obtain and total the aggregate amounts of all eligible infrastructure costs per qualified production and per qualified production per taxable year; (4) Provide a letter to the director of taxation specifying the amount of the tax credit per qualified production for each taxable year that a tax credit is claimed and the cumulative amount of the tax credit for all years claimed; and (5) Submit a report to the legislature no later than twenty days prior to the convening of each regular session detailing the non-aggregated eligible infrastructure costs that form the basis of the tax credit claims and expenditures, itemized by taxpayer, in a redacted format to preserve the confidentiality of the taxpayers claiming the credit. Upon each determination required under this subsection, the department shall issue a letter to the taxpayer, regarding the qualified production, specifying the eligible infrastructure costs and the tax credit amount qualified for in each taxable year a tax credit is claimed. The taxpayer for each qualified production shall file the letter with the taxpayer's tax return for the qualified production to the department of taxation. Notwithstanding the authority of the department of business, economic development, and tourism under this section, the director of taxation may audit and adjust the tax credit amount to conform to the information filed by the taxpayer. (h) For the purposes of this section: "Department" means the department of business, economic development, and tourism. "Director" means the director of taxation. "Eligible infrastructure costs" means costs incurred by a film infrastructure project within the State that are subject to the general excise tax under chapter 237 or income tax under this chapter and that have not been financed by any investments for which a credit was or will be claimed under this chapter. "Eligible infrastructure costs" include but are not limited to include: (1) All expenditures to provide buildings, facilities, or installations, whether a capital lease or purchase, together with necessary equipment for a film, video, television, digital production facility, or digital animation production facility; (2) Project development, including design, professional consulting fees and transaction costs; (3) Development, preproduction, production, post-production and distribution equipment, and system access; and (4) Fixtures and other equipment. "Film infrastructure project" means an infrastructure project undertaken in this State by an entity that: (1) Meets the definition of a "qualified production" under section 235-17; (2) Is authorized to conduct business in this State; (3) Is not in default on a loan made by the State or a loan guaranteed by the State, nor has ever declared bankruptcy under which an obligation of the entity to pay or repay public funds was discharged as a part of the bankruptcy; and (4) Has been approved by the department as qualifying for a film infrastructure tax credit under this section. "Infrastructure project" means a capital project to provide one or more building, facility, or installation needed for the digital media and motion picture industry to function in this State. "Net income tax liability" means net income tax liability reduced by all other credits allowed under this chapter. "Post-certification remedy" means the recapture, disallowance, recovery, reduction, repayment, forfeiture, decertification or any other remedy that would have the effect of reducing or otherwise limiting the use of a tax credit provided by this section." SECTION 2. New statutory material is underscored. SECTION 3. This Act, upon its approval, shall apply to taxable years beginning after December 31, 2021. INTRODUCED BY: _____________________________ |
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