Pennsylvania Act 2004-95 — TAX REFORM CODE OF 1971 - FILM PRODUCTION TAX CREDIT

Act text

TAX REFORM CODE OF 1971 - FILM PRODUCTION TAX CREDIT
                  Act of Jul. 20, 2004, P.L. 801, No. 95              Cl. 72
                             Session of 2004
                               No. 2004-95

     HB 147

                                  AN ACT

     Amending the act of March 4, 1971 (P.L.6, No.2), entitled "An
        act relating to tax reform and State taxation by codifying
        and enumerating certain subjects of taxation and imposing
        taxes thereon; providing procedures for the payment,
        collection, administration and enforcement thereof; providing
        for tax credits in certain cases; conferring powers and
        imposing duties upon the Department of Revenue, certain
        employers, fiduciaries, individuals, persons, corporations
        and other entities; prescribing crimes, offenses and
        penalties," authorizing a film production tax credit; and
        providing for the powers and duties of the Department of
        Community and Economic Development and the Department of
        Revenue.

        The General Assembly of the Commonwealth of Pennsylvania
     hereby enacts as follows:

        Section 1.  The act of March 4, 1971 (P.L.6, No.2), known as
     the Tax Reform Code of 1971, is amended by adding an article to
     read:
                              ARTICLE XVII-C
                        FILM PRODUCTION TAX CREDIT
      Section 1701-C.  Scope of article.
        This article relates to film production tax credits.
      Section 1702-C.  Definitions.
        The following words and phrases when used in this article
     shall have the meanings given to them in this section unless the
     context clearly indicates otherwise:
        "Department."  The Department of Revenue of the Commonwealth.
        "Film."  The term includes a feature film, a television
     series and a television show of 15 minutes or more in length,
     intended for a national audience. The term does not include a
     production featuring news, current events, weather and market
     reports, or public programming, talk show, game show, sports
     event, awards show or other gala event, a production that
     solicits funds, a production that primarily markets a product or
     service, a production containing obscene material or
     performances as defined in 18 Pa.C.S. § 5903(b) (relating to
     obscene and other sexual materials and performances) or a
     production primarily for private, industrial, corporate or
     institutional purposes.
        "Film production tax credit."  The credit provided under this
     article.
        "Pass-through entity."  A partnership as defined in section
     301(n.0) or a Pennsylvania S corporation as defined in section
     301(n.1).
        "Pennsylvania production expense."  A production expense
     incurred in this Commonwealth.
        "Production expense."  An expense incurred in the production
     of a film. The term includes wages and salaries of individuals
     employed in the production of a film on which the taxes imposed
     by Article III or IV have been paid or accrued; the costs of
     construction, operations, editing, photography, sound
     synchronization, lighting, wardrobe and accessories; and the
     cost of rental of facilities and equipment. The term does not
     include expenses incurred in marketing or advertising a film.
        "Qualified film production expense."  A Pennsylvania
     production expense if at least 60% of the total production
     expenses are Pennsylvania production expenses.
        "Qualified tax liability."  The liability for taxes imposed
     under Article III, IV or VI. The term shall not include any tax
     withheld by an employer from an employe under Article III.
        "Taxpayer."  An entity subject to tax under Article III, IV
     or VI.
      Section 1703-C.  Credit for qualified film production expenses.
        (a)  General rule.--A taxpayer who incurs a qualified film
     production expense in a taxable year may apply for a film
     production tax credit as provided in this article. A taxpayer
     seeking a credit under this article must submit an application
     to the department by February 15 for qualified film production
     expenses incurred in the taxable year that ended in the prior
     calendar year.
        (b)  Amount of credit.--A taxpayer that is qualified under
     subsection (a) shall receive a film production tax credit for
     the taxable year in the amount of 20% of the qualified film
     production expenses.
        (c)  Notification.--By August 15 of the calendar year
     following the close of the taxable year during which the
     qualified film production expense was incurred, the department
     shall notify the taxpayer of the amount of the taxpayer's film
     production tax credit approved by the department.
      Section 1704-C.  Carryover, carryback, refund and assignment of
                        credit.
        (a)  General rule.--If the taxpayer cannot use the entire
     amount of the film production tax credit for the taxable year in
     which the film production tax credit is first approved, then the
     excess may be carried over to succeeding taxable years and used
     as a credit against the qualified tax liability of the taxpayer
     for those taxable years. Each time that the film production tax
     credit is carried over to a succeeding taxable year, it shall be
     reduced by the amount that was used as a credit during the
     immediately preceding taxable year. The film production tax
     credit provided by this article may be carried over and applied
     to succeeding taxable years for no more than three taxable years
     following the first taxable year for which the taxpayer was
     entitled to claim the credit.
        (b)  Application.--A film production tax credit approved by
     the Department of Revenue for qualified film production expenses
     in a taxable year first shall be applied against the taxpayer's
     qualified tax liability for the current taxable year as of the
     date on which the credit was approved before the film production
     tax credit can be applied against any tax liability under
     subsection (a).
        (c)  No carryback.--A taxpayer is not entitled to carry back
     or obtain a refund of an unused film production tax credit.
        (d)  Sale or assignment.--
            (1)  A taxpayer, upon application to and approval by the
        Department of Community and Economic Development, may sell or
        assign, in whole or in part, a film production tax credit
        granted to the taxpayer under this article.
            (2)  The Department of Community and Economic Development
        and the department shall jointly promulgate regulations for
        the approval of applications under this subsection.
            (3)  Before an application is approved, the department
        must make a finding that the applicant has filed required
        State tax reports for the taxable year for which the
        qualified expenses were approved and paid any balance of
        State tax due as determined at settlement, assessment or
        determination by the department.
            (4)  Notwithstanding any other provision of law, the
        department shall settle, assess or determine the tax of an
        applicant under this subsection within 90 days of the filing
        of all required final returns or reports in accordance with
        section 806.1(a)(5) of the act of April 9, 1929 (P.L.343,
        No.176), known as The Fiscal Code.
        (e)  Purchasers and assignees.--The purchaser or assignee of
     a portion of a film production tax credit under subsection (d)
     shall immediately claim the credit in the taxable year in which
     the purchase or assignment is made. The amount of the film
     production credit that a purchaser or assignee may use against
     any one qualified tax liability may not exceed 50% of such
     qualified tax liability for the taxable year. The purchaser or
     assignee may not carry over, carry back, obtain a refund of or
     assign the film production tax credit. The purchaser or assignee
     shall notify the Department of Revenue of the seller or assignor
     of the film production tax credit in compliance with procedures
     specified by the Department of Revenue.
      Section 1705-C.  Determination of qualified film production
                        expenses.
        In prescribing standards for determining which production
     expenses are considered qualified film production expenses for
     purposes of computing the credit provided by this article, the
     department shall consider:
            (1)  The location where the services are performed.
            (2)  The residence or business location of the person or
        persons performing the service.
            (3)  The location where qualified film production
        supplies are consumed.
            (4)  Other factors established in regulation by the
        department which are necessary for determination.
      Section 1706-C.  Time limitations.
        A taxpayer is not entitled to a film production tax credit
     for qualified film production expenses incurred in taxable years
     ending after December 31, 2012.
      Section 1707-C.  Limitation on credits.
        (a)  General rule.--The total amount of credits approved by
     the department shall not exceed $10,000,000 in any fiscal year.
        (b)  Exception.--If the total amount of film production tax
     credits applied for by all taxpayers exceeds the amount
     allocated for those credits, then the film production tax credit
     to be received by each applicant shall be the product of the
     allocated amount multiplied by the quotient of the film
     production tax credit applied for by the applicant divided by
     the total of all film production credits applied for by all
     applicants, the algebraic equivalent of which is:
            taxpayer's film production tax credit = amount allocated
            for those credits X (film production tax credit applied
            for by the applicant/total of all film production tax
            credits applied for by all applicants).
      Section 1708-C.  Pass-through entity.
        (a)  General rule.--If a pass-through entity has any unused
     tax credit under section 1704-C, it may elect in writing,
     according to procedures established by the department, to
     transfer all or a portion of the credit to shareholders, members
     or partners in proportion to the share of its distributive
     income to which the shareholder, member or partner is entitled.
        (b)  Limitation.--The credit provided under subsection (a) is
     in addition to any film production tax credit to which a
     shareholder, member or partner of a pass-through entity is
     otherwise entitled under this article. However, a pass-through
     entity and a shareholder, member or partner of a pass-through
     entity may not claim a credit under this article for the same
     qualified film production expense.
        (c)  Application.--A shareholder, member or partner of a
     pass-through entity to whom a credit is transferred under
     subsection (a) shall immediately claim the credit in the taxable
     year in which the transfer is made. A credit transferred to a
     natural person may be applied only against the income referred
     to under section 303(a)(2). The shareholder, member or partner
     may not carry back, obtain a refund of or assign the credit.
      Section 1709-C.  Report to General Assembly.
        The secretary shall submit an annual report to the General
     Assembly indicating the effectiveness of the film production tax
     credit provided by this article no later than April 1 following
     the year in which the credits were approved. The report shall
     include the names of all taxpayers utilizing the credit as of
     the date of the report and the amount of credits approved and
     utilized by each taxpayer. Notwithstanding any law providing for
     the confidentiality of tax records, the information contained in
     the report shall be public information. The report may also
     include any recommendations for changes in the calculation or
     administration of the credit.
      Section 1710-C.  Termination.
        The department shall not approve a film production tax credit
     under this article for taxable years ending after December 31,
     2012.
      Section 1711-C.  Regulations.
        The department shall promulgate regulations necessary for the
     implementation and administration of this article.
        Section 2.  The addition of Article XVII-C of the act shall
     apply to:
            (1)  qualified film production expenses incurred after
        June 30, 2004; and
            (2)  taxable years commencing after December 31, 2003.
        Section 3.  This act shall take effect immediately.

     APPROVED--The 20th day of July, A. D. 2004.

     EDWARD G. RENDELL