H. B. No. 6 As Introduced

As Introduced

128th General Assembly

Regular Session

2009-2010

H. B. No. 6

Representatives Patten, Schneider

Cosponsors: Representatives DeGeeter, Garrison, Harris, Heard, Letson, Luckie, Murray, Newcomb, Szollosi, Yuko

A BILL

To amend sections 5733.98 and 5747.98 and to enact

sections 122.85, 5733.58, and 5747.66 of the

Revised Code to authorize refundable,

nontransferable credits against the corporation

franchise tax or income tax for production of

motion pictures in Ohio.

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

Section 1. That sections 5733.98 and 5747.98 be amended and	7
sections 122.85, 5733.58, and 5747.66 of the Revised Code be	8
enacted to read as follows:	9

Sec. 122.85. (A) As used in this section and in sections	10
5733.58 and 5747.66 of the Revised Code:	11

(1) "Tax credit-eligible production" means a motion picture	12
production certified by the director of development under division	13
(B) of this section as qualifying the motion picture company for a	14
tax credit under section 5733.58 or 5747.66 of the Revised Code.	15

(2) "Certificate owner" means a motion picture company to	16
which a tax credit certificate is issued.	17

(3) "Motion picture company" means an individual,	18
corporation, partnership, limited liability company, or other form	19
of business association producing a motion picture.	20

(4) "Eligible production expenditures" means expenditures	21
made after the effective date of the enactment of this section by	22
..... of the 128th general assembly for goods or services	23
purchased and consumed in this state by a motion picture company	24
directly for the production of a tax credit-eligible production.	25

"Eligible production expenditures" includes, but is not	26
limited to, expenditures for resident and nonresident cast and	27
crew wages, accommodations, costs of set construction and	28
operations, editing and related services, photography, sound	29
synchronization, lighting, wardrobe, makeup and accessories, film	30
processing, transfer, sound mixing, special and visual effects,	31
music, location fees, and the purchase or rental of facilities and	32
equipment. With respect to payroll for nonresident cast and crew,	33
"eligible production expenditures" means one hundred per cent of	34
the payroll expenditure for tax credit-eligible productions	35
certified before July 1, 2010, and seventy-five per cent of the	36
payroll expenditure for tax credit-eligible productions certified	37
on or after July 1, 2010.	38

(5) "Motion picture" means content created in whole or in	39
part within this state for distribution or exhibition to the	40
general public, including, but not limited to, feature-length	41
films; documentaries; long-form, specials, miniseries, series, and	42
interstitial television programming; and interactive web sites.	43
"Motion picture" does not include any television program created	44
primarily as news, weather, or financial market reports, a	45
production featuring sporting events, an awards show or other gala	46
event, a production whose sole purpose is fundraising, a long-form	47
production that primarily markets a product or service or in-house	48
corporate advertising or other similar productions, or any	49
production for which records are required to be maintained under	50
18 U.S.C. 2257 with respect to sexually explicit content.	51

(B) For the purpose of encouraging and developing a strong	52
film industry in this state, on or after July 1, 2009, the	53
director of development may certify a motion picture produced by	54
a motion picture company as a tax credit-eligible production. In	55
the case of a television series, the director may certify the	56
production of each episode of the series as a separate tax	57
credit-eligible production. A motion picture company shall apply	58
for certification of a motion picture as a tax credit-eligible	59
production on a form and in the manner prescribed by the	60
director. Each application shall include the following	61
information:	62

(1) The name and telephone number of the motion picture	63
production company;	64

(2) The name and telephone number of the company's contact	65
person;	66

(3) A list of the first preproduction date through the last	67
production date in Ohio;	68

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

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

(6) The total budgeted eligible production expenditures and	71
the percentage that amount is of the total production budget of	72
the motion picture;	73

(7) The total percentage of the motion picture being shot in	74
Ohio;	75

(8) The level of employment of cast and crew who reside in	76
Ohio;	77

(9) A synopsis of the script;

(10) The shooting script;

(11) A creative elements list that includes the names of the	80
principal cast and crew and the producer and director;	81

(12) The motion picture's distribution plan, including	82
domestic and international distribution, and sales estimates for	83
the picture;	84

(13) Documentation of financial ability to undertake and	85
complete the motion picture;	86

(14) Estimated value of the tax credit based upon total	87
budgeted eligible production expenditures;	88

(15) Any other information considered necessary by the	89
director.	90

Within ninety days after certification of a motion picture as	91
a tax credit-eligible production, and any time thereafter upon the	92
director's request, the motion picture company shall present to	93
the director of development sufficient evidence of reviewable	94
progress. If the motion picture company fails to present	95
sufficient evidence, the director of development may rescind the	96
certification. Upon rescission, the director shall notify the	97
applicant that the certification has been rescinded. Nothing in	98
this section prohibits an applicant whose tax credit-eligible	99
production certification has been rescinded from submitting a	100
subsequent application for certification.	101

(C)(1) A motion picture company whose motion picture has been	102
certified as a tax credit-eligible production may apply to the	103
director of development for a refundable credit against the tax	104
imposed by section 5733.06 or 5747.02 of the Revised Code. The	105
director in consultation with the tax commissioner shall prescribe	106
the form and manner of the application and the information or	107
documentation required to be submitted with the application.	108

The credit is determined as follows:

109

(a) If the total budgeted eligible production expenditures	110
stated in the application submitted under division (B) of this	111
section or the actual eligible production expenditures as finally	112
determined under division (D) of this section, whichever is least,	113
is less than or equal to three hundred thousand dollars, no	114
credit is allowed;	115

(b) If the total budgeted eligible production expenditures	116
stated in the application submitted under division (B) of this	117
section or the actual eligible production expenditures as finally	118
determined under division (D) of this section, whichever is least,	119
is greater than three hundred thousand dollars, the credit equals	120
twenty-five per cent of the least of those eligible production	121
expenditure amounts, subject to the limitation in division (C)(4)	122
of this section.	123

(2) Except as provided in division (C)(4) of this section, if	124
the director of development approves a motion picture company's	125
application for a credit, the director shall issue a tax credit	126
certificate to the company. The director in consultation with the	127
tax commissioner shall prescribe the form and manner of issuing	128
certificates. The director shall assign a unique identifying	129
number to each tax credit certificate and shall record the	130
certificate in a register devised and maintained by the director	131
for that purpose. The certificate shall state the amount of the	132
eligible production expenditures on which the credit is based and	133
the amount of the credit. Upon the issuance of a certificate, the	134
director shall certify to the tax commissioner the name of the	135
applicant, the amount of eligible production expenditures shown on	136
the certificate, and any other information required by the rules	137
adopted to administer this section.	138

(3) The amount of eligible production expenditures for which	139
a tax credit may be claimed is subject to inspection and	140
examination by the tax commissioner or employees of the	141
commissioner under section 5703.19 of the Revised Code and any	142
other applicable law. Once the eligible production expenditures	143
are finally determined under section 5703.19 of the Revised Code	144
and division (D) of this section, the credit amount is not subject	145
to adjustment unless the director determines an error was	146
committed in the computation of the credit amount.	147

(4) No tax credit certificate may be issued before the	148
completion of the tax credit-eligible production. Not more than	149
twenty million dollars of tax credit may be allowed per fiscal	150
biennium, and not more than five million dollars of tax credit may	151
be allowed per tax credit-eligible production.	152

(D) A motion picture company whose motion picture has been	153
certified as a tax credit-eligible production shall engage, at the	154
company's expense, an independent certified public accountant to	155
examine the company's production expenditures to identify the	156
expenditures that qualify as eligible production expenditures. The	157
certified public accountant shall issue a report to the company	158
and to the director of development certifying the company's	159
eligible production expenditures and any other information	160
required by the director. Upon receiving and examining the report,	161
the director may disallow any expenditure the director determines	162
is not an eligible production expenditure. If the director	163
disallows an expenditure, the director shall issue a written	164
notice to the motion picture production company stating that the	165
expenditure is disallowed and the reason for the disallowance.	166
Upon examination of the report and disallowance of any	167
expenditures, the director shall determine finally the lesser of	168
the total budgeted eligible production expenditures stated in the	169
application submitted under division (B) of this section or the	170
actual eligible production expenditures for the purpose of	171
computing the amount of the credit.	172

(E) No credit shall be allowed under section 5733.58 or	173
5747.66 of the Revised Code unless the director has reviewed the	174
report and made the determination prescribed by division (D) of	175
this section.	176

(F) This state reserves the right to refuse the use of this	177
state's name in the credits of any tax credit-eligible motion	178
picture production.	179

(G)(1) The director of development in consultation with the	180
tax commissioner may adopt rules for the administration of this	181
section, including rules setting forth and governing the criteria	182
for determining whether a motion picture production is a tax	183
credit-eligible production; activities that constitute the	184
production of a motion picture; reporting sufficient evidence of	185
reviewable progress; expenditures that qualify as eligible	186
production expenditures; a competitive process for approving	187
credits; and consideration of geographic distribution of credits.	188
The rules may be adopted under Chapter 119. of the Revised Code.	189

(2) The director may require a reasonable application fee to	190
cover administrative costs of the tax credit program. The fees	191
collected shall be credited to the motion picture tax credit	192
program operating fund, which is hereby created in the state	193
treasury. The motion picture tax credit program operating fund	194
shall consist of all grants, gifts, fees, and contributions made	195
to the director of development for marketing and promotion of the	196
motion picture industry within this state. The director of	197
development shall use money in the fund to pay expenses related to	198
the administration of the Ohio film office and the credit	199
authorized by this section and sections 5733.58 and 5747.66 of the	200
Revised Code.	201

Sec. 5733.58. (A) Any term used in this section has the same	202
meaning as in section 122.85 of the Revised Code.	203

(B) There is allowed a credit against the tax imposed by	204
section 5733.06 of the Revised Code for any corporation that is	205
the certificate owner of a tax credit certificate issued under	206
section 122.85 of the Revised Code. The credit shall be claimed	207
for the taxable year in which the certificate is issued by the	208
director of development. The credit amount equals the amount	209
stated in the certificate. The credit shall be claimed in the	210
order required under section 5733.98 of the Revised Code. If the	211
credit amount exceeds the tax otherwise due under section 5733.06	212
of the Revised Code after deducting all other credits in that	213
order, the excess shall be refunded.	214

(C) If, pursuant to division (G) of section 5733.01 of the	215
Revised Code, the corporation is not required to pay tax under	216
this chapter, the corporation may file an annual report under	217
section 5733.02 of the Revised Code and claim the credit	218
authorized by this section. Nothing in this section allows a	219
corporation to claim more than one credit per tax credit-eligible	220
production.	221

Sec. 5733.98. (A) To provide a uniform procedure for	222
calculating the amount of tax imposed by section 5733.06 of the	223
Revised Code that is due under this chapter, a taxpayer shall	224
claim any credits to which it is entitled in the following order,	225
except as otherwise provided in section 5733.058 of the Revised	226
Code:	227

(1) For tax year 2005, the credit for taxes paid by a	228
qualifying pass-through entity allowed under section 5733.0611 of	229
the Revised Code;	230

(2) The credit allowed for financial institutions under	231
section 5733.45 of the Revised Code;	232

(3) The credit for qualifying affiliated groups under section	233
5733.068 of the Revised Code;	234

(4) The subsidiary corporation credit under section 5733.067	235
of the Revised Code;	236

(5) The savings and loan assessment credit under section	237
5733.063 of the Revised Code;	238

(6) The credit for recycling and litter prevention donations	239
under section 5733.064 of the Revised Code;	240

(7) The credit for employers that enter into agreements with	241
child day-care centers under section 5733.36 of the Revised Code;	242

(8) The credit for employers that reimburse employee child	243
care expenses under section 5733.38 of the Revised Code;	244

(9) The credit for maintaining railroad active grade crossing	245
warning devices under section 5733.43 of the Revised Code;	246

(10) The credit for purchases of lights and reflectors under	247
section 5733.44 of the Revised Code;	248

(11) The job retention credit under division (B) of section	249
5733.0610 of the Revised Code;	250

(12) The credit for tax years 2008 and 2009 for selling	251
alternative fuel under section 5733.48 of the Revised Code;	252

(13) The second credit for purchases of new manufacturing	253
machinery and equipment under section 5733.33 of the Revised Code;	254

(14) The job training credit under section 5733.42 of the	255
Revised Code;	256

(15) The credit for qualified research expenses under section	257
5733.351 of the Revised Code;	258

(16) The enterprise zone credit under section 5709.66 of the	259
Revised Code;	260

(17) The credit for the eligible costs associated with a	261
voluntary action under section 5733.34 of the Revised Code;	262

(18) The credit for employers that establish on-site child	263
day-care centers under section 5733.37 of the Revised Code;	264

(19) The ethanol plant investment credit under section	265
5733.46 of the Revised Code;	266

(20) The credit for purchases of qualifying grape production	267
property under section 5733.32 of the Revised Code;	268

(21) The export sales credit under section 5733.069 of the	269
Revised Code;	270

(22) The credit for research and development and technology	271
transfer investors under section 5733.35 of the Revised Code;	272

(23) The enterprise zone credits under section 5709.65 of the	273
Revised Code;	274

(24) The credit for using Ohio coal under section 5733.39 of	275
the Revised Code;	276

(25) The credit for small telephone companies under section	277
5733.57 of the Revised Code;	278

(26) The credit for eligible nonrecurring 9-1-1 charges under	279
section 5733.55 of the Revised Code;	280

(27) For tax year 2005, the credit for providing programs to	281
aid the communicatively impaired under division (A) of section	282
5733.56 of the Revised Code;	283

(28) The research and development credit under section	284
5733.352 of the Revised Code;	285

(29) For tax years 2006 and subsequent tax years, the credit	286
for taxes paid by a qualifying pass-through entity allowed under	287
section 5733.0611 of the Revised Code;	288

(30) The refundable credit for rehabilitating a historic	289
building under section 5733.47 of the Revised Code;	290

(31) The refundable jobs creation credit under division (A)	291
of section 5733.0610 of the Revised Code;	292

(32) The refundable credit for tax withheld under division	293
(B)(2) of section 5747.062 of the Revised Code;	294

(33) The refundable credit under section 5733.49 of the	295
Revised Code for losses on loans made to the Ohio venture capital	296
program under sections 150.01 to 150.10 of the Revised Code;	297

(34) For tax years 2006, 2007, and 2008, the refundable	298
credit allowable under division (B) of section 5733.56 of the	299
Revised Code;	300

(35) The refundable motion picture production credit under	301
section 5733.58 of the Revised Code.	302

(B) For any credit except the refundable credits enumerated	303
in ~~divisions (A)(30) to (34) of~~ this section, the amount of the	304
credit for a tax year shall not exceed the tax due after allowing	305
for any other credit that precedes it in the order required under	306
this section. Any excess amount of a particular credit may be	307
carried forward if authorized under the section creating that	308
credit.	309

Sec. 5747.66. (A) Any term used in this section has the same	310
meaning as in section 122.85 of the Revised Code.	311

(B) There is allowed a credit against the tax imposed by	312
section 5747.02 of the Revised Code for any individual who, on the	313
last day of the individual's taxable year, is the certificate	314
owner of a tax credit certificate issued under section 122.85 of	315
the Revised Code. The credit shall be claimed for the taxable year	316
that includes the date the certificate was issued by the director	317
of development. The credit amount equals the amount stated in the	318
certificate. The credit shall be claimed in the order required	319
under section 5747.98 of the Revised Code. If the credit amount	320
exceeds the tax otherwise due under section 5747.02 of the Revised	321
Code after deducting all other credits in that order, the excess	322
shall be refunded.	323

Nothing in this section limits or disallows pass-through	324
treatment of the credit.	325

Sec. 5747.98. (A) To provide a uniform procedure for	326
calculating the amount of tax due under section 5747.02 of the	327
Revised Code, a taxpayer shall claim any credits to which the	328
taxpayer is entitled in the following order:	329

(1) The retirement income credit under division (B) of	330
section 5747.055 of the Revised Code;	331

(2) The senior citizen credit under division (C) of section	332
5747.05 of the Revised Code;	333

(3) The lump sum distribution credit under division (D) of	334
section 5747.05 of the Revised Code;	335

(4) The dependent care credit under section 5747.054 of the	336
Revised Code;	337

(5) The lump sum retirement income credit under division (C)	338
of section 5747.055 of the Revised Code;	339

(6) The lump sum retirement income credit under division (D)	340
of section 5747.055 of the Revised Code;	341

(7) The lump sum retirement income credit under division (E)	342
of section 5747.055 of the Revised Code;	343

(8) The low-income credit under section 5747.056 of the	344
Revised Code;	345

(9) The credit for displaced workers who pay for job training	346
under section 5747.27 of the Revised Code;	347

(10) The campaign contribution credit under section 5747.29	348
of the Revised Code;	349

(11) The twenty-dollar personal exemption credit under	350
section 5747.022 of the Revised Code;	351

(12) The joint filing credit under division (G) of section	352
5747.05 of the Revised Code;	353

(13) The nonresident credit under division (A) of section	354
5747.05 of the Revised Code;	355

(14) The credit for a resident's out-of-state income under	356
division (B) of section 5747.05 of the Revised Code;	357

(15) The credit for employers that enter into agreements with	358
child day-care centers under section 5747.34 of the Revised Code;	359

(16) The credit for employers that reimburse employee child	360
care expenses under section 5747.36 of the Revised Code;	361

(17) The credit for adoption of a minor child under section	362
5747.37 of the Revised Code;	363

(18) The credit for purchases of lights and reflectors under	364
section 5747.38 of the Revised Code;	365

(19) The job retention credit under division (B) of section	366
5747.058 of the Revised Code;	367

(20) The credit for selling alternative fuel under section	368
5747.77 of the Revised Code;	369

(21) The second credit for purchases of new manufacturing	370
machinery and equipment and the credit for using Ohio coal under	371
section 5747.31 of the Revised Code;	372

(22) The job training credit under section 5747.39 of the	373
Revised Code;	374

(23) The enterprise zone credit under section 5709.66 of the	375
Revised Code;	376

(24) The credit for the eligible costs associated with a	377
voluntary action under section 5747.32 of the Revised Code;	378

(25) The credit for employers that establish on-site child	379
day-care centers under section 5747.35 of the Revised Code;	380

(26) The ethanol plant investment credit under section	381
5747.75 of the Revised Code;	382

(27) The credit for purchases of qualifying grape production	383
property under section 5747.28 of the Revised Code;	384

(28) The export sales credit under section 5747.057 of the	385
Revised Code;	386

(29) The credit for research and development and technology	387
transfer investors under section 5747.33 of the Revised Code;	388

(30) The enterprise zone credits under section 5709.65 of the	389
Revised Code;	390

(31) The research and development credit under section	391
5747.331 of the Revised Code;	392

(32) The credit for rehabilitating a historic building under	393
section 5747.76 of the Revised Code;	394

(33) The refundable credit for rehabilitating a historic	395
building under section 5747.76 of the Revised Code;	396

(34) The refundable jobs creation credit under division (A)	397
of section 5747.058 of the Revised Code;	398

(35) The refundable credit for taxes paid by a qualifying	399
entity granted under section 5747.059 of the Revised Code;	400

(36) The refundable credits for taxes paid by a qualifying	401
pass-through entity granted under division (J) of section 5747.08	402
of the Revised Code;	403

(37) The refundable credit for tax withheld under division	404
(B)(1) of section 5747.062 of the Revised Code;	405

(38) The refundable credit under section 5747.80 of the	406
Revised Code for losses on loans made to the Ohio venture capital	407
program under sections 150.01 to 150.10 of the Revised Code;	408

(39) The refundable motion picture production credit under	409
section 5747.66 of the Revised Code.	410

(B) For any credit, except the refundable credits enumerated	411
in ~~divisions (A)(33) to (38) of~~ this section and the credit	412
granted under division (I) of section 5747.08 of the Revised	413
Code, the amount of the credit for a taxable year shall not	414
exceed the tax due after allowing for any other credit that	415
precedes it in the order required under this section. Any excess	416
amount of a particular credit may be carried forward if	417
authorized under the section creating that credit. Nothing in	418
this chapter shall be construed to allow a taxpayer to claim,	419
directly or indirectly, a credit more than once for a taxable	420
year.	421

Section 2. That existing sections 5733.98 and 5747.98 of the	422
Revised Code are hereby repealed.	423