SESSION OF 2023
SUPPLEMENTAL NOTE ON SENATE BILL NO. 91
As Amended by House Committee on Taxation
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 and
establish educational and economic development programs
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:
●Produced in Kansas;
____________________
*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 ●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;
●Evidence of workers’ compensation coverage in
compliance with state law;
2- 91 ●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.
The project of a production company that enters into an
agreement with the Secretary would be considered to be a
certified project, 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:
●Various categories of goods and services
associated with typical production and
postproduction activities, as provided for by the bill;
3- 91 ●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 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.
4- 91 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 and the Secretary
of Revenue 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 percent of qualified
production expenditures, or 30 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 million, one-third of which are
qualified expenditures approved by the
Secretary; or
○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
5- 91 percent of 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 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
●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:
6- 91 ●The total amount of income tax credits in
aggregate could not exceed $10 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; the bill would require the claims 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;
●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;
7- 91 ●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; and
○A report by a Kansas-licensed certified public
accountant verifying compliance of
expenditures with requirements of 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
bill would require the report 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 with information as necessary for the report.
Education Grants
The bill would authorize the Secretary to award grants to
colleges and universities in Kansas for the purpose of
developing, expanding, and improving Kansas education
programs that will aid the development and support of the film
and digital media industry in Kansas. For a college or
university to be eligible for grants, the institution must meet
the following requirements:
●Be not-for-profit;
●Have a main campus or principal operations
located in Kansas; and
●Be engaged in or seeking to engage in areas of the
film and digital media industry in Kansas.
9- 91 The bill would require grants made under this program
to be used for educational purposes that include, but are not
limited to, the following:
●Internships and apprenticeship programs;
●Scholarships;
●Curriculum development and staffing; or
●Resources such as lab facilities or equipment.
Terms and Conditions
The Secretary would be allowed to establish terms and
conditions for grant awards but the bill would require such
terms to:
●Require scholarship recipients to reside in Kansas
and work primarily in Kansas or for a Kansas-
based company for a minimum of two years
following degree completion;
●Include specified objectives and milestones as
agreed to by the college or university and the
Secretary such as graduate job placement rate;
and
●Require Kansas educational institutions to provide
information requested by the Secretary for
administration of the program.
Report to Legislature
The bill would require the Secretary to provide an annual
report on the activities of the education grant program to the
House Committee on Commerce, Labor and Economic
Development and the Senate Committee on Commerce on or
before January 31 of each year, beginning in 2024. The bill
would require the report to contain the following information:
10- 91 ●Specific and aggregate expenditures for the
program;
●Kansas educational institutions receiving grants;
●Amount of funds expended for each grant;
●Reasons and purposes for which grants were
approved;
●Actual use of grants by recipients; and
●Progress on agreed milestones and objects.
Kansas Film and Digital Media Production Development Act
Education Fund
The bill would establish the Kansas Film and Digital
Media Production Development Act Education Fund
(Education Fund), which would be administered by the
Secretary.
The bill would require, subject to appropriations, an
annual transfer of $1.0 million from the State General Fund
(SGF) to the Education Fund, beginning July 1, 2023. At the
end of each fiscal year, the bill would require any unexpended
funds to remain credited to the Education Fund for use in the
next fiscal year. The bill would require any unencumbered
moneys remaining in the Education Fund on January 1, 2033,
to be transferred to the SGF, at which time the Education
Fund would be abolished.
Workforce Development Grants and Loans
The bill would authorize the Secretary to award grants or
loans to projects certified by the Secretary under the Act for
the following purposes:
●Facilitating and supporting certified projects;
11- 91 ●Developing the Kansas film and digital media
industry through workforce training; and
●Directly investing in Kansas companies engaged in
or seeking to engage in certified projects.
Grant Awards
The bill would require that all grants made by the
Secretary be used for workforce development purposes
which could include, but not be limited to, the following:
●Apprenticeship programs for Kansas residents; or
●Crew training for Kansas residents including:
○Training provided by colleges or universities
eligible for educational fund grants under the
program;
○Employee training provided by any production
company or Kansas company engaged in a
certified project; or
○Development of training models for use by
Kansas colleges and universities.
The bill would allow the Secretary to set the terms and
conditions of grant agreements and require grant recipients to
provide the Secretary with information needed to administer
the program and provide reports to the Legislature as
required by the bill.
Direct Investment
The bill would require that any direct investments made
by the Secretary be in Kansas-based businesses engaged in
or seeking to be engaged in a certified project and be
composed of a loan component for 80 percent of the
investment and a grant component for 20 percent of the
investment. The terms and conditions of such agreements
would contain the following:
12- 91 ●Specified objectives and milestones as required by
the Secretary;
●Provisions for repayment of the grant or loan if
conditions specified in the agreement are not met;
●Provisions requiring the recipient provide the
Secretary with any information requested for the
following purposes:
○Administration of the direct investment;
○Monitoring the use of funds;
○Achievement of milestones; and
○Preparation of annual reports as required by
the bill; and
●Other terms and conditions as determined by the
Secretary.
Report to Legislature
The bill would require the Secretary to provide an annual
report on the activities of the workforce training and direct
investment program to the House Committee on Commerce,
Labor and Economic Development and the Senate
Committee on Commerce on or before January 31 of each
year, beginning in 2024. The bill would require the report to
contain the following information:
●Specific and aggregate expenditures for the
program;
●List of businesses or eligible colleges and
universities receiving grants;
●Amount of funds expended for each grant or loan;
●Reasons and purposes for which grants were
approved;
●Actual use of grants or loans by recipients; and
13- 91 ●Progress on agreed milestones and objects.
Kansas Film and Digital Media Production Development Act
Workforce Training and Business Direct Investment Fund
The bill would establish the Kansas Film and Digital
Media Production Development Act Workforce Training and
Business Direct Investment Fund (Workforce Training Fund)
that would be administered by the Secretary.
The bill would require, subject to appropriations, an
annual transfer of $1.0 million from the SGF to the Workforce
Training Fund, beginning July 1, 2024. At the end of each
fiscal year, the bill would require any unexpended funds to
remain credited to the Workforce Training Fund for use in the
next fiscal year. The bill would require any unencumbered
moneys remaining in the Workforce Training Fund on January
1, 2033, to be transferred to the SGF, at which time the
Workforce Training Fund would be abolished.
Economic Impact Report
The bill would require the Secretary to submit an
economic impact report to the House Committee on
Commerce, Labor, and Economic Development, Senate
Committee on Commerce, House Committee on Taxation,
and Senate Committee on Assessment and Taxation on or
before January 31, 2027, and January 31, 2031. The report
would be required to include evaluations for all preceding
years and completed projects and would be required to
include the economic impacts attributable to each approved
project, including state and local taxes and employment
information. The Secretary would be required to utilize the
best available methodology to calculate a multiplier effect of
the actual impact of the expenditures. The Secretary of
Revenue would be required to provide the Secretary with
necessary information to prepare the reports.
14- 91 Sunset on Tax Incentives, Grants, and Loans
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, and no grants or loans
would be awarded 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.
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;
and Wichita State University School of Digital Arts & Studios.
The proponents generally stated the bill would help the
Kansas film industry grow and help retain Kansas graduates
who are obtaining degrees in film production and related
fields. The proponents also 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
15- 91 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 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.
The Senate Committee amended the bill to:
●Remove language granting sole discretion to the
Secretary 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 the first
appropriation would be made, as required by other provisions
of the bill.
Senate Committee of the Whole
The Senate Committee of the Whole amended the bill to
include the education and workforce development grant and
16- 91 loan programs previously removed from the bill by the Senate
Committee on Commerce.
[Note: The amendment made by the Senate Committee
of the Whole did not include the language regarding loan
repayment originally included in those provisions of the bill.]
House Committee on Taxation
In the House Committee hearing, proponent testimony
was provided by a representative of Grow Kansas Film. The
proponent generally detailed the actions taken by the Senate
on the bill and differences between the bill and House Bill
2182.
Written-only proponent testimony was provided by
representatives of the Chamber of Lawrence, Department of
Commerce, Greater Kansas City Chamber of Commerce,
Hallmark Cards, Kansas Economic Development Alliance,
METL Coalition, Motion Picture Association, Overland Park
Chamber of Commerce, Teamsters Joint Council 56, Travel
Industry Association of Kansas, Visit KCK, and Wichita
Regional Chamber of Commerce.
Written-only opponent testimony was provided by a
representative of the Kansas Policy Institute.
Written-only neutral testimony was provided by a
representative of the League of Kansas Municipalities.
The House Committee amended the bill to insert the
provision requiring economic impact studies.
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 provisions of the bill, if enacted, would
decrease SGF revenues by $12.0 million in FY 2024, and in
each future fiscal year through FY 2033. Of the total amount,
17- 91 $1.0 million would be from the transfer to the Education Fund,
$1.0 million from the transfer to the Workforce Training Fund,
and the remaining $10.0 million from the income tax
provisions of the bill, assuming the full amount of available
tax credits would be awarded by the Department of
Commerce each fiscal year.
The Department of Revenue could not provide an
estimate for the fiscal effect of the sales tax exemption that
would be provided for the bill. The Department of Revenue
further indicates a total of $148,851 from the SGF 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 SGF in FY 2024 and 1.0 new FTE
position to implement the bill.
The Department of Transportation 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 effects 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; Department of Commerce; workforce development; scholarships;
postsecondary education; Kansas Film and Digital Media Production Development
Act Education Fund; Kansas Film and Digital Media Production Development Act
Workforce Training and Business Direct Investment Fund; SGF transfer
18- 91