Hawaii 2023 Regular Session

Hawaii Senate Bill SB1106 Compare Versions

Only one version of the bill is available at this time.

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1	1	THE SENATE S.B. NO. 1106 THIRTY-SECOND LEGISLATURE, 2023 STATE OF HAWAII A BILL FOR AN ACT relating to TAXES. BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF HAWAII:
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3	3	THE SENATE S.B. NO. 1106
4	4	THIRTY-SECOND LEGISLATURE, 2023
5	5	STATE OF HAWAII
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7	7	THE SENATE
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9	9	S.B. NO.
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11	11	1106
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13	13	THIRTY-SECOND LEGISLATURE, 2023
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17	17	STATE OF HAWAII
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31	31	A BILL FOR AN ACT
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37	37	relating to TAXES.
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43	43	BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF HAWAII:
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47	47	SECTION 1. Section 235-17, Hawaii Revised Statutes, is amended as follows: 1. By amending subsection (a) to read: "(a) Any law to the contrary notwithstanding, there shall be allowed to each taxpayer subject to the taxes imposed by this chapter, an income 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: (1) Twenty-two per cent of the qualified production costs incurred by a qualified production in any county of the State with a population of over seven hundred thousand; [or] (2) Twenty-seven per cent of the qualified production costs incurred by a qualified production in any county of the State with a population of seven hundred thousand or less[.]; (3) Twenty-seven per cent of the qualified production costs incurred by a qualified production in any county of the State with a population of over seven hundred thousand; provided that over thirty-five per cent of below-the-line positions of the qualified production shall be filled by persons who file income tax returns in the State; or (4) 34.5 per cent of the qualified production costs incurred by a population in any county of the State with a population of seven hundred thousand or less; provided that over thirty-five per cent of below-the-line positions of the qualified production shall be filled by persons who file income tax returns in the State. A qualified production 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 qualified production 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." 2. By amending subsections (h) and (i) to read: "(h) Every taxpayer claiming a tax credit under this section for a qualified production shall, no later than ninety days following the end of each taxable year in which qualified production costs were expended, submit a written, sworn statement to the department of business, economic development, and tourism that identifies: (1) All qualified production costs as provided by subsection (a), 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[.]; and (4) The number of total below-the-line position hires versus the number of below-the-line position local hires. This information may be reported from the department of business, economic development, and tourism to the legislature pursuant to subsection (i)(4). (i) The department of business, economic development, and tourism shall: (1) Maintain records of the names of the taxpayers and qualified productions thereof claiming the tax credits under subsection (a); (2) Obtain and total the aggregate amounts of all qualified production costs per qualified production and per qualified production per taxable year; (3) Review and verify the percentage of below-the-line positions filled by persons who file income tax returns in the State for each qualified production that is claiming the credit under paragraphs (3) or (4) of subsection (a); [(3)] (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 [(4)] (5) Submit a report to the legislature no later than twenty days prior to the convening of each regular session detailing the non-aggregated qualified production costs that form the basis of the tax credit claims and expenditures, itemized by taxpayer, in a redacted format to preserve the confidentiality and that shall include the dollar amount claimed, name of company, and name of the qualified production of the taxpayers claiming the credit." 3. By amending subsection (o) to read: "(o) For the purposes of this section: "Below-the-line position" means a technical role that does not substantially affect the artistic creativity of a qualified production. A "below-the-line position" may include technical production or post-production crew or non-principal cast. A "below-the-line position" does not include producers, directors, screenwriters, and principal cast. "Commercial": (1) Means an advertising message that is filmed using film, videotape, or digital media, for dissemination via television broadcast or theatrical distribution; (2) Includes a series of advertising messages if all parts are produced at the same time over the course of six consecutive weeks; and (3) Does not include an advertising message with Internet‑only distribution. "Digital media" means production methods and platforms directly related to the creation of cinematic imagery and content, specifically using digital means, including but not limited to digital cameras, digital sound equipment, and computers, to be delivered via film, videotape, interactive game platform, or other digital distribution media. "Post-production" means production activities and services conducted after principal photography is completed, including but not limited to editing, film and video transfers, duplication, transcoding, dubbing, subtitling, credits, closed captioning, audio production, special effects (visual and sound), graphics, and animation. "Production" means a series of activities that are directly related to the creation of visual and cinematic imagery to be delivered via film, videotape, or digital media and to be sold, distributed, or displayed as entertainment or the advertisement of products for mass public consumption, including but not limited to scripting, casting, set design and construction, transportation, videography, photography, sound recording, interactive game design, and post-production. "Qualified production": (1) Means a production, with expenditures in the State, for the total or partial production of a feature-length motion picture, short film, made-for-television movie, commercial, music video, interactive game, television series pilot, single season (up to twenty‑two episodes) of a television series regularly filmed in the State (if the number of episodes per single season exceeds twenty‑two, additional episodes for the same season shall constitute a separate qualified production), television special, single television episode that is not part of a television series regularly filmed or based in the State, national magazine show, or national talk show. For the purposes of subsections (d) and (l), each of the aforementioned qualified production categories shall constitute separate, individual qualified productions; and (2) Does not include: (A) News; (B) Public affairs programs; (C) Non-national magazine or talk shows; (D) Televised sporting events or activities; (E) Productions that solicit funds; (F) Productions produced primarily for industrial, corporate, institutional, or other private purposes; and (G) Productions that include any material or performance prohibited by chapter 712. "Qualified production costs" means the costs incurred by a qualified production within the State that are subject to the general excise tax under chapter 237 at the highest rate of tax or income tax under this chapter if the costs are not subject to general excise tax and that have not been financed by any investments for which a credit was or will be claimed pursuant to section 235‑110.9. Qualified production costs include but are not limited to: (1) Costs incurred during preproduction such as location scouting and related services; (2) Costs of set construction and operations, purchases or rentals of wardrobe, props, accessories, food, office supplies, transportation, equipment, and related services; (3) Wages or salaries of cast, crew, and musicians; (4) Costs of photography, sound synchronization, lighting, and related services; (5) Costs of editing, visual effects, music, other post-production, and related services; (6) Rentals and fees for use of local facilities and locations, including rentals and fees for use of state and county facilities and locations that are not subject to general excise tax under chapter 237 or income tax under this chapter; (7) Rentals of vehicles and lodging for cast and crew; (8) Airfare for flights to or from Hawaii, and interisland flights; (9) Insurance and bonding; (10) Shipping of equipment and supplies to or from Hawaii, and interisland shipments; and (11) Other direct production costs specified by the department in consultation with the department of business, economic development, and tourism; provided that any government-imposed fines, penalties, or interest that are incurred by a qualified production within the State shall not be "qualified production costs". "Qualified production costs" does not include any costs funded by any grant, forgivable loan, or other amounts not included in gross income for purposes of this chapter." SECTION 2. Statutory material to be repealed is bracketed and stricken. New statutory material is underscored. SECTION 3. This Act shall take effect upon its approval and apply to taxable years beginning after December 31, 2022. INTRODUCED BY: _____________________________
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49	49	SECTION 1. Section 235-17, Hawaii Revised Statutes, is amended as follows:
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51	51	1. By amending subsection (a) to read:
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53	53	"(a) Any law to the contrary notwithstanding, there shall be allowed to each taxpayer subject to the taxes imposed by this chapter, an income 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:
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55	55	(1) Twenty-two per cent of the qualified production costs incurred by a qualified production in any county of the State with a population of over seven hundred thousand; [or]
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57	57	(2) Twenty-seven per cent of the qualified production costs incurred by a qualified production in any county of the State with a population of seven hundred thousand or less[.];
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59	59	(3) Twenty-seven per cent of the qualified production costs incurred by a qualified production in any county of the State with a population of over seven hundred thousand; provided that over thirty-five per cent of below-the-line positions of the qualified production shall be filled by persons who file income tax returns in the State; or
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61	61	(4) 34.5 per cent of the qualified production costs incurred by a population in any county of the State with a population of seven hundred thousand or less; provided that over thirty-five per cent of below-the-line positions of the qualified production shall be filled by persons who file income tax returns in the State.
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63	63	A qualified production 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.
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65	65	In the case of a partnership, S corporation, estate, or trust, the tax credit allowable is for qualified production 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.
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67	67	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.
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69	69	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."
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71	71	2. By amending subsections (h) and (i) to read:
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73	73	"(h) Every taxpayer claiming a tax credit under this section for a qualified production shall, no later than ninety days following the end of each taxable year in which qualified production costs were expended, submit a written, sworn statement to the department of business, economic development, and tourism that identifies:
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75	75	(1) All qualified production costs as provided by subsection (a), if any, incurred in the previous taxable year;
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77	77	(2) The amount of tax credits claimed pursuant to this section, if any, in the previous taxable year; [and]
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79	79	(3) The number of total hires versus the number of local hires by category and by county[.]; and
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81	81	(4) The number of total below-the-line position hires versus the number of below-the-line position local hires.
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83	83	This information may be reported from the department of business, economic development, and tourism to the legislature pursuant to subsection (i)(4).
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85	85	(i) The department of business, economic development, and tourism shall:
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87	87	(1) Maintain records of the names of the taxpayers and qualified productions thereof claiming the tax credits under subsection (a);
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89	89	(2) Obtain and total the aggregate amounts of all qualified production costs per qualified production and per qualified production per taxable year;
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91	91	(3) Review and verify the percentage of below-the-line positions filled by persons who file income tax returns in the State for each qualified production that is claiming the credit under paragraphs (3) or (4) of subsection (a);
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93	93	[(3)] (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
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95	95	[(4)] (5) Submit a report to the legislature no later than twenty days prior to the convening of each regular session detailing the non-aggregated qualified production costs that form the basis of the tax credit claims and expenditures, itemized by taxpayer, in a redacted format to preserve the confidentiality and that shall include the dollar amount claimed, name of company, and name of the qualified production of the taxpayers claiming the credit."
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97	97	3. By amending subsection (o) to read:
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99	99	"(o) For the purposes of this section:
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101	101	"Below-the-line position" means a technical role that does not substantially affect the artistic creativity of a qualified production. A "below-the-line position" may include technical production or post-production crew or non-principal cast. A "below-the-line position" does not include producers, directors, screenwriters, and principal cast.
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103	103	"Commercial":
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105	105	(1) Means an advertising message that is filmed using film, videotape, or digital media, for dissemination via television broadcast or theatrical distribution;
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107	107	(2) Includes a series of advertising messages if all parts are produced at the same time over the course of six consecutive weeks; and
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109	109	(3) Does not include an advertising message with Internet‑only distribution.
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111	111	"Digital media" means production methods and platforms directly related to the creation of cinematic imagery and content, specifically using digital means, including but not limited to digital cameras, digital sound equipment, and computers, to be delivered via film, videotape, interactive game platform, or other digital distribution media.
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113	113	"Post-production" means production activities and services conducted after principal photography is completed, including but not limited to editing, film and video transfers, duplication, transcoding, dubbing, subtitling, credits, closed captioning, audio production, special effects (visual and sound), graphics, and animation.
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115	115	"Production" means a series of activities that are directly related to the creation of visual and cinematic imagery to be delivered via film, videotape, or digital media and to be sold, distributed, or displayed as entertainment or the advertisement of products for mass public consumption, including but not limited to scripting, casting, set design and construction, transportation, videography, photography, sound recording, interactive game design, and post-production.
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117	117	"Qualified production":
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119	119	(1) Means a production, with expenditures in the State, for the total or partial production of a feature-length motion picture, short film, made-for-television movie, commercial, music video, interactive game, television series pilot, single season (up to twenty‑two episodes) of a television series regularly filmed in the State (if the number of episodes per single season exceeds twenty‑two, additional episodes for the same season shall constitute a separate qualified production), television special, single television episode that is not part of a television series regularly filmed or based in the State, national magazine show, or national talk show. For the purposes of subsections (d) and (l), each of the aforementioned qualified production categories shall constitute separate, individual qualified productions; and
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121	121	(2) Does not include:
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123	123	(A) News;
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125	125	(B) Public affairs programs;
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127	127	(C) Non-national magazine or talk shows;
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129	129	(D) Televised sporting events or activities;
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131	131	(E) Productions that solicit funds;
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133	133	(F) Productions produced primarily for industrial, corporate, institutional, or other private purposes; and
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135	135	(G) Productions that include any material or performance prohibited by chapter 712.
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137	137	"Qualified production costs" means the costs incurred by a qualified production within the State that are subject to the general excise tax under chapter 237 at the highest rate of tax or income tax under this chapter if the costs are not subject to general excise tax and that have not been financed by any investments for which a credit was or will be claimed pursuant to section 235‑110.9. Qualified production costs include but are not limited to:
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139	139	(1) Costs incurred during preproduction such as location scouting and related services;
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141	141	(2) Costs of set construction and operations, purchases or rentals of wardrobe, props, accessories, food, office supplies, transportation, equipment, and related services;
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143	143	(3) Wages or salaries of cast, crew, and musicians;
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145	145	(4) Costs of photography, sound synchronization, lighting, and related services;
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147	147	(5) Costs of editing, visual effects, music, other post-production, and related services;
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149	149	(6) Rentals and fees for use of local facilities and locations, including rentals and fees for use of state and county facilities and locations that are not subject to general excise tax under chapter 237 or income tax under this chapter;
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151	151	(7) Rentals of vehicles and lodging for cast and crew;
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153	153	(8) Airfare for flights to or from Hawaii, and interisland flights;
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155	155	(9) Insurance and bonding;
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157	157	(10) Shipping of equipment and supplies to or from Hawaii, and interisland shipments; and
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159	159	(11) Other direct production costs specified by the department in consultation with the department of business, economic development, and tourism;
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161	161	provided that any government-imposed fines, penalties, or interest that are incurred by a qualified production within the State shall not be "qualified production costs". "Qualified production costs" does not include any costs funded by any grant, forgivable loan, or other amounts not included in gross income for purposes of this chapter."
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163	163	SECTION 2. Statutory material to be repealed is bracketed and stricken. New statutory material is underscored.
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165	165	SECTION 3. This Act shall take effect upon its approval and apply to taxable years beginning after December 31, 2022.
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169	169	INTRODUCED BY: _____________________________
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171	171	INTRODUCED BY:
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179	179	Report Title: Motion Picture, Digital Media, and Film Production Tax Credit; Below-the-line Position; Local Hires Description: Increases the Motion Picture, Digital Media, and Film Production Income Tax Credit for qualified productions when certain percentages of its below-the-line positions are persons who file income tax returns in the State. The summary description of legislation appearing on this page is for informational purposes only and is not legislation or evidence of legislative intent.
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183	183	Report Title:
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185	185	Motion Picture, Digital Media, and Film Production Tax Credit; Below-the-line Position; Local Hires
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189	189	Description:
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191	191	Increases the Motion Picture, Digital Media, and Film Production Income Tax Credit for qualified productions when certain percentages of its below-the-line positions are persons who file income tax returns in the State.
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199	199	The summary description of legislation appearing on this page is for informational purposes only and is not legislation or evidence of legislative intent.