88R13304 CJD-F
By: Price, Shine, Gervin-Hawkins, Moody, H.B. No. 3600
Clardy, et al.
A BILL TO BE ENTITLED
AN ACT
relating to the establishment of the Texas Multimedia Production
Program; providing tax credits; authorizing fees.
BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF TEXAS:
SECTION 1. Subtitle F, Title 4, Government Code, is amended
by adding Chapter 485B to read as follows:
CHAPTER 485B. TEXAS MULTIMEDIA PRODUCTION PROGRAM
SUBCHAPTER A. GENERAL PROVISIONS
Sec. 485B.001. DEFINITIONS. (a) Except as otherwise
provided by this chapter, terms used in this chapter have the
meanings assigned by Chapters 485 and 485A, and rules adopted under
those chapters, as those chapters and rules existed on January 1,
2022.
(b) In this chapter:
(1) "Moving image project" means a visual and sound
production, including a film, television program, national or
multistate commercial, or education or instructional video. The
term does not include a production that is obscene, as defined by
Section 43.21, Penal Code.
(2) "Production company" means a film production
company, television production company, or film and television
production company.
SUBCHAPTER B. TAX CREDIT FOR CERTAIN MULTIMEDIA PRODUCTIONS
Sec. 485B.051. TAX CREDIT PROGRAM. (a) The office shall
implement and administer a tax credit program for production
companies that produce moving image projects in this state.
(b) The office shall develop a procedure by which a
production company may apply to the office for a certificate of
eligibility for the tax credit program authorized by this
subchapter. The procedure must:
(1) specify the method by which an applicant must
demonstrate that an individual is a Texas resident; and
(2) require the submission, before production of a
moving image project begins, of:
(A) an estimate of the applicant's total in-state
spending related to the project;
(B) the shooting script or story board, as
applicable, for the project;
(C) the estimated number of jobs for cast and
production crew during the production and completion of the
project; and
(D) any other information required by the office
to determine the amount of in-state spending by the applicant.
(c) The office may award a certificate of eligibility to a
production company based only on in-state spending by the company
that has been verified by the office.
(d) The office is not required to act on an application, and
shall deny an application, for a production that the office finds to
be obscene, as defined by Section 43.21, Penal Code. The office
must provide written notice of the finding to the applicant not
later than the seventh business day after the date the office makes
the finding.
(e) The office may not award a certificate of eligibility
under this subchapter unless the office:
(1) reviews a copy of the final script of the moving
image project to which the certificate of eligibility relates; and
(2) determines whether a substantial change occurred
during production of the moving image project such that the
production is ineligible for the certificate under Subsection (d).
(f) The office shall include the amount of the tax credit,
as determined under Sections 485B.053 and 485B.054, on the face of a
certificate of eligibility. An applicant who receives a
certificate of eligibility must provide the certificate to the
comptroller, along with any other information required by the
comptroller, to receive a tax credit under Subchapter O, Chapter
171, Tax Code.
(g) The office by rule may impose an application fee in an
amount sufficient to offset the administrative costs to the office
and to the comptroller in administering this chapter.
Sec. 485B.052. QUALIFICATION. (a) To qualify for a
certificate of eligibility under this subchapter for a moving image
project, a production company must:
(1) demonstrate to the office that the production
company made at least $15 million in in-state spending for the
project;
(2) film at least 25 percent of the project in this
state, including additional pick-up days and second unit days;
(3) submit to the office a ledger of expenses, in a
format prescribed by the office, that lists all in-state spending
and includes all receipts, invoices, pay orders, and other
documentation required by the office to determine the amount of the
production company's in-state spending; and
(4) meet the requirements of Subsection (b).
(b) Unless the office determines and certifies in writing
that a sufficient number of qualified crew, actors, and extras are
not available to a production company at the time principal
photography begins, at least 25 percent of the total number of
individuals employed or used as production crew, actors, and extras
for a moving image project must be Texas residents.
Sec. 485B.053. AMOUNT OF TAX CREDIT. (a) The office shall
adopt rules prescribing the method the office will use to calculate
the amount of credit to list on a certificate of eligibility awarded
to a production company under this subchapter for a moving image
project. The office shall publish a written summary of the method
the office develops to determine the amount of credit before the
date the office begins to award certificates of eligibility.
(b) The method adopted by the office under Subsection (a)
must provide that the amount of credit listed on a certificate of
eligibility awarded to a production company for a moving image
project is equal to the sum of:
(1) subject to Subsection (c), 30 percent of the
production company's in-state spending for the project, not
including wages;
(2) 20 percent of the wages paid by the production
company to individuals who are not Texas residents while working in
this state on the project;
(3) 35 percent of the wages paid by the production
company to Texas residents who do not reside in underutilized and
economically distressed areas;
(4) 38 percent of the wages paid by the production
company to Texas residents who reside in underutilized and
economically distressed areas;
(5) if applicable, 10 percent of the production
company's in-state spending for an episodic television series of
three or more episodes for which a completed distribution agreement
is provided to the office;
(6) if the production company spends at least 25
percent of the project's filming days in an underutilized and
economically distressed area, 2.5 percent of the production
company's in-state spending for the project; and
(7) three percent of the production company's in-state
spending for post-production activities.
(c) The office may not consider the amount described by
Subsection (b)(1) when calculating the amount of credit to list on a
certificate of eligibility awarded to a production company for a
moving image project under Subsection (b) unless the production
company provides to the office promotional materials that may be
used by the office to promote economic development and tourism in
this state, including a promotional video that:
(1) uses an image of this state in its end credits; and
(2) includes at least:
(A) 30 behind-the-scenes stills of the
production during principal photography for the project;
(B) 10 behind-the-scenes stills of the lead
actors during principal photography for the project; and
(C) three minutes of behind-the-scenes video
footage of principal photography for the project.
Sec. 485B.054. REDUCTION OF TAX CREDIT FOR STATE DEBT.
Notwithstanding Section 485B.053, the office shall reduce the
amount of credit listed on a certificate of eligibility awarded to a
production company by an amount equal to any delinquent amount owed
by the production company to this state.
SECTION 2. Chapter 171, Tax Code, is amended by adding
Subchapter O to read as follows:
SUBCHAPTER O. TAX CREDIT FOR CERTIFIED TEXAS MULTIMEDIA PRODUCTION
PROGRAM
Sec. 171.751. DEFINITIONS. In this subchapter:
(1) "Certified production" means a media production
that is the basis for a certificate of eligibility awarded to a
production company under Chapter 485B, Government Code.
(2) "Office" means the Music, Film, Television, and
Multimedia Office.
(3) "Production company" has the meaning assigned by
Section 485B.001, Government Code.
Sec. 171.752. ELIGIBILITY FOR CREDIT. An entity is
eligible to apply for a credit in the amount and under the
conditions provided by this subchapter against the tax imposed
under this chapter.
Sec. 171.753. QUALIFICATION. (a) An entity qualifies for a
credit under this subchapter if the entity submits to the
comptroller with the application required by Section 171.756:
(1) a certificate of eligibility awarded by the
office;
(2) an audited cost report prepared by a certified
public accountant, as defined by Section 901.002, Occupations Code,
that itemizes the costs and expenses incurred by a production
company to make the certified production and on which the amount of
the credit is based; and
(3) an attestation from the production company as to
the total costs and expenses incurred to make the certified
production.
(b) An entity that sells or assigns a credit under this
subchapter to another entity shall provide a copy of the
certificate of eligibility, audited cost report, and attestation to
the purchaser or assignee.
Sec. 171.754. AMOUNT OF CREDIT; LIMITATIONS. (a) Subject
to Subsection (b), the amount of the credit under this subchapter is
the amount listed by the office on the certificate of eligibility
awarded to a production company for a certified production.
(b) The total credit claimed for a report, including the
amount of any carryforward under Section 171.755, may not exceed
the amount of franchise tax due for the report after any other
applicable tax credits.
(c) An entity may not claim a credit under this subchapter
on a report that is originally due before September 1, 2025.
However, before September 1, 2025, an entity may sell or assign a
credit for which the entity qualifies under Section 171.753.
Sec. 171.755. CARRYFORWARD. (a) If an entity is eligible
for a credit that exceeds the limitation under Section 171.754(b),
the entity may carry the unused credit forward for not more than
five consecutive reports.
(b) A carryforward is considered the remaining portion of a
credit that cannot be claimed in the current year because of the
limitation under Section 171.754(b).
Sec. 171.756. APPLICATION FOR CREDIT. (a) An entity must
apply to the comptroller for a credit under this subchapter on or
with the report for the period for which the credit is claimed.
(b) An entity shall submit with an application the
information required under Section 171.753 and any other
information the comptroller determines is necessary to determine
whether the entity qualifies for the credit.
(c) The burden of establishing eligibility for and the
amount of the credit is on the entity.
Sec. 171.757. SALE OR ASSIGNMENT OF CREDIT. (a) An entity
awarded a certificate of eligibility by the office may sell or
assign all or part of the credit to one or more entities. An entity
to which all or part of a credit is sold or assigned may sell or
assign all or part of the credit to another entity. There is no
limit on the total number of transactions for sale or assignment of
all or part of the total credit authorized under this subchapter.
(b) An entity that sells or assigns a credit under this
section, and the entity to which the credit is sold or assigned,
shall jointly submit written notice of the sale or assignment to the
comptroller on a form prescribed by the comptroller not later than
the 30th day after the date of the sale or assignment. The notice
must include:
(1) the date of the sale or assignment;
(2) the amount of the credit sold or assigned;
(3) the names and federal tax identification numbers
of:
(A) the entity that sold or assigned the credit
or part of the credit; and
(B) the entity to which the credit or part of the
credit was sold or assigned;
(4) the amount of the credit owned by the selling or
assigning entity before the sale or assignment; and
(5) the amount of the credit the selling or assigning
entity retained, if any, after the sale or assignment.
(c) The sale or assignment of a credit under this section
does not increase the total amount of the credit that may be
claimed. After an entity claims a credit for a production company
expenditure that formed the basis for the certificate of
eligibility awarded by the office, another entity may not use the
same expenditure as the basis for another certificate of
eligibility or credit.
(d) Notwithstanding the requirements of this subchapter, a
credit earned or purchased by, or assigned to, a partnership,
limited liability company, S corporation, or other pass-through
entity may be allocated to the partners, members, or shareholders
of that entity and claimed under this subchapter in accordance with
the provisions of any agreement among the partners, members, or
shareholders, and without regard to the ownership interest of the
partners, members, or shareholders in the certified production,
provided that the entity that claims the credit must be subject to
the tax imposed under this chapter.
(e) An entity to which all or part of a credit is sold or
assigned and that is subject to a premium tax imposed under Chapter
221, 222, 223, or 224, Insurance Code, may claim all or part of the
credit against that tax. The provisions of this subchapter,
including provisions relating to the total amount of the credit
that may be claimed for a report, the carryforward of the credit,
and the sale or assignment of the credit, apply with respect to a
credit claimed against a tax imposed under Chapter 221, 222, 223, or
224, Insurance Code, to the same extent those provisions apply to a
credit claimed against the tax imposed under this chapter. An
entity claiming all or part of a credit as authorized by this
subsection is not required to pay any additional retaliatory tax
levied under Chapter 281, Insurance Code, as a result of claiming
that credit.
Sec. 171.758. RULES. The comptroller shall adopt rules and
forms necessary to implement this subchapter.
SECTION 3. Subchapter O, Chapter 171, Tax Code, as added by
this Act, applies only to a report originally due on or after
September 1, 2025.
SECTION 4. This Act takes effect September 1, 2023.