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Sub. H. B. No. 196 As Passed by the HouseAs Passed by the House
127th General Assembly | Regular Session | 2007-2008 |
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Cosponsors:
Representatives Combs, Collier, Stebelton, Gibbs, Hagan, J., Schindel, Mecklenborg, Dolan, Aslanides, Bacon, Batchelder, Coley, Evans, Grady, Huffman, Hughes, Schneider, Uecker, Webster
A BILL
To amend section 5747.98 and to enact sections 122.85
and 5747.66 of the Revised Code to authorize
income tax credits for investments in motion
pictures produced in Ohio.
BE IT ENACTED BY THE GENERAL ASSEMBLY OF THE STATE OF OHIO:
Section 1. That section 5747.98 be amended and sections
122.85 and 5747.66 of the Revised Code be enacted to read as
follows:
Sec. 122.85. (A) As used in this section and in section
5747.66 of the Revised Code:
(1) "Allocated share" means the share of a qualifying
investor's credit amount allocated as described in division (E) of
this section.
(2) "Base investment" means the amount of money invested by a
qualifying investor in a motion picture production company
multiplied by the percentage that anticipated eligible production
expenditures are of the total production budget that
is expended,
as determined
under division (H) of this section. If the amount
invested is three hundred thousand dollars or less, the base
investment equals zero.
(3) "Certificate owner" means a qualifying investor to which
a tax credit certificate is issued or any other person to which a
credit amount is allocated or transferred under this section.
(4) "Company" means a corporation, partnership, limited
liability company, or other form of business association.
(5) "Eligible production expenditures" means expenditures
made in or after 2009 for goods or services consumed in this
state, by a motion picture production
company directly
for the
production of a tax credit-eligible
production. "Eligible
production expenditures" includes, but is
not limited to,
expenditures for resident and nonresident cast and crew wages and
fringe
benefits, accommodations, travel, costs of set
construction and
operations, editing and related services,
photography, sound
synchronization, lighting, wardrobe, makeup
and accessories, film
processing, transfer, sound mixing, special
and visual effects,
music, location fees, the purchase or rental
of facilities and
equipment, and out-of-state goods purchased or
leased and
ultimately consumed in full or on a pro rata basis in
this state.
(6) "Qualifying investor" means an individual or a
partnership or other pass-through entity, as defined in section
5733.04 of the Revised Code, that invests money in a tax
credit-eligible production.
(7) "Motion picture" means entertainment content created in
whole or in part within this state, including feature-length
films; documentaries; long-form, specials, miniseries, series, and
interstitial television programming; sound recordings, videos, and
music videos; interactive television; interactive games;
videogames; commercials; infomercials; any format of digital
media, including an interactive web site, created for distribution
or exhibition to the general public; and any trailer, pilot, video
teaser, or demo created primarily to stimulate the sale,
marketing, promotion, or exploitation of future investment in
either a product or a motion picture by any means and media in any
digital media format, film or videotape, provided the motion
picture qualifies as a motion picture. "Motion picture" does not
include any television program created primarily as news, weather,
or financial market reports, a production featuring current events
or sporting events, an awards show or other gala event, a
production whose sole purpose is fundraising, a long-form
production that primarily markets a product or service, a
production used for corporate training or in-house corporate
advertising or other similar productions, any production for
purposes of political advocacy, or any production for
which
records are required to be maintained under 18 U.S.C. 2257
with
respect to sexually explicit content.
(8) "Motion picture production company" means a company
engaged in the business of producing motion pictures, but does not
include any company owned, affiliated, or controlled, in whole or
in part, by any company or person that is in default on a loan
made by the state or a loan guaranteed by the state.
(9) "Tax credit-eligible production" means a motion picture
production, investment in which qualifies for tax credits under
section 5747.66 of the Revised Code as certified by the director
of development under division (B) of this section.
(10) "Transfer agent" means a motion picture production
company or another person designated by such a company under
division (G) of this section.
(B) For the purpose of encouraging the development of a
strong capital base for motion picture productions in this state,
the director of development, on or after January 1, 2009, but
before January 1, 2014, may certify a motion picture produced
by
a motion picture production company as a
tax credit-eligible
production. In the case of a television
series, the director may
certify the production of each episode of
the series as a
separate tax credit-eligible production. If the
director
determines that the production of two or more commercials
or
videos are related parts of a distinct advertising,
promotional,
informational, or entertainment series or
undertaking, the
director may certify the productions as a single
tax
credit-eligible production for the purpose of computing the
credit amounts under division (D) of this section.
The director of development shall not certify a motion
picture production as a tax credit-eligible production unless the
motion picture production company and a financially responsible
affiliate of the company formally agree to reimburse this state
for the amount of tax credits allowed and claimed under section
5747.66 of the Revised Code on the basis of expenditures that are
certified under division (H) of this section but thereafter are
determined not to qualify as eligible production expenditures. The
reimbursement shall be in a form and amount acceptable to the
director of development. For the purposes of this division, a
financially responsible affiliate of a motion picture production
company is a person related to the motion picture production
company by direct or indirect ownership or control of a majority
of the capital stock or other equity interests and that the
director of development determines to be financially capable of
reimbursing this state as required by this division.
(C) A motion picture production company shall apply for
certification of
a motion picture as a tax credit-eligible
production on a form and
in the manner prescribed by the
director. Every application shall
include, at a minimum, all of
the following information:
(1) The name, address, and telephone number of the motion
picture
production company;
(2) The name and telephone number of the company's contact
person;
(3) A list of the scheduled first preproduction date through
the scheduled last
production date in Ohio;
(4) The total production budget of the motion picture;
(5) The amount expended in this state by the company directly
for the production and the percentage that amount is of the total
production budget of the motion picture;
(6) The total percentage of principal photography of the
motion picture being shot in
Ohio;
(7) The level of employment of cast and crew who reside in
Ohio;
(8) A synopsis of the script;
(9) A creative elements list that includes the names of the
principal cast and crew, and the producer and director.
(D) Upon application by a qualifying investor, the director
of development shall determine the qualifying investor's base
investment, and shall issue a tax credit certificate to the
qualifying investor. The director shall prescribe the form and
manner of the application; the information or documentation
required to be submitted with the application; and the form and
manner of issuing the certificate. The director shall assign a
unique identifying number to each tax credit certificate and shall
record the certificate in a register devised and maintained by the
director for that purpose. The certificate shall state the amount
of the qualifying investor's base investment and the total amount
of the credit allowed, which shall equal twenty-five per cent of
the qualifying investor's base investment. Not more than one
hundred million dollars in tax credit certificates may be issued
per year, and not more than twenty-five million dollars in tax
credit certificates may be issued per tax credit-eligible
production.
The credit amount shall be determined under this division on
the basis of the base investment and on the basis of the eligible
production expenditures as finally determined under division (H)
of this section. Once the eligible production expenditures are
finally determined under that division, the credit amount is not
subject to adjustment unless the base investment amount is
adjusted or unless an error was committed in the computation of
the credit amount.
(E) If a qualifying investor is a pass-through entity as
defined in section 5733.04 of the Revised Code, the pass-through
entity may allocate the credit amount among persons with an equity
interest in the entity in any proportion or manner provided in the
partnership agreement or other governing instrument of the entity,
notwithstanding any application of the principles of section 704
of the Internal Revenue Code. Upon allocation, the persons to
which the credit is allocated become the certificate owners of
their respective allocated shares of the credit. The pass-through
entity shall certify to the transfer agent the allocated share
allocated to each such person and provide such information as is
necessary to allow the transfer agent to provide the statements
and certifications required under division (G) of this section.
(F) Any certificate owner may transfer to any other person
all or a portion of the credit amount owned by the certificate
owner. Upon transfer, the transferee becomes the certificate owner
of the credit amount transferred. The transferor shall notify the
transfer agent of each transfer made by the transferor in
accordance with rules prescribed by the director of development.
The rules shall require the transferor to provide to the transfer
agent the identity of the transferee and the unique identifying
number assigned to the tax credit certificate that corresponds
with the credit amount transferred.
(G) Each motion picture production company that has a motion
picture production certified as a tax credit-eligible production
shall designate itself or another person as the transfer agent for
the purpose of providing the statements and certifications
required under this division. Upon making the designation, the
motion picture production company shall provide notice of the
designation to each certificate owner of a certificate issued with
respect to investments made in the company's motion picture
production. Before claiming a credit under section 5747.66 of the
Revised Code, a certificate owner shall request from the transfer
agent a statement certifying the certificate owner's share of the
credit amount, and the transfer agent shall provide the statement
to the certificate owner. The statement shall be in a form
prescribed by the director of development. The transfer agent also
shall provide a statement to the tax commissioner showing the
identity of the certificate owner and the certificate owner's
share of the credit amount. The statement shall be in a form
prescribed by the tax commissioner. A tax credit may not be
claimed by a certificate owner unless the transfer agent issues
the statement to the certificate owner.
(H) Each motion picture production company that has a motion
picture production certified as a tax credit-eligible production
shall engage, at the company's expense, an independent certified
public accountant to examine the company's production expenditures
to identify the expenditures that qualify as eligible production
expenditures. The certified public accountant shall issue a report
to the company and to the director of development certifying the
company's eligible production expenditures and any other
information required by the director. Upon receiving and examining
the report, the director may disallow any expenditure the director
determines is not an eligible production expense. If the director
disallows an expenditure, the director, not later than thirty days
after receiving the report, shall issue a written notice to the
motion picture production company stating that the expenditure is
disallowed, the reason for the disallowance, and the manner in
which an appeal of the disallowance may be made. If the director
does not issue the notice within the prescribed time, the eligible
production expenditures certified by the certified public
accountant's report are conclusively determined to be the eligible
production expenditures on the basis of which base investments are
determined and the credit is allowed under section 5747.66 of the
Revised Code.
The company, not later than thirty days after issuance of the
notice, may appeal the disallowance by filing a notice of appeal
with the director. If a notice of appeal is properly and timely
filed, the director shall schedule a hearing on the appeal. The
company shall be given the opportunity to present evidence and
testimony at the hearing regarding the disallowed expenditures.
The hearing may be continued from time to time as necessary. On
the basis of evidence or testimony presented by the company, the
director, within thirty days after the conclusion of the hearing,
may revise or affirm the initial notice of disallowance of
expenditures and issue a final notice to the company stating the
revision or affirmation. The director's final notice is not
appealable.
(I)(1) No credit shall be allowed under section 5747.66 of
the Revised Code on the basis of any expenditure unless the
expenditure has been certified by a certified public accountant
under division (H) of this section and has not been disallowed by
the director of development under that division.
(2) A credit shall not be disallowed under section 5747.66 of
the Revised Code if, after the director of development issues the
final notice under division (H) of this section, it is discovered
that the credit is claimed on the basis of expenditures that do
not qualify as eligible production expenditures but that were
certified as eligible production expenditures by the certified
public accountant and not disallowed by the director.
(J) This state reserves the right to refuse the use of this
state's name in the credits of any tax credit-eligible motion
picture production.
(K) The director of development shall adopt rules for the
administration of this section, including rules governing the
criteria for determining whether a motion picture production is a
tax credit eligible production, which criteria shall be developed
by the director in consultation with the tax commissioner;
expenditures that qualify as eligible production expenditures; the
form and manner of certifications by transfer agents;
reimbursement requirements under division (B) of this section;
and the appeal procedure under division (H) of this section. The
rules shall be adopted under Chapter 119. of the Revised Code.
Sec. 5747.66. Any term used in this section has the same
meaning as in section 122.85 of the Revised Code.
A nonrefundable credit is allowed against the tax imposed by
section 5747.02 of the Revised Code for any individual who, on the
last day of the individual's taxable year, is the certificate
owner of a tax credit certificate issued under section 122.85 of
the Revised Code. If the individual is the qualifying investor,
the credit shall be claimed for the individual's taxable year that
includes the day the base investment was made. If the individual
is not the qualifying investor, the credit shall be claimed for
the individual's taxable year that includes the last day of the
qualifying investor's taxable year in which the qualifying
investor's base investment was made. The amount of the credit
shall equal the credit amount certified by the transfer agent
under division (G) of section 122.85 of the Revised Code. The
credit shall be claimed in the order required under section
5747.98 of the Revised Code. If the credit amount exceeds the tax
otherwise due under section 5747.02 of the Revised Code after
deducting all other credits in that order, the excess may be
carried forward for not more than ten taxable years following the
taxable year in which the credit is first claimed, and the amount
claimed in any year shall be deducted from the balance carried
forward to an ensuing year.
Sec. 5747.98. (A) To provide a uniform procedure for
calculating the amount of tax due under section 5747.02 of the
Revised Code, a taxpayer shall claim any credits to which the
taxpayer is
entitled in the following order:
(1) The retirement income credit under division (B) of
section 5747.055 of the Revised Code;
(2) The senior citizen credit under division (C) of
section
5747.05 of the Revised Code;
(3) The lump sum distribution credit under division (D) of
section 5747.05 of the Revised Code;
(4) The dependent care credit under section 5747.054 of
the
Revised Code;
(5) The lump sum retirement income credit under division
(C)
of section 5747.055 of the Revised Code;
(6) The lump sum retirement income credit under division
(D)
of section 5747.055 of the Revised Code;
(7) The lump sum retirement income credit under division
(E)
of section 5747.055 of the Revised Code;
(8) The low-income credit under section 5747.056 of the
Revised Code;
(9) The credit for displaced workers who pay for job
training
under section 5747.27 of the Revised Code;
(10) The campaign contribution credit under section
5747.29
of
the Revised Code;
(11) The twenty-dollar personal exemption credit under
section 5747.022 of the Revised Code;
(12) The joint filing credit under division (G) of
section
5747.05 of the Revised Code;
(13) The nonresident credit under division (A) of
section
5747.05 of the Revised Code;
(14) The credit for a resident's out-of-state income
under
division (B) of section 5747.05 of the Revised Code;
(15) The credit for employers that enter
into agreements
with
child day-care centers under section 5747.34 of the
Revised
Code;
(16) The credit for employers that reimburse employee
child
care expenses under section 5747.36 of the Revised Code;
(17) The credit for adoption of a minor child under section
5747.37 of the Revised Code;
(18) The credit for purchases of lights and reflectors under
section
5747.38 of the Revised Code;
(19)
The job retention credit under division (B) of section
5747.058 of the Revised Code;
(20) The credit for
selling alternative fuel under section
5747.77 of the
Revised
Code;
(21) The second credit for purchases of new
manufacturing
machinery and
equipment and the credit for using
Ohio coal under
section 5747.31 of the
Revised Code;
(22) The job training credit under section 5747.39 of
the
Revised Code;
(23) The enterprise zone credit under section 5709.66 of
the
Revised Code;
(24) The credit for the eligible costs associated with a
voluntary action
under section 5747.32 of the Revised Code;
(25) The credit
for employers that establish on-site
child
day-care centers under section
5747.35 of the Revised Code;
(26)
The ethanol plant investment credit under section
5747.75 of the Revised Code;
(27) The credit for purchases of qualifying grape
production
property under section 5747.28 of the Revised Code;
(28) The export sales credit under section 5747.057 of
the
Revised Code;
(29) The credit for research and development and
technology
transfer investors under section 5747.33 of the Revised
Code;
(30)
The enterprise zone credits under
section 5709.65
of
the
Revised Code;
(31) The credit for investment in a motion picture production
under section 5747.66 of the Revised Code;
(32) The research and development credit under section
5747.331 of the Revised Code;
(32)(33) The refundable credit for rehabilitating a historic
building under section 5747.76 of the Revised Code;
(33)(34) The refundable jobs creation credit
under
division
(A)
of section
5747.058 of the Revised Code;
(34)(35) The refundable credit for taxes paid by a
qualifying
entity granted under section 5747.059 of the Revised
Code;
(35)(36) The refundable credits for taxes paid by a
qualifying
pass-through
entity granted under division (J) of
section 5747.08
of the Revised Code;
(36)(37) The refundable credit for tax withheld under
division
(B)(1) of section 5747.062 of the Revised Code;
(37)(38) The refundable credit under section 5747.80 of the
Revised Code for losses on loans made to the Ohio venture
capital
program under sections 150.01 to 150.10 of the Revised
Code.
(B) For any credit, except the refundable credits enumerated
in
divisions (A)(32) to (37) of
this
section
and
the
credit
granted
under division
(I) of
section
5747.08 of
the
Revised
Code, the
amount of the credit
for
a
taxable year
shall
not
exceed the tax
due after allowing for any
other credit
that
precedes it in the
order required under this
section. Any
excess
amount of a
particular credit may be carried
forward if
authorized
under the
section creating that credit.
Nothing in
this
chapter
shall be
construed to allow a taxpayer to
claim,
directly
or
indirectly, a
credit more than once for a
taxable
year.
Section 2. That existing section 5747.98 of the Revised Code
is hereby repealed.
Section 3. (A) In adopting the rules required under division
(K) of section 122.85 of the Revised Code, as enacted by this act,
the Director of Development shall file the notice and text of the
proposed rules as required by division (B) of section 119.03 of
the Revised Code not later than two hundred five days after the
effective date of this act.
(B) Not later than eighty days after the effective date of
this act, the Director of Development shall adopt initial rules to
effect the same purposes of the rules required under division (K)
of section 122.85 of the Revised Code, as enacted by this act. The
initial rules shall be adopted pursuant to section 111.15 of the
Revised Code, but division (D) of that section does not apply to
the adoption of the initial rules. The initial rules shall be
effective until the final rules adopted pursuant to division (A)
of this section and Chapter 119. of the Revised Code take effect.
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