WES MOORE, Governor Ch. 434
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Chapter 434
(Senate Bill 452)
AN ACT concerning
Income Tax – Film Production Activity Income Tax Credit – Alterations and
Maryland Entertainment Council
FOR the purpose of expanding eligibility for the credit against the State income tax for
certain film production activities to include documentaries and talk, reality, and
game shows; altering the definition of “total direct costs” to include certain
compensation for certain individuals; increasing the percentages of total direct costs
that qualify for the tax credit; establishing the Maryland Entertainment Council to
study and make recommendations regarding Maryland’s film, television, and
entertainment industry; altering the aggregate amount of tax credit certificates that
the Secretary of Commerce may issue each fiscal year; and generally relating to the
film production activity tax credit and the Maryland Entertainment Council.
BY repealing and reenacting, with amendments,
Article – Tax – General
Section 10–730
Annotated Code of Maryland
(2022 Replacement Volume)
SECTION 1. BE IT ENACTED BY THE GENERAL ASSEMBLY OF MARYLAND,
That the Laws of Maryland read as follows:
Article – Tax – General
10–730.
(a) (1) In this section the following words have the meanings indicated.
(2) “Department” means the Department of Commerce.
(3) “Digital animation project” means the creation, development, and
production of computer–generated animation content for distribution or exhibition to the
general public.
(4) (i) “Film production activity” means:
1. the production of a film or video project that is intended
for nationwide commercial distribution; and
2. for a television series, each season of the television series.
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(ii) “Film production activity” includes the production of:
1. a feature film;
2. a television project;
3. a commercial;
4. a corporate film;
5. a music video; [or]
6. a digital animation project;
7. A DOCUMENTARY ; OR OR
8. A TALK, REALITY, OR GAME SHOW ; OR
9. A LIVE TO TAPE EVENT .
(iii) “Film production activity” does not include production of:
1. a student film;
2. a noncommercial personal video;
3. a sports broadcast;
4. a broadcast of a live event;
5. [a talk show;
6.] a video, computer, or social networking game;
[7.] 6. pornography;
[8.] 7. an infomercial;
[9.] 8. a digital project or an animation project other than a
digital animation project; or
[10.] 9. a multimedia project.
(5) “Maryland small or independent film entity” means a qualified film
production entity that: WES MOORE, Governor Ch. 434
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(i) has been incorporated in Maryland for at least 3 months;
(ii) is independently owned and operated;
(iii) is not a subsidiary of another entity;
(iv) is not dominant in its field of operation;
(v) employs 25 or fewer full–time employees; and
(vi) employs Maryland residents as at least 40% of its workforce in
the film production activity.
(6) “Pornography” means any production for which records are required to
be maintained under § 2257 of Title 18, U.S.C., with respect to any performer in such
production engaging in sexually explicit conduct.
(7) “Qualified film production entity” means an entity that:
(i) is carrying out a film production activity; and
(ii) the Secretary determines to be eligible for the tax credit under
this section in accordance with subsection (c) of this section.
(8) “Secretary” means the Secretary of Commerce.
(9) “Television series” means a group of program episodes intended for
television broadcast or transmission with a common series title, with or without a
predetermined number of episodes, and shall include a miniseries and a pilot episode
produced for an intended television series.
(10) (i) “Total direct costs”, with respect to a film production activity,
means the total costs incurred in the State that are necessary to carry out the film
production activity.
(ii) “Total direct costs” includes costs incurred for:
1. employee wages and benefits;
2. fees for services;
3. acquiring or leasing property; [and]
4. SALARIES, WAGES, OR OTHER COMPENSATIO N FOR
WRITERS, DIRECTORS, OR PRODUCERS DOMICILED IN THE STATE; AND Ch. 434 2023 LAWS OF MARYLAND
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[4.] 5. any other expense necessary to carry out a film
production activity, including costs associated with:
A. set construction and operation;
B. wardrobe, makeup, and related services;
C. photography and sound synchronization, lighting, and
related services and materials;
D. editing and related services, including film processing,
transfers of film to tape or digital format, sound mixing, computer graphic services, special
effects services, and animation services;
E. salary, wages, and other compensation including related
benefits, for work performed in the State, paid to persons employed in the production;
F. rental of facilities in the State and equipment used in the
State;
G. leasing of vehicles;
H. food and lodging;
I. music, if performed, composed, or recorded by a Maryland
musician or published by a person or company domiciled in Maryland;
J. travel expenses incurred to bring persons employed, either
directly or indirectly, in the production of the project to Maryland, but not including
expenses of these persons departing from Maryland; and
K. legal and accounting services performed by attorneys or
accountants licensed in Maryland.
(iii) “Total direct costs” does not include any salary, wages, or other
compensation for:
1. personal services of an individual who receives more than
$500,000 in salary, wages, or other compensation for personal services in connection with
any film production activity; or
2. EXCEPT AS PROVIDED IN SUBPARAGRAPH (II) OF THIS
PARAGRAPH , writers, directors, or producers.
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(b) (1) A qualified film production entity may claim a credit against the State
income tax for film production activities in the State in an amount equal to the amount
stated in the final tax credit certificate approved by the Secretary for film production
activities.
(2) If the tax credit allowed under this section in any taxable year exceeds
the total tax otherwise payable by the qualified film production entity for that taxable year,
the qualified film production entity may claim a refund in the amount of the excess.
(c) (1) Before beginning a film production activity, a film production entity
shall submit to the Department an application to qualify as a film production entity.
(2) The application shall describe the anticipated film production activity,
including:
(i) the projected total budget;
(ii) the estimated number of Maryland resident and out–of–state
employees and total wages to be paid; and
(iii) the anticipated dates for carrying out the major elements of the
film production activity.
(3) Except as provided in subsection (h) of this section, to qualify as a film
production entity, the estimated total direct costs incurred in the State must exceed
$250,000.
(4) The application shall include any other information required by the
Secretary.
(5) For a film production entity with total direct costs that exceed $250,000,
the Secretary may require the information provided in an application to be verified by an
independent auditor selected and paid for by the film production entity seeking
certification.
(6) The Secretary shall:
(i) determine if the film production entity qualifies for the credit
under this section; and
(ii) notify the Comptroller of the estimated amount of total direct
costs and the taxable year the credit will be claimed.
(d) (1) After completion of the film production activity, a qualified film
production entity shall apply to the Department for a tax credit certificate.
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(2) The application shall be on a form required by the Secretary and shall
include:
(i) proof of the total direct costs that qualify for the tax credit; and
(ii) the number of employees hired and wages paid.
(3) Subject to subsections (f) and (h) of this section, the Secretary shall
determine the total direct costs that qualify for the tax credit and issue a tax credit
certificate for:
(i) except as provided in item (ii) of this paragraph, [25%] 28% of
the total direct costs that qualify for the tax credit; and
(ii) for a television series, [27%] 30% of the total direct costs that
qualify for the tax credit.
(e) In accordance with § 2.5–109 of the Economic Development Article, the
Department shall submit a report on film production activity in the State and the economic
benefits to the State resulting from film production activity during the reporting period.
(f) (1) Except as provided in paragraph (2) of this subsection, the Secretary
may not issue tax credit certificates for credit amounts in the aggregate totaling more than:
(i) for fiscal year 2014, $25,000,000;
(ii) for fiscal year 2015, $7,500,000;
(iii) for fiscal year 2016, $7,500,000;
(iv) for fiscal year 2019, $8,000,000;
(v) for fiscal year 2020, $11,000,000; [and]
(vi) for fiscal [year] YEARS 2021 [and each fiscal year thereafter]
THROUGH 2023 2024 2023, $12,000,000;
(VII) FOR FISCAL YEAR 2024, $15,000,000;
(VIII) FOR FISCAL YEAR 2025, $17,500,000;
(VII) (IX) FOR FISCAL YEAR 2024 YEARS 2025 THROUGH 2028
YEAR 2026, $25,000,000 $20,000,000; AND
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(VIII) (X) FOR FISCAL YEAR 2025 2029 2027 AND EACH FISCAL
YEAR THEREAFTER , $50,000,000 $12,000,000.
(2) If the aggregate credit amounts under the tax credit certificates issued
by the Secretary total less than the maximum provided under paragraph (1) of this
subsection in any fiscal year, any excess amount may be carried forward and issued under
tax credit certificates in a subsequent fiscal year.
(3) The Secretary may not issue tax credit certificates for credit amounts
totaling more than $10,000,000 in the aggregate for a single film production activity.
(4) (i) For fiscal year 2019 and each fiscal year thereafter, the Secretary
shall make 10% of the credit amount authorized under paragraph (1) of this subsection
available for Maryland small or independent film entities.
(ii) If the total amount of credits applied for by Maryland small or
independent film entities is less than the amount made available under subparagraph (i)
of this paragraph, the Secretary shall make available the unused amount of credits for use
by qualified film production entities.
(g) (1) Except as provided in paragraph (2) of this subsection, a qualified film
production entity that receives a tax credit certificate under this section for a film
production activity shall include:
(i) for a feature film project, a 5–second long static or animated logo
that promotes the State in the end credits before the below–the–line crew crawl for the life
of the project and a link to the State’s website on the project’s website;
(ii) for a television series project, an embedded 5–second long static
or animated logo that promotes the State during each broadcast worldwide for the life of
the project and a link to the State’s website on the project’s website; or
(iii) for any other project, the State logo at the end of each project and
in online promotions.
(2) In lieu of including a State logo as required under paragraph (1) of this
subsection, the qualified film production entity may offer alternative marketing
opportunities to be evaluated by the Department to ensure that those opportunities offer
equal or greater promotional value to the State.
(h) (1) For a Maryland small or independent film entity to qualify as a film
production entity:
(i) the estimated total direct costs incurred in the State shall exceed
$25,000; and
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(ii) at least 50% of the filming of the film production activity must
occur within the State.
(2) The Secretary shall determine the total direct costs that qualify for the
tax credit and issue a tax credit certificate to a Maryland small or independent film entity
for [25%] 28% of the total direct costs that qualify for the tax credit, not to exceed $125,000.
(i) The Department and the Comptroller jointly shall adopt regulations to carry
out the provisions of this section and to specify criteria and procedures for the application
for, approval of, and monitoring of continuing eligibility for the tax credit under this section.
SECTION 2. AND BE IT FURTHER ENACTED, That this Act shall take effect July
1, 2023, and shall be applicable to all taxable years beginning after December 31, 2022.
SECTION 2. AND BE IT FURTHER ENACTED, That:
(a) There is a Maryland Entertainment Council.
(b) (1) Subject to paragraph (2) of this subsection, the Council consists of:
(i) one member of the Senate of Maryland, appointed by the
President of the Senate;
(ii) one member of the House of Delegates, appointed by the Speaker
of the House;
(iii) the Governor’s appointed Senior Advisor on Film, Television, and
Entertainment; and
(iv) the following members, appointed by the Governor:
1. one expert in the business of the film, television, and
entertainment industry, such as an executive, producer, studio representative, or an
individual holding a leadership role within the industry;
2. one expert in workforce development or higher education
related to the film, television, and entertainment industry;
3. one expert in emerging technologies or specialties of the
film, television, and entertainment industry, such as an expert in gaming, artificial
intelligence, visual effects, animation, post–production, or another related specialty;
4. one expert in legal or policy fields specific to the film,
television, and entertainment industry;
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5. one representative of the independent film and television
community;
6. one representative of nongovernmental entities or
philanthropic institutions that support film, television, or entertainment directly or
creative economies more broadly; and
7. one representative of organized labor in the entertainment
industry.
(2) The Governor may appoint up to three additional individuals as
honorary cochairs of the Council who are:
(i) individuals with extraordinary cultural capital and commanding
significant influence within the film, television, and entertainment industry;
(ii) business leaders commanding a significant stake within the film,
television, and entertainment industry; or
(iii) individuals who have defined the current cultural brand of the
film, television, and entertainment industry within the State.
(3) An individual appointed as an honorary cochair of the Council shall be
a nonvoting member of the Council whose responsibilities shall be limited to the promotion
and business development of Maryland’s film, television, and entertainment industry.
(c) The Senior Advisor on Film, Television, and Entertainment shall chair the
Council.
(d) The Department of Commerce shall provide staff for the Council.
(e) A member of the Council:
(1) may not receive compensation as a member of the Council; but
(2) is entitled to reimbursement for expenses under the Standard State
Travel Regulations, as provided in the State budget.
(f) The Council shall:
(1) assess Maryland’s existing assets, opportunities, and competitive
position within the film, television, and entertainment industry;
(2) study:
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(i) Maryland’s State, local, and private assets that currently
support Maryland’s film, television, and entertainment industry, including key
infrastructure, existing workforce, workforce pipelines, scenic profile, emerging specialties,
and independent creative communities;
(ii) existing State programs, agencies, offices, grant programs, and
commissions across State agencies that support the film, television, and entertainment
industry;
(iii) models, competitive profiles, methods, and legislation that states
have utilized to incentivize necessary infrastructure and workforce to support the film,
television, and entertainment industry;
(iv) industry needs, disruptive trends, and emerging technologies
within the film, television, and entertainment industry; and
(v) complementary industries, aligned businesses, and potential
corporate, philanthropic, and other partners for the film, television, and entertainment
industry; and
(3) make recommendations on the development of a coordinated,
comprehensive strategic plan to position Maryland as an emerging leader in the film,
television, and entertainment industry.
(g) On or before December 1, 2023, the Council shall submit a preliminary report
to the Governor, the Secretary of Commerce, and, in accordance with § 2–1257 of the State
Government Article, the General Assembly that includes:
(1) an assessment of Maryland’s existing infrastructure, creative profile,
and core structural advantages that the State is uniquely positioned to leverage;
(2) recommendations on how to best utilize existing State offices,
commissions, and programs to advance Maryland’s film, television, and entertainment
industry and what, if any, additional investments should be made to support these State
functions;
(3) a clear definition of Maryland’s creative and competitive profile; and
(4) recommendations to measure the economic impact of additional
investment in the film, television, and entertainment industry.
(h) On or before September 1, 2024, the Council shall submit its final report to
the Governor, the Secretary of Commerce, and, in accordance with § 2–1257 of the State
Government Article, the General Assembly on:
(1) the matters included in the Council’s preliminary report; WES MOORE, Governor Ch. 434
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(2) recommendations regarding the expansion of eligibility for film
production incentives, including with respect to live to tape events, and the potential
economic impact from that expansion;
(2) (3) recommendations to strengthen the structure and funding of the State’s
existing film and theatrical production incentives to ensure a greater return on investment
on Maryland’s investment in the film, television, and entertainment industry;
(3) (4) recommendations for additional State investment to bolster identified
specialties and high–leverage growth opportunities in the film, television, and
entertainment industry;
(4) (5) recommendations to support and grow Maryland’s independent
creative community and incentivize export promotions of Maryland–based talent;
(5) (6) methods to bolster film–, television–, and entertainment–related
business development and identify potential industry partnerships;
(6) (7) methods to sustainably grow the film, television, and entertainment
workforce and identify potential workforce development and higher education partners;
and
(7) (8) other recommendations, as appropriate, to support and grow the
economic impact of Maryland’s film, television, and entertainment industry.
SECTION 3. AND BE IT FURTHER ENACTED, That it is the intent of the General
Assembly that the Department of Commerce encourage Maryland–based film entities to
apply for the credit authorized under § 10–730 of the Tax – General Article, as enacted by
Section 1 of this Act.
SECTION 3. 4. AND BE IT FURTHER ENACTED, That Section 1 of this Act shall
be applicable to all taxable years beginning after December 31, 2022.
SECTION 4. 5. AND BE IT FURTHER ENACTED, That this Act shall take effect
July 1, 2023. Section 2 of this Act shall remain effective for a period of 2 years and, at the
end of June 30, 2025, Section 2 of this Act, with no further action required by the General
Assembly, shall be abrogated and of no further force and effect.
Approved by the Governor, May 8, 2023.