SESSION OF 2023
SUPPLEMENTAL NOTE ON SENATE BILL NO. 91
As Amended by Senate Committee on
Commerce
Brief*
SB 91, as amended, would enact the Kansas Film and
Digital Media Production Development Act (Act). The Act
would create a sales tax exemption and nonrefundable
income tax credits for qualifying film production activities to
incentivize and promote the growth of film and digital media
production and industry in Kansas. The bill would also create
definitions pursuant to its implementation and specify
reporting requirements on relevant tax incentives for the
Secretary of Commerce (Secretary).
Kansas Film and Digital Media Industry Development
Program
The bill would establish the Kansas Film and Digital
Media Industry Development Program (Program) to be
administered by the Secretary in consultation with the Kansas
Creative Arts Industries Commission. The Secretary would be
authorized to approve and to provide tax incentives for
eligible projects, to be certified and approved according to
requirements prescribed by the bill. In consideration of
projects to approve, the Secretary would be required to
consider the immediate and potential impact on the growth of
the Kansas film and digital media industry.
Eligible projects would include new films, videos, or
digital projects that are:
____________________
*Supplemental notes are prepared by the Legislative Research
Department and do not express legislative intent. The supplemental
note and fiscal note for this bill may be accessed on the Internet at
http://www.kslegislature.org ●Produced in Kansas;
●Fixed on a media format for viewing or
reproduction;
●Intended for multimarket commercial distribution;
and
●Anticipated to incur qualified expenditures, as
defined by the bill, of at least $50,000.
Eligible projects would not include:
●News or athletic event coverage;
●Local interest programming or advertising;
●Instructional or corporate videos;
●Projects not intended for multimarket commercial
distribution;
●Any portion of a project not shot, recorded, or
created in Kansas; or
●Any production of obscene material or an obscene
performance, as defined by Kansas law.
To apply for eligibility for the Program, production
companies would be required to submit an application to the
Secretary for approval. In addition to the application,
production companies would be required to submit the
following to the Secretary prior to commencement of the
project, in order to be eligible for the income tax credit and
sales tax exemption provided for by the bill:
●Evidence of adequate financing for the project;
●Evidence of general liability insurance of $1.0
million, or more if required by the Secretary;
2- 91 ●Evidence of workers’ compensation coverage in
compliance with state law;
●A description of the project, including anticipated:
○Timeline and completion date;
○Eligible expenditures, as defined by the bill;
○Project activities to be conducted in Kansas;
○Employment of personnel who are Kansas
residents;
○Use of Kansas-based vendors;
○Construction or contribution of production
infrastructure; and
○Participation in Kansas film and digital media
industry development activities; and
●A statement of economic impact of the activities of
the project on the region and the state as a whole.
Production companies that enter into an agreement with
the Secretary would be considered certified projects, for
purposes of the bill, and would be eligible for the income tax
credit and sales tax exemption provided for by the bill. The
amounts of tax credits, described in more detail below, would
be determined based on amounts of qualified expenditures as
determined and approved by the Secretary.
The bill would require any agreement entered into
between a production company and the Secretary to include
provisions for repayment of tax credits or exemptions should
the production company violate the Act or any rules and
regulations pertaining to the Act.
For purposes of the bill, production and postproduction
expenditures would be defined to include costs associated
with eligible productions for:
3- 91 ●Various categories of goods and services
associated with typical production and
postproduction activities, as provided for by the bill;
●Wages or salaries of principal cast members,
producers, screenwriters, directors, and crew
members;
●Transportation costs;
●Food and lodging;
●Facility rental;
●Insurance costs; and
●Other direct costs associated with generally
accepted entertainment industry practice.
For purposes of the bill, production and postproduction
expenditures would not include expenditures for:
●Goods, equipment, or vehicles not purchased,
rented, or leased in Kansas;
●Production activities or services not conducted in
Kansas and services not performed at the filming
site unless by a Kansas-based vendor;
●Postproduction activities or services not conducted
in Kansas by Kansas-based vendors; or
●Footage shot outside of the state, marketing, story
rights, or distribution.
Qualified production and postproduction expenditures,
for purposes of the bill, would include eligible production and
postproduction expenditures actually made by production
companies for certified projects. Qualified production
expenditures would not include salaries and wages of
principal cast members, producers, screenwriters, or
4- 91 directors, constituting more than 25 percent of total
production expenditures. The Secretary would have
discretion to limit specified eligible expenditures or total
amounts approved as qualified production or postproduction
expenditures.
Production companies entering into an agreement with
the Secretary would be required to regularly provide
documentation and information as requested by the Secretary
to determine qualified expenditures and ensure compliance
with the program.
The bill would authorize the Secretary of Revenue and
the Secretary of Commerce to adopt rules and regulations to
implement its provisions.
Income Tax Credits
The bill would create a nonrefundable income tax credit
for tax year 2023 through tax year 2032 for production
companies or their affiliates that make qualified expenditures
on certified projects.
The credit would be equal to 30.0 percent of qualified
production expenditures, or 30.0 percent of qualified
postproduction expenses for projects lacking qualified
production expenditures.
Certain production-related activities would be available
for additional credit amounts, as approved by the Secretary,
as follows:
●Up to 5 percent of qualified expenditures for one of
the following:
○Multi-film deal;
○Television series;
○Production for which total expenditures are at
least $50.0 million, one-third of which are
5- 91 qualified expenditures approved by the
Secretary;
○Contributions to film-related infrastructure or
workforce development in Kansas; or
●Up to 5 percent for qualified production
expenditures for productions in which at least 50
percent of the the crew or “above-the-line”
personnel (principal cast member, producer,
screenwriter, or director) are Kansas residents.
An additional credit amount of up to 5 percent of
qualified expenditures would be available to a production
company that was a previous recipient of an income tax credit
provided for under the bill.
Income Tax Credit for Kansas-based Companies
The bill would also create a nonrefundable income tax
credit for 25 percent of qualified production expenditures of at
least $25,000 for Kansas-based production companies. For
purposes of this credit, eligible projects would include projects
not intended for multimarket commercial distribution.
This credit could be received in addition to or in lieu of
the the general income tax credit created by the bill, as
determined by the Secretary.
Income Tax Credit General Provisions
The bill would specify that the income tax credits
provided for by the bill would be:
●Applied against the income tax in the tax year such
qualified expenditures were made;
●Transferable to any individual or entity subject to
income tax in Kansas; and
6- 91 ●Able to be carried forward for up to ten future tax
years.
Limits on Tax Credit Amounts
The bill would further specify limits on income tax credit
amounts as follows:
●The total amount of income tax credits in
aggregate could not exceed $10.0 million per tax
year;
●Ten percent of the aggregate total amount of tax
credits per tax year would be required to be
designated to Kansas-based production
companies;
●The tax credit amount for expenditures on a single
individual who is a principal cast member,
producer, screenwriter, or director could not exceed
$500,000; and
●The maximum cumulative amount of credits
claimed by a production company in a tax year
could not exceed 40 percent of the total qualified
production expenditures for that tax year.
Tax Credit Administration
The bill would further specify the following regarding the
administration of tax credit claims:
●Claims would be filed with the Secretary of
Revenue and would be required to be submitted
within one year of the last eligible expenditure;
○The Secretary of Revenue would be required
to grant up to a six month extension at the
request of a production company;
7- 91 ●Claims submitted by a production company would
be required to be filed as a single claim;
●Claims for closely integrated activities of multiple
affiliates could be required by the Secretary of
Revenue to be submitted as a single claim;
●Claims for expenditures made by production
companies hired by another production company
would be required to be filed by the hiring
company;
●Claims would be required to include:
○A copy of the project certification;
○A determination of qualified expenditures by
the Secretary of Commerce; and
○A report by a Kansas-licensed certified public
accountant verifying compliance of
expenditures with the bill; and
●Credits claimed by S-corporations, partnerships, or
limited liability companies would be distributed
proportionally by shareholders, partners, or
members.
Sales Tax Exemption
The bill would create a sales tax exemption for
expenditures for certified projects made in Kansas on
production and postproduction activities, as defined by the
bill.
The bill would require the Secretary, in considering
approval of applications for the sales tax exemption, to
prioritize expenditures in rural or economically depressed
urban areas to the extent feasible. The Secretary would be
permitted to require that all or a portion of expenditures
eligible for the exemption be made with businesses in such
areas.
8- 91 Tax Incentive Reporting
The bill would require the Secretary to provide an annual
report to the Senate Committee on Commerce and the House
Committee on Commerce, Labor and Economic Development
on or before January 31 of each year, beginning in 2024. The
report would be required to include:
●Amounts and recipients of tax incentives approved
during the prior year;
●Amount of tax incentives anticipated for the current
year;
●The companies that have applied for and that have
been certified for projects; and
●A description of ongoing and completed projects
and their impact on the Kansas film and digital
media production industry.
The Secretary of Revenue would be required to provide
the Secretary of Commerce with information as necessary for
the report.
Sunset on Tax Incentives
The bill would specify no income tax credits or sales tax
exemptions would apply or be awarded for expenditures
made on or after January 1, 2033.
Background
The bill was introduced by the Senate Committee on
Commerce at the request of a representative of Grow Kansas
Film.
9- 91 Senate Committee on Commerce
In the Senate Committee hearing, proponent testimony
was provided by Senator Baumgardner and Senator Pittman;
and by representatives of First City Film Festival; Grow
Kansas Film; Hallmark Cards, Inc.; Johnson County
Community College; Kansas Department of Commerce;
Lawrence Chamber of Commerce; Lights On; Tallgrass Film
Association; University of Kansas Film and Media Studies;
Wichita State University School of Digital Arts & Studios.
Proponents generally stated this bill would aid the Kansas
film industry to grow and to help retain Kansas graduates who
are obtaining degrees in film production and related fields.
Proponents stated the majority of other states have similar
incentive programs and that the bill is necessary to get film
productions to occur in Kansas rather than in other states.
Written-only proponent testimony was provided by
representatives of the METL Coalition of Chambers of
Commerce of Manhattan, Emporia, Topeka, and Lawrence;
Digital Innovation in Media Programs; Gordon Parks Museum
Foundation; Greater Kansas City Chamber of Commerce;
Grow Kansas Film; Kansas Association of Broadcasters;
Kansas Economic Development Alliance; Motion Picture
Association; Overland Park Chamber of Commerce ;
Teamsters Joint Council 56; Travel Industry Association of
Kansas; Visit KC;Visit Kansas City Kansas; Visit Wichita; and
Wichita Regional Chamber of Commerce; and by five private
citizens.
Opponent testimony was provided by a representative
of the Kansas Policy Institute, who stated that the rate of
return found in similar programs is very low. The conferee
also noted incentive programs similar to the bill can lead to a
“race to the bottom” between states as they compete against
each other.
Written-only neutral testimony was provided by a
representative of the League of Kansas Municipalities.
10- 91 The Senate Committee amended the bill to:
●Remove language granting sole discretion to the
Secretary of Commerce in determining qualified
expenditures;
●Grant an extension of up to six months for
submitting a claim for the income tax credit at the
request of the production company;
●Make both income tax credits nonrefundable;
●Allow the income tax credits to carry forward for ten
years; and
●Remove provisions creating educational and
workforce development training grant and loan
programs.
The Senate Committee also made a technical
amendment correcting the year in which first appropriation
would be made, as required by other provisions of the bill.
Fiscal Information
According to the fiscal note prepared by the Division of
the Budget on the bill, as introduced, the Department of
Revenue estimates the income tax credit provisions of the
bill, if enacted, would decrease State General Fund revenues
by $10.0 million in FY 2024, and in each future fiscal year
through FY 2033, assuming the full amount of available tax
credits would be awarded by the Department of Commerce
each fiscal year.
The Department could not provide an estimate for the
fiscal effect of the sales tax exemption that would be provided
for the bill.
11- 91 The Department further indicates a total of $148,851
from the State General Fund would be required in FY 2024 to
implement the bill and to modify the automated tax system.
The Department of Commerce indicated that bill would
require $90,633 from the State General Fund in FY 2024 and
1.00 new FTE position to implement the bill.
The Kansas Department of Transportation (KDOT)
indicates the sales tax provision of the bill would reduce state
revenues to the State Highway Fund by unknown amounts.
The Kansas Association of Counties and the League of
Kansas Municipalities indicated the bill also has the potential
to provide a net reduction to local sales tax collections by
unspecified amounts.
The fiscal effect associated with the $10.0 million cap on
the film, video, or digital media production income tax credit
provisions in the bill are reflected in The FY 2024 Governor’s
Budget Report.
Film production; digital media; economic development; tax credits; income tax; sales
tax exemptions
12- 91