As Introduced

127th General Assembly
Regular Session
2007-2008
H. B. No. 196


Representative Patton 

Cosponsors: Representatives Combs, Collier, DeGeeter, Stebelton, Budish, Miller, Skindell 

A BILL
To amend section 5747.98 and to enact sections 122.85 1
and 5747.66 of the Revised Code to authorize 2
income tax credits for investments in motion 3
pictures produced in Ohio.4


BE IT ENACTED BY THE GENERAL ASSEMBLY OF THE STATE OF OHIO:

       Section 1. That section 5747.98 be amended and sections 5
122.85 and 5747.66 of the Revised Code be enacted to read as 6
follows:7

       Sec. 122.85.  (A) As used in this section and in section 8
5747.66 of the Revised Code:9

       (1) "Allocated share" means the share of a qualifying 10
investor's credit amount allocated as described in division (E) of 11
this section.12

       (2) "Base investment" means the amount of money invested by a 13
qualifying investor in a motion picture production company 14
multiplied by the percentage of the total production budget that 15
is expended in this state by the company directly for the 16
production of a tax credit-eligible production, as determined 17
under division (H) of this section.18

       (3) "Certificate owner" means a qualifying investor to which 19
a tax credit certificate is issued or any other person to which a 20
credit amount is allocated or transferred under this section.21

       (4) "Company" means a corporation, partnership, limited 22
liability company, or other form of business association.23

       (5) "Eligible production expenditures" means expenditures 24
made in this state by a motion picture production company directly 25
for the production of a tax credit-eligible production.26

       (6) "Headquartered in Ohio" means incorporated in this state 27
in the case of a corporation, or, in the case of any other 28
company, domiciled and headquartered in this state.29

       (7) "Qualifying investor" means an individual or a 30
partnership or other pass-through entity, as defined in section 31
5733.04 of the Revised Code, that invests money in a tax 32
credit-eligible production.33

       (8) "Motion picture" means a nationally distributed 34
feature-length film, video, television series, or commercial made 35
in this state, in whole or in part, for theatrical or television 36
viewing, or as a television pilot, but does not include the 37
production of television coverage of news or sporting events.38

       (9) "Motion picture production company" means a company 39
engaged in the business of producing motion pictures, but does not 40
include any company owned, affiliated, or controlled, in whole or 41
in part, by any company or person that is in default on a loan 42
made by the state or a loan guaranteed by the state.43

       (10) "Tax credit-eligible production" means a motion picture 44
production, investment in which qualifies for tax credits under 45
section 5747.66 of the Revised Code as certified by the director 46
of development under division (B) of this section.47

       (11) "Transfer agent" means a motion picture production 48
company or another person designated by such a company under 49
division (G) of this section.50

        (B) For the purpose of encouraging the development of a 51
strong capital base for motion picture productions in this state, 52
the director of development may certify a motion picture produced 53
by a motion picture production company headquartered in Ohio as a 54
tax credit-eligible production. In the case of a television 55
series, the director may certify the production of each episode of 56
the series as a separate tax credit-eligible production. If the 57
director determines that the production of two or more commercials 58
or videos are related parts of a distinct advertising, 59
promotional, informational, or entertainment series or 60
undertaking, the director may certify the productions as a single 61
tax credit-eligible production for the purpose of computing the 62
credit amounts under division (D) of this section.63

       The director of development shall not certify a motion 64
picture production as a tax credit-eligible production unless the 65
motion picture production company and a financially responsible 66
affiliate of the company formally agree to indemnify this state 67
for the amount of tax credits allowed and claimed under section 68
5747.66 of the Revised Code on the basis of expenditures that are 69
certified under division (H) of this section but thereafter are 70
determined not to qualify as eligible production expenditures. The 71
indemnification shall be in a form and amount acceptable to the 72
director of development. For the purposes of this division, a 73
financially responsible affiliate of a motion picture production 74
company is a person related to the motion picture production 75
company by direct or indirect ownership or control of a majority 76
of the capital stock or other equity interests and that the 77
director of development determines to be financially capable of 78
indemnifying this state as required by this division.79

       (C) A motion picture company shall apply for certification of 80
a motion picture as a tax credit-eligible production on a form and 81
in the manner prescribed by the director. Every application shall 82
include, at a minimum, all of the following information:83

       (1) The name and telephone number of the motion picture 84
production company;85

       (2) The name and telephone number of the company's contact 86
person;87

       (3) A list of the first preproduction date through the last 88
production date in Ohio;89

       (4) The Ohio production office address and telephone number;90

       (5) The total production budget of the motion picture;91

       (6) The amount expended in this state by the company directly 92
for the production and the percentage that amount is of the total 93
production budget of the motion picture;94

       (7) The total percentage of the motion picture being shot in 95
Ohio;96

       (8) The level of employment of cast and crew who reside in 97
Ohio;98

       (9) A synopsis of the script;99

       (10) A creative elements list that includes the names of the 100
principal cast and crew, and the producer and director;101

       (11) The motion picture's distribution plan, including 102
domestic and international distribution, and the sales estimates 103
for the picture.104

       (D) Upon application by a qualifying investor, the director 105
of development shall determine the qualifying investor's base 106
investment, and shall issue a tax credit certificate to the 107
qualifying investor. The director shall prescribe the form and 108
manner of the application; the information or documentation 109
required to be submitted with the application; and the form and 110
manner of issuing the certificate. The director shall assign a 111
unique identifying number to each tax credit certificate and shall 112
record the certificate in a register devised and maintained by the 113
director for that purpose. The certificate shall state the amount 114
of the qualifying investor's base investment and the total amount 115
of the credit allowed for the base investment as prescribed in 116
divisions (D)(1), (2), and (3) of this section:117

       (1) If the qualifying investor's base investment is greater 118
than three hundred thousand dollars but not greater than eight 119
million dollars, twenty-five per cent of the qualifying investor's 120
base investment;121

       (2) If the qualifying investor's base investment is greater 122
than eight million dollars but not greater than one hundred 123
million dollars, two million dollars plus fifteen per cent of the 124
qualifying investor's base investment in excess of eight million 125
dollars;126

       (3) If the qualifying investor's base investment is greater 127
than one hundred million dollars, fifteen million eight hundred 128
thousand dollars plus five per cent of the base investment in 129
excess of one hundred million dollars.130

       The credit amount shall be determined under this division on 131
the basis of the base investment and on the basis of the eligible 132
production expenditures as finally determined under division (H) 133
of this section. Once the eligible production expenditures are 134
finally determined under that division, the credit amount is not 135
subject to adjustment unless the base investment amount is 136
adjusted or unless an error was committed in the computation of 137
the credit amount.138

       (E) If a qualifying investor is a pass-through entity as 139
defined in section 5733.04 of the Revised Code, the pass-through 140
entity may allocate the credit amount among persons with an equity 141
interest in the entity in any proportion or manner provided in the 142
partnership agreement or other governing instrument of the entity, 143
notwithstanding any application of the principles of section 704 144
of the Internal Revenue Code. Upon allocation, the persons to 145
which the credit is allocated become the certificate owners of 146
their respective allocated shares of the credit. The pass-through 147
entity shall certify to the transfer agent the allocated share 148
allocated to each such person and provide such information as is 149
necessary to allow the transfer agent to provide the statements 150
and certifications required under division (G) of this section.151

       (F) Any certificate owner may transfer to any other person 152
all or a portion of the credit amount owned by the certificate 153
owner. Upon transfer, the transferee becomes the certificate owner 154
of the credit amount transferred. The transferor shall notify the 155
transfer agent of each transfer made by the transferor in 156
accordance with rules prescribed by the director of development. 157
The rules shall require the transferor to provide to the transfer 158
agent the identity of the transferee and the unique identifying 159
number assigned to the tax credit certificate that corresponds 160
with the credit amount transferred.161

       (G) Each motion picture production company that has a motion 162
picture production certified as a tax credit-eligible production 163
shall designate itself or another person as the transfer agent for 164
the purpose of providing the statements and certifications 165
required under this division. Upon making the designation, the 166
motion picture production company shall provide notice of the 167
designation to each certificate owner of a certificate issued with 168
respect to investments made in the company's motion picture 169
production. Before claiming a credit under section 5747.66 of the 170
Revised Code, a certificate owner shall request from the transfer 171
agent a statement certifying the certificate owner's share of the 172
credit amount, and the transfer agent shall provide the statement 173
to the certificate owner. The statement shall be in a form 174
prescribed by the director of development. The transfer agent also 175
shall provide a statement to the tax commissioner showing the 176
identity of the certificate owner and the certificate owner's 177
share of the credit amount. The statement shall be in a form 178
prescribed by the tax commissioner. A tax credit may not be 179
claimed by a certificate owner unless the transfer agent issues 180
the statement to the certificate owner.181

       (H) Each motion picture production company that has a motion 182
picture production certified as a tax credit-eligible production 183
shall engage, at the company's expense, an independent certified 184
public accountant to examine the company's production expenditures 185
to identify the expenditures that qualify as eligible production 186
expenditures. The certified public accountant shall issue a report 187
to the company and to the director of development certifying the 188
company's eligible production expenditures and any other 189
information required by the director. Upon receiving and examining 190
the report, the director may disallow any expenditure the director 191
determines is not an eligible production expense. If the director 192
disallows an expenditure, the director, not later than thirty days 193
after receiving the report, shall issue a written notice to the 194
motion picture production company stating that the expenditure is 195
disallowed, the reason for the disallowance, and the manner in 196
which an appeal of the disallowance may be made. If the director 197
does not issue the notice within the prescribed time, the eligible 198
production expenditures certified by the certified public 199
accountant's report are conclusively determined to be the eligible 200
production expenditures on the basis of which base investments are 201
determined and the credit is allowed under section 5747.66 of the 202
Revised Code.203

       The company, not later than thirty days after issuance of the 204
notice, may appeal the disallowance by filing a notice of appeal 205
with the director. If a notice of appeal is properly and timely 206
filed, the director shall schedule a hearing on the appeal. The 207
company shall be given the opportunity to present evidence and 208
testimony at the hearing regarding the disallowed expenditures. 209
The hearing may be continued from time to time as necessary. On 210
the basis of evidence or testimony presented by the company, the 211
director, within thirty days after the conclusion of the hearing, 212
may revise or affirm the initial notice of disallowance of 213
expenditures and issue a final notice to the company stating the 214
revision or affirmation. The director's final notice is not 215
appealable.216

       (I)(1) No credit shall be allowed under section 5747.66 of 217
the Revised Code on the basis of any expenditure unless the 218
expenditure has been certified by a certified public accountant 219
under division (H) of this section and has not been disallowed by 220
the director of development under that division.221

       (2) A credit shall not be disallowed under section 5747.66 of 222
the Revised Code if, after the director of development issues the 223
final notice under division (H) of this section, it is discovered 224
that the credit is claimed on the basis of expenditures that do 225
not qualify as eligible production expenditures but that were 226
certified as eligible production expenditures by the certified 227
public accountant and not disallowed by the director.228

       (J) This state reserves the right to refuse the use of this 229
state's name in the credits of any tax credit-eligible motion 230
picture production.231

       (K) The director of development shall adopt rules for the 232
administration of this section, including rules governing the 233
criteria for determining whether a motion picture production is a 234
tax credit eligible production, which criteria shall be developed 235
by the director in consultation with the tax commissioner; 236
expenditures that qualify as eligible production expenditures; the 237
form and manner of certifications by transfer agents; 238
indemnification requirements under division (B) of this section; 239
and the appeal procedure under division (H) of this section. The 240
rules shall be adopted under Chapter 119. of the Revised Code.241

       Sec. 5747.66.  Any term used in this section has the same 242
meaning as in section 122.85 of the Revised Code.243

       A nonrefundable credit is allowed against the tax imposed by 244
section 5747.02 of the Revised Code for any individual who, on the 245
last day of the individual's taxable year, is the certificate 246
owner of a tax credit certificate issued under section 122.85 of 247
the Revised Code. If the individual is the qualifying investor, 248
the credit shall be claimed for the individual's taxable year that 249
includes the day the base investment was made. If the individual 250
is not the qualifying investor, the credit shall be claimed for 251
the individual's taxable year that includes the last day of the 252
qualifying investor's taxable year in which the qualifying 253
investor's base investment was made. The amount of the credit 254
shall equal the credit amount certified by the transfer agent 255
under division (G) of section 122.85 of the Revised Code. The 256
credit shall be claimed in the order required under section 257
5747.98 of the Revised Code. If the credit amount exceeds the tax 258
otherwise due under section 5747.02 of the Revised Code after 259
deducting all other credits in that order, the excess may be 260
carried forward for not more than ten taxable years following the 261
taxable year in which the credit is first claimed, and the amount 262
claimed in any year shall be deducted from the balance carried 263
forward to an ensuing year.264

       Sec. 5747.98.  (A) To provide a uniform procedure for265
calculating the amount of tax due under section 5747.02 of the266
Revised Code, a taxpayer shall claim any credits to which the267
taxpayer is entitled in the following order:268

       (1) The retirement income credit under division (B) of269
section 5747.055 of the Revised Code;270

       (2) The senior citizen credit under division (C) of section271
5747.05 of the Revised Code;272

       (3) The lump sum distribution credit under division (D) of273
section 5747.05 of the Revised Code;274

       (4) The dependent care credit under section 5747.054 of the275
Revised Code;276

       (5) The lump sum retirement income credit under division (C)277
of section 5747.055 of the Revised Code;278

       (6) The lump sum retirement income credit under division (D)279
of section 5747.055 of the Revised Code;280

       (7) The lump sum retirement income credit under division (E)281
of section 5747.055 of the Revised Code;282

       (8) The low-income credit under section 5747.056 of the 283
Revised Code;284

       (9) The credit for displaced workers who pay for job training 285
under section 5747.27 of the Revised Code;286

       (10) The campaign contribution credit under section 5747.29287
of the Revised Code;288

       (11) The twenty-dollar personal exemption credit under289
section 5747.022 of the Revised Code;290

       (12) The joint filing credit under division (G) of section291
5747.05 of the Revised Code;292

       (13) The nonresident credit under division (A) of section293
5747.05 of the Revised Code;294

       (14) The credit for a resident's out-of-state income under295
division (B) of section 5747.05 of the Revised Code;296

       (15) The credit for employers that enter into agreements with 297
child day-care centers under section 5747.34 of the Revised Code;298

       (16) The credit for employers that reimburse employee child 299
care expenses under section 5747.36 of the Revised Code;300

       (17) The credit for adoption of a minor child under section301
5747.37 of the Revised Code;302

       (18) The credit for purchases of lights and reflectors under303
section 5747.38 of the Revised Code;304

       (19) The job retention credit under division (B) of section305
5747.058 of the Revised Code;306

       (20) The credit for purchases of new manufacturing machinery307
and equipment under section 5747.26 or section 5747.261 of the308
Revised Code;309

       (21) The second credit for purchases of new manufacturing310
machinery and equipment and the credit for using Ohio coal under311
section 5747.31 of the Revised Code;312

       (22) The job training credit under section 5747.39 of the313
Revised Code;314

       (23) The enterprise zone credit under section 5709.66 of the315
Revised Code;316

       (24) The credit for the eligible costs associated with a317
voluntary action under section 5747.32 of the Revised Code;318

       (25) The credit for employers that establish on-site child319
day-care centers under section 5747.35 of the Revised Code;320

       (26) The ethanol plant investment credit under section321
5747.75 of the Revised Code;322

       (27) The credit for purchases of qualifying grape production323
property under section 5747.28 of the Revised Code;324

       (28) The export sales credit under section 5747.057 of the325
Revised Code;326

       (29) The credit for research and development and technology327
transfer investors under section 5747.33 of the Revised Code;328

       (30) The enterprise zone credits under section 5709.65 of the329
Revised Code;330

       (31) The credit for investment in a motion picture production 331
under section 5747.66 of the Revised Code;332

       (32) The research and development credit under section 333
5747.331 of the Revised Code;334

       (32)(33) The refundable jobs creation credit under division335
(A) of section 5747.058 of the Revised Code;336

       (33)(34) The refundable credit for taxes paid by a qualifying337
entity granted under section 5747.059 of the Revised Code;338

       (34)(35) The refundable credits for taxes paid by a339
qualifying pass-through entity granted under division (J) of340
section 5747.08 of the Revised Code;341

       (35)(36) The refundable credit for tax withheld under342
division (B)(1) of section 5747.062 of the Revised Code;343

       (36)(37) The refundable credit under section 5747.80 of the 344
Revised Code for losses on loans made to the Ohio venture capital 345
program under sections 150.01 to 150.10 of the Revised Code.346

       (B) For any credit, except the refundable credits enumerated347
in divisions (A)(32) to (36) of this section and the credit 348
granted under division (I) of section 5747.08 of the Revised Code, 349
the amount of the credit for a taxable year shall not exceed the 350
tax due after allowing for any other credit that precedes it in 351
the order required under this section. Any excess amount of a 352
particular credit may be carried forward if authorized under the 353
section creating that credit. Nothing in this chapter shall be 354
construed to allow a taxpayer to claim, directly or indirectly, a355
credit more than once for a taxable year.356

       Section 2.  That existing section 5747.98 of the Revised Code 357
is hereby repealed.358

       Section 3. (A) In adopting the rules required under division 359
(K) of section 122.85 of the Revised Code, as enacted by this act, 360
the Director of Development shall file the notice and text of the 361
proposed rules as required by division (B) of section 119.03 of 362
the Revised Code not later than two hundred five days after the 363
effective date of this act.364

       (B) Not later than eighty days after the effective date of 365
this act, the Director of Development shall adopt initial rules to 366
effect the same purposes of the rules required under division (K) 367
of section 122.85 of the Revised Code, as enacted by this act. The 368
initial rules shall be adopted pursuant to section 111.15 of the 369
Revised Code, but division (D) of that section does not apply to 370
the adoption of the initial rules. The initial rules shall be 371
effective until the final rules adopted pursuant to division (A) 372
of this section and Chapter 119. of the Revised Code take effect.373