February 28, 2008, Introduced by Reps. Meisner, Huizenga, Johnson, Miller, Leland, Hammon, Byrnes, Kathleen Law, Griffin, Condino, Robert Jones, Polidori, Gonzales, Corriveau, Espinoza, Brown, Simpson, Donigan, Gillard, Amos, Spade, McDowell, Bauer, Valentine, Hammel, Meadows, Dean, Casperson, Rick Jones, Bieda, Byrum, Ebli, Proos, Angerer, Accavitti, Palsrok, Nofs, Clemente, Hansen, Lemmons, Jackson, Lindberg, Clack, Hildenbrand, Vagnozzi, Sak, Knollenberg, Constan and Young and referred to the Committee on Commerce.
A bill to amend 2007 PA 36, entitled
"Michigan business tax act,"
(MCL 208.1101 to 208.1601) by adding section 455.
THE PEOPLE OF THE STATE OF MICHIGAN ENACT:
Sec. 455. (1) The Michigan film office, with the concurrence
of the state treasurer, may enter into an agreement with an
eligible production company providing the company with a credit
against the tax imposed by this act or against taxes withheld under
chapter 7 of the income tax act of 1967, 1967 PA 281, MCL 206.351
to 206.367, as provided under this section and section 367 of the
income tax act of 1967, 1967 PA 281, MCL 206.367. To qualify for
the credit under this section, a company shall meet all of the
following requirements:
(a) Spend at least $50,000.00 in this state for the
development, preproduction, production, and postproduction costs of
a state certified qualified production.
(b) Enter into an agreement as provided in this section.
(c) Receive a postproduction certificate of completion from
the office under subsection (5).
(d) Submit the postproduction certificate of completion issued
by the office under subsection (5) to the department under
subsection (7).
(e) Shall not be delinquent in a tax or other obligation owed
to this state or be owned or under common control of an entity that
is delinquent in a tax or other obligation owed to this state.
(2) For direct production expenditures made after February 29,
2008, an agreement under this section may provide for an eligible
production company to claim a tax credit equal to 42% of direct
production expenditures for a state certified qualified production
in a core community and 40% of direct production expenditures for a
state certified qualified production in part of this state other
than a core community. A taxpayer shall not claim a credit under
this section for any of the following:
(a) A direct expenditure for which the company claims a credit
under section 459.
(b) A direct expenditure for which the company claims a credit
under section 367 of the income tax act of 1967, 1967 PA 281, MCL
206.367.
(c) A direct expenditure for which another taxpayer claims a
credit under this section, a credit under section 459, or a credit
under section 367 of the income tax act of 1967, 1967 PA 281, MCL
206.367.
(3) An eligible production company intending to produce a
qualified production in this state, or that initiated production of
a qualified production after February 29, 2008 and before the
effective date of the amendatory act that added this section, may
submit an application to enter into an agreement under this section
to the Michigan film office. The request shall be submitted in a
form prescribed by the Michigan film office and shall be
accompanied by a $100.00 application fee and all of the information
and records requested by the office. An application fee received by
the office under this subsection shall be deposited in the Michigan
film promotion fund. The office shall not process the application
until it is complete. As part of the application, the company shall
estimate direct production expenditures for an identified qualified
production. If the office, with the concurrence of the state
treasurer, determines to enter into an agreement under this
section, the agreement shall provide for all of the following:
(a) A requirement that the eligible production company
commence work in this state on the identified qualified production
within 90 days of the date of the agreement or else the agreement
shall expire. However, upon request submitted by the company based
on good cause, the office may extend the period for commencement of
work in this state for an additional 90 days.
(b) A statement identifying the company and the qualified
production that the company intends to produce in whole or in part
in this state.
(c) A unique number assigned to the qualified production by
the office.
(d) A requirement that the qualified production not depict
obscene matter or an obscene performance.
(e) If the qualified production is a long-form narrative film
production, a requirement that the qualified production include an
acknowledgement that the qualified production was filmed in this
state.
(f) A requirement that the company provide the office with the
information and independent certification the office and the
department deem necessary to verify direct production expenditures
and eligibility for the credit under this section.
(g) If determined to be necessary by the office and the state
treasurer, a provision for addressing expenditures in excess of
those identified in the agreement.
(4) In determining whether to enter into an agreement under
this section, the Michigan film office and the state treasurer
shall consider all of the following:
(a) The potential that in the absence of the credit the
qualified production will be produced in a location other than this
state.
(b) The extent to which the qualified production may have the
effect of promoting this state as a tourist destination.
(c) The extent to which the qualified production may have the
effect of promoting economic development or job creation in this
state.
(d) The extent to which the credit will attract private
investment for the production of qualified productions in this
state.
(e) The record of the eligible production company in
completing commitments to engage in a qualified production.
(5) If the Michigan film office determines that an eligible
production company has complied with the terms of an agreement
entered into under this section, the office shall issue a
postproduction certificate to the company. The company shall submit
a request to the office for a postproduction certificate on a form
prescribed by the office, along with any information or independent
certification the office or the department deems necessary. The
office shall process each request within 60 days after the request
is complete. However, the office may request additional information
or independent certification before issuing a postproduction
certificate of completion and need not issue the postproduction
certificate until satisfied that direct production expenditures and
eligibility are adequately established. The additional information
requested may include a report of direct production costs for the
qualified production audited and certified by an independent
certified public accountant. Each postproduction certificate of
completion shall be signed by the Michigan film commissioner and
shall include the following information:
(a) The name of the eligible production company.
(b) The name of the certified production produced in whole or
in part in this state.
(c) The eligible production company's direct production
expenditures for the qualified production.
(d) The date of completion for the qualified production in
this state.
(e) The unique number assigned to the qualified production
project by the Michigan film office under subsection (3).
(f) The eligible production company's federal employer
identification number or Michigan treasury number.
(g) Any independent certification required by the department
or the Michigan film office.
(6) Information and records submitted by an eligible
production company to the Michigan film office under this section
shall be considered confidential and exempt from disclosure under
the freedom of information act, 1976 PA 442, MCL 15.231 to 15.246,
to the extent that the information or records describe the
commercial and financial operations of the company, the information
or records have not been publicly disseminated at any time, and
disclosure of the information or records might put the company at a
competitive disadvantage. A company submitting materials under this
section shall specifically designate any information and records
that the company deems confidential. The office may release any
information and records submitted under this section that have not
been designated confidential by the company.
(7) An eligible production company shall submit a
postproduction certificate of completion issued under subsection
(5) to the department. If the credit allowed under this section
exceeds the tax liability of the company for the tax year or if the
company claiming the credit does not have a tax liability under
this act for the tax year, the department shall refund the excess
or pay the amount of the credit to the company. The credit under
this section shall be claimed after all other credits under this
act.
(8) An eligible production company may assign all or a portion
of a credit under this section to any assignee. An assignee may
subsequently assign a credit or any portion of a credit assigned
under this subsection to 1 or more assignees. A company may claim a
portion of a credit and assign the remaining credit amount. A
credit assignment under this subsection is irrevocable. The credit
assignment under this subsection shall be made on a form prescribed
by the department. The qualified taxpayer shall send a copy of the
completed assignment form to the department in the tax year in
which the assignment is made and shall attach a copy of the form to
the return on which the credit is claimed.
(9) The amount of the credit under this section shall be
reduced by a credit application and redemption fee equal to 0.5% of
the credit claimed, which shall be paid by the taxpayer claiming
the credit and be deposited by the department in the Michigan film
promotion fund.
(10) A taxpayer that willfully submits information under this
section that the taxpayer knows to be fraudulent or false shall, in
addition to any other penalties provided by law, be liable for a
civil penalty equal to the amount of the taxpayer's credit under
this section. A penalty collected under this section shall be
deposited in the Michigan film promotion fund.
(11) Not later than March 1 of each year after 2008, the
Michigan film office shall submit to the governor, the chairperson
of the senate finance committee, and the house tax policy committee
an annual report concerning the operation and effectiveness of the
credit under this section. The requirements of section 28(1)(f) of
1941 PA 122, MCL 205.28, do not apply to disclosure of tax
information required by this subsection. The report shall include
all of the following:
(a) A brief assessment of the overall effectiveness of the
credit under this section at attracting qualified productions to
this state during the immediately preceding calendar year.
(b) The number of qualified productions for which the eligible
production company applied for a tax credit under this section
during the immediately preceding year, the names of the qualified
productions produced in this state for which credits were begun or
completed in the immediately preceding year, and the locations in
this state that were used in the production of qualified
productions in the immediately preceding calendar year.
(c) The amount of money spent by each eligible production
company identified in subdivision (b) to produce each qualified
production in this state and a breakdown of all production spending
by all companies classified as goods, services, or salaries and
wages in the immediately preceding calendar year.
(d) An estimate of the number of persons employed in this
state by eligible production companies that qualified for the
credit under this section in the immediately preceding calendar
year.
(e) The value of all tax credit certificates of completion
issued under this section in the immediately preceding calendar
year.
(12) As used in this section:
(a) "Core community" means a qualified local governmental unit
as defined under section 2 of the obsolete property rehabilitation
act, 2000 PA 146, MCL 125.2782.
(b) "Direct production expenditure" means a development,
preproduction, production, or postproduction expenditure made in
this state directly attributable to the production or distribution
of a qualified production that is a transaction subject to taxation
in this state, including, but not limited to, all of the following:
(i) Payments to vendors doing business in this state to
purchase or use tangible personal property in producing or
distributing the qualified production or to purchase services
relating to the production or distribution of the qualified
production, including all of the following:
(A) Expenditures for optioning or purchasing intellectual
property including, but not limited to, books, scripts, music, or
trademarks relating to the development or purchase of a script,
story, scenario, screenplay, or format, including all expenditures
generally associated with the optioning or purchase of intellectual
property, including option money, agent fees, and attorney fees
relating to the transaction, but not including deferrals,
deferments, royalties, profit participation, or recourse or
nonrecourse loans negotiated by the eligible production company to
obtain the rights to the intellectual property.
(B) Production work, production equipment, production
software, development work, postproduction work, postproduction
equipment, postproduction software, set design, set construction,
set operations, props, lighting, wardrobe, makeup, makeup
accessories, photography, sound synchronization, special effects,
visual effects, audio effects, film processing, music, sound
mixing, editing, and related services and materials.
(C) Use of facilities or equipment, use of soundstages or
studios, location fees, and related services and materials.
(D) Catering, food, lodging, and related services and
materials.
(E) Use of vehicles, which may include chartered aircraft
based in this state used for transportation in this state directly
attributable to production of a qualified production, but may not
include the chartering of aircraft for transportation outside of
this state.
(F) Commercial airfare if purchased through a travel agency or
travel company based in this state for travel to and from this
state or within this state directly attributable to production or
distribution of a qualified production.
(G) Insurance coverage or bonding if purchased from an
insurance agent based in this state.
(H) Expenditures for distribution, including, but not limited
to, both of the following:
(I) Preproduction, production, or postproduction costs
relating to the creation of trailers, marketing videos,
commercials, point-of-purchase videos, and content created on film
or digital media, including, but not limited to, the duplication of
films, videos, compact discs, digital video discs, and digital
files or other digital media created for consumer consumption.
(II) Purchase of equipment relating to the duplication or
market distribution of any content created or produced in this
state.
(I) Other expenditures for production of a qualified
production in accordance with generally accepted entertainment
industry practices.
(ii) Payments and compensation, not to exceed $2,000,000.00 for
any 1 employee or contractual or salaried employee who performs
services in this state for the production or distribution of a
qualified production, including all of the following:
(A) Payment of wages, benefits, or fees for talent,
management, or labor.
(B) Payment to a personal services corporation or professional
employer organization for the services of a performing artist if
the personal services corporation or professional employer
organization pays the tax levied under this act on the portion of
the payment qualifying for the tax credit under this section and
the payments received by the performing artist are subject to
taxation under the income tax act of 1967, 1967 PA 281, MCL 206.1
to 206.532.
(c) "Eligible production company" or "company" means an entity
in the business of producing qualified productions, but does not
include an entity that is more than 30% owned, affiliated, or
controlled by an entity or individual who is in default on a loan
made by this state, a loan guaranteed by this state, or a loan made
or guaranteed by any other state.
(d) "Interactive website" means a website, the production
costs of which exceed $500,000.00 in an annual period and primarily
includes interactive games, end user applications, animation,
simulation, sound, graphics, story lines, or video created or
repurposed for distribution over the internet. Interactive website
does not include a website primarily used for institutional,
private, industrial, retail, or wholesale marketing or promotional
purposes, or which contains obscene matter or an obscene
performance.
(e) "Michigan film office" or "office" means the Michigan film
office created under chapter 2A of the Michigan strategic fund act,
1984 PA 270, MCL 125.2029 to 125.2029g.
(f) "Michigan film promotion fund" means the fund created
under chapter 2A of the Michigan strategic fund act, 1984 PA 270,
MCL 125.2029 to 125.2029g.
(g) "Obscene matter or an obscene performance" means matter
described in 1984 PA 343, MCL 752.361 to 752.374.
(h) "Postproduction expenditure" means a direct expenditure
for editing, Foley recording, automatic dialogue replacement, sound
editing, special or visual effects including computer-generated
imagery or other effects, scoring and music editing, beginning and
end credits, negative cutting, soundtrack production, dubbing,
subtitling, or addition of sound or visual effects. Postproduction
expenditure includes direct expenditures for advertising,
marketing, distribution, or related expenses.
(i) "State certified qualified production" or "qualified
production" means single media or multimedia entertainment content
created in whole or in part in this state for distribution or
exhibition to the general public in 2 or more states by any means
and media in any digital media format, film, or video tape,
including, but not limited to, a motion picture, a documentary, a
television series, a television miniseries, a television special,
interstitial television programming, long-form television,
interactive television, music videos, interactive games, video
games, commercials, internet programming, an internet video, a
sound recording, a video, digital animation, or an interactive
website. Qualified production also includes any trailer, pilot,
video teaser, or demo created primarily to stimulate the sale,
marketing, promotion, or exploitation of future investment in a
production. Qualified production does not include any of the
following:
(i) A production for which records are required to be
maintained with respect to any performer in the production under 18
USC 2257.
(ii) A production that includes obscene matter or an obscene
performance.
(iii) A production that primarily consists of televised news or
current events.
(iv) A production that primarily consists of a live sporting
event.
(v) A production that primarily consists of political
advertising.
(vi) A radio program.
(vii) A weather show.
(viii) A financial market report.
(ix) A talk show.
(x) A game show.
(xi) A production that primarily markets a product or service
other than a state certified qualified production.
(xii) An awards show or other gala event production.
(xiii) A production with the primary purpose of fund-raising.
(xiv) A production that primarily is for employee training or
in-house corporate advertising or other similar production.
(j) "Sound recording" means a recording of music, poetry, or
spoken-word performance, but does not include the audio portions
spoken and recorded as part of a motion picture, video, theatrical
production, television news coverage, or athletic event.
(k) "State certified qualified production" means a qualified
production for which a postproduction certificate has been issued
by the office under subsection (5).