Introduced Version
HOUSE BILL No. 1354
_____
DIGEST OF INTRODUCED BILL
Citations Affected: IC 6-2.5-5-41; IC 6-3.1-31.
Synopsis: Film and audio production tax incentives. Provides that
transactions involving tangible personal property are exempt from sales
tax if the person acquiring the property acquires it for the person's
direct use in the direct production of a motion picture or an audio
production. Provides a state tax credit for certain expenditures made in
Indiana for a motion picture or an audio production. Excludes obscene
motion pictures from the definition of motion picture for purposes of
the sales tax exemption and the tax credit.
Effective: January 1, 2007.
January 12, 2006, read first time and referred to Committee on Ways and Means.
Introduced
Second Regular Session 114th General Assembly (2006)
PRINTING CODE. Amendments: Whenever an existing statute (or a section of the Indiana
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NEW will appear in that style type in the introductory clause of each SECTION that adds
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HOUSE BILL No. 1354
A BILL FOR AN ACT to amend the Indiana Code concerning
taxation.
Be it enacted by the General Assembly of the State of Indiana:
SOURCE: IC 6-2.5-5-41; (06)IN1354.1.1. -->
SECTION 1. IC 6-2.5-5-41 IS ADDED TO THE INDIANA CODE
AS A
NEW SECTION TO READ AS FOLLOWS [EFFECTIVE
JANUARY 1, 2007]:
Sec. 41. (a) As used in this section, "motion
picture or audio production" has the meaning set forth in
IC 6-3.1-31-2.
(b) As used in this section, "new business activity" has the
meaning set forth in IC 6-3.1-31-4.
(c) Except as provided in subsection (d), transactions involving
tangible personal property are exempt from the state gross retail
tax if the person acquiring the property acquires it for the person's
direct use in the:
(1) direct production; or
(2) direct postproduction;
of a motion picture or audio production in Indiana.
(d) A person who acquires tangible personal property for the
person's direct use in the direct production or direct
postproduction of an advertising commercial in Indiana is not
entitled to an exemption under this section unless:
(1) the person is engaged in new business activity; or
(2) the Indiana economic development corporation grants an
exemption to the person based on a finding that the direct
production or direct postproduction of the advertising
commercial will occur in another state if an exemption is not
granted under this section.
(e) For purposes of this section, the following are not considered
to be directly used in the direct production or direct
postproduction of a motion picture or audio production:
(1) Food services.
(2) A vehicle used to transport actors and crew.
(3) Gasoline used in a vehicle used to transport actors and
crew.
(4) Lodging.
SOURCE: IC 6-3.1-31; (06)IN1354.1.2. -->
SECTION 2. IC 6-3.1-31 IS ADDED TO THE INDIANA CODE
AS A
NEW CHAPTER TO READ AS FOLLOWS [EFFECTIVE
JANUARY 1, 2007]:
Chapter 31. Motion Picture and Audio Production Credit
Sec. 1. As used in this chapter, "corporation" refers to the
Indiana economic development corporation established by
IC 5-28-3-1.
Sec. 2. (a) As used in this chapter, "motion picture or audio
production" means:
(1) a feature length film;
(2) a video;
(3) a television pilot or series;
(4) an advertising commercial;
(5) a music video or an audio recording; or
(6) a corporate production;
produced for any combination of theatrical, television, or other
media viewing.
(b) The term includes preproduction, production, and
postproduction work.
(c) The term does not include:
(1) material that is obscene (as described in IC 35-49-2-1); or
(2) television coverage of news or athletic events.
Sec. 3. As used in this chapter, "motion picture or audio
production company" means an entity engaged in the business of
producing motion pictures or audio productions.
Sec. 4. (a) As used in this chapter, "new business activity"
means either of the following:
(1) The initial advertising commercial production for a newly
developed or created product, service, or advertiser.
(2) Advertising commercial production for a product, service,
or advertiser that is produced in Indiana at least two (2) years
since the previous date on which advertising commercial
production for the product, service, or advertiser occurred in
Indiana.
(b) The term does not include the production of advertising for
a product, service, or advertiser that is switched from an Indiana
motion picture or audio production company to another Indiana
motion picture or audio production company.
Sec. 5. As used in this chapter, "pass through entity" means a:
(1) corporation that is exempt from the adjusted gross income
tax under IC 6-3-2-2.8(2);
(2) partnership;
(3) trust;
(4) limited liability company; or
(5) limited liability partnership.
Sec. 6. As used in this chapter, "qualified expenses" means the
amount of a motion picture or audio production company's
expenditures made in Indiana for a motion picture or audio
production.
Sec. 7. As used in this chapter, "state tax liability" means a
taxpayer's total tax liability that is incurred under:
(1) IC 6-3-1 through IC 6-3-7 (the adjusted gross income tax);
(2) IC 27-1-18-2 (the insurance premiums tax); and
(3) IC 6-5.5 (the financial institutions tax);
as computed after the application of the credits that under
IC 6-3.1-1-2 are to be applied before the credit provided by this
chapter.
Sec. 8. (a) Except as provided in section 13 of this chapter, a
motion picture or audio production company that incurs qualified
expenses in a calendar year is entitled to a credit under this
chapter if the qualified expenses:
(1) meet the requirements of subsections (c) and (d);
(2) meet any applicable requirement set forth in subsection
(f), (g), or (h); and
(3) are certified as qualified expenses by the corporation
under section 12 of this chapter.
(b) The amount of a credit allowed under this section is
determined under section 9 of this chapter.
(c) Except as provided in subsection (e), a motion picture or
audio production company's qualified expenses must include:
(1) wages and salaries paid to Indiana residents; and
(2) purchases from Indiana vendors;
that when combined exceed the minimum amounts specified in
subsection (d) as a condition of receiving a credit under this
chapter.
(d) Except as provided in subsection (e), the sum of the qualified
expenses described in subsection (c) must exceed the percentage of
the motion picture or audio production company's total
expenditures set forth in the following table:
CALENDAR YEAR PERCENTAGE
2007 30%
2008 30%
2009 40%
2010 50%
2011 and thereafter 60%
(e) If the corporation finds that the sum of the qualified
expenses described in subsection (c) of a motion picture or audio
production company does not exceed the minimum percentage as
specified in subsection (d) in spite of the good faith efforts of the
motion picture or audio production company to comply with
subsection (d), the corporation may allow a credit under this
chapter in a reduced amount. The percentage used to calculate the
motion picture or audio production company's credit under section
9 of this chapter must be reduced by a full percentage point for
each full percentage point by which the sum of the qualified
expenses described in subsection (c) of the motion picture or audio
production company fell below the minimum percentage
prescribed by subsection (d).
(f) If a motion picture or audio production company's qualified
expenses are incurred in the production of a feature film, the total
amount of the qualified expenses must exceed three hundred
thousand dollars ($300,000) to qualify for a tax credit under this
chapter.
(g) If a motion picture or audio production company's qualified
expenses are incurred in the production of a television series, the
total amount of the qualified expenses must exceed one hundred
thousand dollars ($100,000) to qualify for a tax credit under this
chapter.
(h) If a motion picture or audio production company's qualified
expenses are incurred in the production of an advertising
commercial, the motion picture or audio production company must
be engaged in new business activity to qualify for a tax credit
under this chapter.
Sec. 9. (a) Except as provided in section 8(e) of this chapter, the
total amount of a tax credit that may be claimed under this chapter
in a particular calendar year equals:
(1) the total amount of qualified expenses incurred by the
taxpayer in the calendar year; multiplied by
(2) twenty-five percent (25%).
(b) The credit provided by this chapter may be carried forward
and applied to the taxpayer's state tax liability for nine (9) years
following the unused credit year.
(c) A taxpayer is not entitled to any carryback or refund of any
unused credit.
Sec. 10. (a) Except as provided in subsection (b), a motion
picture or audio production company may not assign any part of
a credit to which the motion picture or audio production company
is entitled under this chapter.
(b) A motion picture or audio production company that incurs
qualified expenses in the production of an advertising commercial
may assign a tax credit allowed under this chapter to either of the
following:
(1) The advertiser for whom the advertising commercial was
produced.
(2) The advertising agency employed by the advertiser for
whom the advertising commercial was produced.
Sec. 11. If a motion picture or audio production company is a
pass through entity that does not have state tax liability against
which the tax credit allowed under this chapter may be applied, a
shareholder or partner of the motion picture or audio production
company is entitled to a tax credit equal to:
(1) the tax credit determined for the motion picture or audio
production company for the calendar year; multiplied by
(2) the percentage of the motion picture or audio production
company's distributive income to which the shareholder or
partner is entitled.
Sec. 12. The corporation shall certify that a motion picture or
audio production company's expenditures are eligible for a tax
credit under this chapter if the corporation determines that the
expenditures were:
(1) made in Indiana; and
(2) directly related to the production of a motion picture or an
audio production.
Sec. 13. (a) The corporation may waive any requirement of
section 8 of this chapter for a motion picture or audio production
company that proposes to incur qualified expenses for the
production of an advertising commercial upon finding the
following:
(1) Evidence that there is at least one (1) other competing
production company outside Indiana that is being considered
for the proposed advertising commercial production.
(2) A disparity, using the best available data, in the projected
costs for the company's production in Indiana compared with
the costs for the competing production company's proposed
production in the competing site.
(3) That the Indiana motion picture or audio production
company will lose the proposed advertising commercial
production to the competing production company unless the
Indiana motion picture or audio production company is
awarded a tax credit under this chapter.
(b) A waiver awarded under this section must be approved and
signed by the president of the corporation and attached to the
certificate of verification submitted with the taxpayer's annual
state tax return or returns submitted under section 14 of this
chapter.
Sec. 14. To receive the credit provided by this chapter, a
taxpayer must claim the credit on the taxpayer's annual state tax
return or returns in the manner prescribed by the department. A
taxpayer claiming a credit under this chapter shall attach a copy
of the corporation's certificate of verification to the income tax
return that is filed for the calendar year for which the credit is
claimed.