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Welcome!
The Wenzlau Law Group focuses on
a number of practices that hold great value for its
clients' entertainment needs.
Arizona Offices:
10575 North 114th Street, Suite 103
Scottsdale, Arizona 85259
Tel: (480) 344-7788
Fax: (480) 344-7701
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Brentwood, Tennessee 37027
Tel: (615) 236-1444
Fax: (615) 236-1111
Email:
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CLICK HERE FOR THE LATEST INFORMATION
FROM THE ARIZONA DEPARTMENT OF COMMERCE (ADOC)
>> NEW!!
PRODUCTIONS COMING TO ARIZONA. DOWNLOAD OUR
TAX INCENTIVE PAMPHLET (INCLUDES FORMS & REFERENCE
MATERIALS). (6MB; 103 Pages)
CLICK HERE FOR RELEVANT TAX INCENTIVE
FORMS
ARIZONA
FILM INCENTIVES:
Motion Picture Tax
Credit Information S.B. 1346 & 1347:
FACT
SHEET FOR S.B. 1346 - Motion Picture Production; Tax
Credit
(Original
Hyperlink; As Passed By the Senate)
FACT
SHEET FOR S.B. 1347 - Motion Picture Production; Tax
Incentives
(Original
Hyperlink; As Passed By the Senate)
(Original
Hyperlink; As Passed By the House)
(Arizona
Department of Commerce Fact Sheet)
(Enacted
Senate Bill 1347; Motion Picture Tax Credit PDF)
FACT
SHEET FOR S.B. 1346 - motion picture production; tax
credit
Purpose
Establishes a refundable individual and corporate
income tax credit for investment in motion picture
productions in Arizona.
Background
Arizona’s involvement in the film industry dates
back to the early westerns; it has been the location
for feature films, television series and commercials.
To encourage film productions, most states have undertaken
advertising, incentive and marketing campaigns. These
efforts include websites that display photos of locations,
information on permits and regulations, and directories
of local technicians/crew. Financial incentives offered
by states include sales tax exemptions, income tax
credits and low-interest loans for film production
activities. In addition, certain states, including
Illinois, Louisiana, Mississippi and New Mexico, also
offer incentives to local film technician and crew
jobs as well as those companies that provide equipment
to film productions.
For example, near the end of 2002, New Mexico enacted
legislation calling for sales tax exemptions, income
tax credits and no-interest loans on film productions
taking place in New Mexico. According to a report
conducted by the ESI Corporation for the Arizona Department
of Commerce (ADOC), in 2002, the film industry spent
about $8 million in New Mexico. During 2003, the first
year the incentives took place, film industry spending
reportedly reached approximately $80 million.
According to ESI’s report, the film industry’s
economic impact on Arizona in 2003 included total
wages of approximately $21.9 million, over $107 million
in direct economic activity (or output) throughout
and approximately 1,700 direct and indirect jobs.
ESI’s report recommends that Arizona create
an incentive program to attract out-of-state production
companies that provides a tax rebate for utilizing
Arizona talent, technicians/crews and equipment; ensure
that incentives are understandable and easily obtainable;
and support incentives that are geared toward smaller,
resident independent film and video productions, such
as loaning out equipment.
There is an undetermined fiscal impact to the state
General Fund.
Provisions
Tax Credits
1. Allows, for calendar years 2006 through 2010, a
refundable individual or corporate income tax credit
for the taxable year in which investment is made in
a certified production of motion pictures by taxpayers
that are domiciled or headquartered in Arizona.
2. Computes the tax credit as 20 percent of the actual
investment made by the taxpayer if the total amount
of the actual investment made and spent by the certified
production company in Arizona is more than $100,000.
3. Limits the aggregate amount of tax credits as follows:
a) $20 million in calendar year 2006.
b) $30 million in calendar year 2007.
c) $40 million in calendar year 2008.
d) $50 million in calendar year 2009.
e) $60 million in calendar year 2010.
4. Requires ADOC to establish a preapproved process
for investors.
5. Prohibits motion picture investor credits from
exceeding the total amount of the actual investment
made and spent by the certified production in that
production.
6. Prohibits ADOC from granting a credit certificate
for investment in any production that constitutes
an obscene motion picture film or obscene pictorial
publication.
7. Allows co-owners of a business, including partners,
shareholders of an S corporation, corporate partners
and members of any pass-through entity to claim the
pro rata share of the allowable credit based on ownership
interest.
8. Prohibits the total amount of the allowable credit
from exceeding the total amount that would have been
allowed to a sole owner.
9. Allows a taxpayer to chose the income tax credit
or deduction for expenses, but not both.
Tax Credit Administration
10. Requires ADOC to establish a procedure for identifying
qualified motion picture production projects for purposes
of motion picture production investment tax credits.
11. Requires a motion picture production company to
apply for certification with ADOC for review and evaluation.
12. States applications to ADOC are not subject to
public access under the public records laws.
13. Requires ADOC to make a determination within 30
days of receipt of the application of whether the
application meets the specified criteria.
14. Requires ADOC to provide its initial certification
of a project to investors and the Department of Revenue
(DOR) that includes a unique identifying number for
each certified production.
15. Requires the production company, upon completion
of a certified production, to report the total base
investment made in Arizona, a completed expenditure
questionnaire and a final cast and crew list for the
project.
16. Requires ADOC to review the production expenses
of the production company and issue a credit certificate
to investors that includes the identifying number
assigned to the production in the initial certification.
17. Allows tax credits to be recaptured if ADOC finds
that monies for which an investor received credits
were not invested in and spent with the certified
production company within 24 months of the date the
credits were claimed.
18. Subjects the recaptured credit to interest and
penalties.
19. Requires ADOC and DOR to collaborate in adoption
of rules regarding the motion picture production investment
incentives.
Miscellaneous
20. Adds the income tax credit to the Joint Legislative
Tax Credit Review Committee schedule in 2010.
21. Defines terms.
22. Contains a purpose statement.
23. Contains a severability clause.
24. Becomes effective on the general effective date,
except as otherwise noted.
Amendments Adopted by CED
1. Authorizes the tax credit to be refundable.
2. Clarifies definitions.
3. Allows an income tax credit or deduction for expenses.
Amendments Adopted by FIN
1. Establishes a cap on the amount of tax credits
that can be issued.
2. Modifies the amount of the credit.
3. Requires ADOC to establish a qualification process.
4. Prohibits ADOC from granting a credit certificate
to certain obscene productions.
Amendments Adopted by Committee of the Whole
1. Limits the availability of the tax credits to five
years.
2. Adds a severability clause.
Correction
· Modifies background information.
Senate Action
CED 2/16/05 DPA 7-1-0
FIN 2/17/05 DPA 5-3-1
3rd Read 3/3/05 22-7-1
Prepared by Senate Research
March 28, 2005
SL/jas
(top of page)
FACT
SHEET FOR S.B. 1347 - motion picture production; tax
incentives
(Original
Hyperlink)
Purpose
Allows a motion picture production company to elect either an income tax credit
or an exemption from transaction privilege tax and use tax for motion picture
production costs in Arizona.
Background
Arizona’s involvement in the film industry dates back to the early westerns;
it has been the location for feature films, television series and commercials.
To encourage film productions, most states have undertaken advertising, incentive
and marketing campaigns. These efforts include websites that display photos of
locations, information on permits and regulations, and directories of local technicians/crew.
Financial incentives offered by states include sales tax exemptions, income tax
credits and low-interest loans for film production activities. In addition, certain
states, including Illinois, Louisiana, Mississippi and New Mexico, also offer
incentives to local film technician and crew jobs as well as those companies
that provide equipment to film productions.
For example, near the end of 2002, New Mexico enacted legislation calling for
sales tax exemptions, income tax credits and no-interest loans on film productions
taking place in New Mexico. According to a report conducted by the ESI Corporation
for the Arizona Department of Commerce (ADOC), in 2002, the film industry spent
about $8 million in New Mexico. During 2003, the first year the incentives took
place, film industry spending reportedly reached approximately $80 million.
According to ESI’s report, the film industry’s economic impact on
Arizona in 2003 included total wages of approximately $21.9 million, over $107
million in direct economic activity (or output) throughout and approximately
1,700 direct and indirect jobs.
ESI’s report recommends that Arizona create an incentive program to attract
out-of-state production companies that provides a tax rebate for utilizing Arizona
talent, technicians/crews and equipment; ensure that incentives are understandable
and easily obtainable; and support incentives that are geared toward smaller,
resident independent film and video productions, such as loaning out equipment.
There is an undetermined fiscal impact to the state General Fund.
Provisions
Transaction Privilege Tax & Use Tax Exemption
1. Requires ADOC, beginning calendar year 2006 through 2010, to annually qualify
motion picture production companies for the motion picture production tax incentives.
2. Allows a motion picture production company to apply with ADOC for the tax
incentives provided that the motion picture production company incurs production
costs greater than $125,000 for a period of less than six months or $250,000
for a period greater than six months and employs a minimum number of Arizona
residents.
3. Prescribes limits on the items that are considered productions costs.
4. Requires the Department of Revenue (DOR) to prescribe an application form
for a transaction privilege tax (TPT) deduction certificate (Certificate).
5. Allows a motion picture production company to use the Certificate only related
to production costs subject to TPT.
6. Prescribes the information a motion picture production company must report
to ADOC on the application form.
7. Requires ADOC to review all applications within 30 days.
8. Requires ADOC to establish the tax incentive qualification process.
9. Requires ADOC to issue a written letter of qualification to the motion picture
production company and transmit a copy to DOR.
10. Requires a motion picture production company to agree to furnish records
of expenditures to DOR upon request.
11. Disqualifies a motion picture production company that receives a Certificate
from an individual or corporate income tax credit.
12. Requires ADOC to deny an application related to any obscene motion picture
film or obscene pictorial publication production.
13. Allows DOR to recapture the TPT deductions if DOR determines, after an audit,
that the motion picture production company failed to meet its statutory obligations.
14. Repeals the section of statute that provides the application process for
and refund of 50 percent of TPT paid for production cost-related expenditures.
15. Exempts sales of tangible personal property to a motion picture production
company from the retail classification for TPT purposes.
16. Exempts sales or gross income from leases or rentals of lodging space to
a motion picture production company with a Certificate from the transient lodging
classification and exempts sales of catered food, drink and condiment to a motion
picture production company with a Certificate from the restaurant classification.
17. Exempts leases or rentals of tangible personal property to a motion picture
production company from the personal property rental classification for TPT purposes.
18. Exempts the gross proceeds of sales or gross income received from a contract
for the construction of any building or structure associated with a motion picture
production in Arizona from the prime contracting classification for TPT purposes.
19. Exempts sales of tangible personal property to a motion picture production
company from use tax.
Individual & Corporate Income Tax Credit
20. Establishes, for calendar years 2006 through 2010, a refundable individual
and corporate income tax credit of 20 percent of motion picture production costs
that are directly attributable to the production of a motion picture in Arizona.
21. Limits the aggregate amount of each tax credit to:
a) $20 million in calendar year 2006.
b) $30 million in calendar year 2007.
c) $40 million in calendar year 2008.
d) $50 million in calendar year 2009.
e) $60 million in calendar year 2010.
22. Requires the motion picture production company to employ a minimum number
of Arizona residents and include an acknowledgement that the production was filmed
in Arizona in the credits of each commercial motion picture.
23. Requires ADOC to establish a preapproval process for production companies.
24. Prescribes limits on the items that are considered productions costs.
25. Disqualifies a motion picture production company that receives an individual
or corporate income tax credit from receiving a Certificate.
26. Requires ADOC to deny an application related to any obscene motion picture
film or obscene pictorial publication production.
27. Allows co-owners of a business, including partners, members of a limited
liability company, corporate partners and shareholders of an S corporation to
claim the pro rata share of the allowable credit based on ownership interest.
28. Prohibits the total amount of the allowable credit from exceeding the total
amount that would have been allowed to a sole owner.
29. Prohibits DOR from granting Certificate or income tax credit for any production
that constitutes an obscene motion picture film.
30. Specifies that a taxpayer can choose the income tax credit or a deduction
for expenses, but not both.
Miscellaneous
31. Requires ADOC to:
a) keep annual records on the application forms.
b) maintain annual data on Arizona-based motion picture industry company growth
and motion picture industry employment and wages.
c) prepare and publish an annual report summarizing the above information by
December 1.
32. Allows DOR to release confidential taxpayer information to ADOC for the purposes
of qualifying companies for the incentives.
33. Requires ADOC and DOR to cooperatively adopt rules relating to the motion
picture production tax incentives.
34. Adds the motion picture production costs income tax credit to the Joint Legislative
Tax Credit Review Committee schedule in 2010.
35. Contains a purpose statement.
36. Contains a severability clause.
37. Defines terms.
38. Becomes effective on January 1, 2006.
Amendments Adopted by CED
1. Transfers the authority to qualify motion picture production companies for
the tax incentives for DOR to ADOC.
2. Expands the information a motion picture production company must report on
the application form.
3. Requires ADOC to review all applications within 30 days.
4. Requires ADOC to establish the tax incentive qualification process
5. Requires ADOC to issue a written letter of qualification to the motion picture
production company and transmit a copy to DOR.
6. Specifies that a company’s election of the TPT exemptions is effective
for the calendar year.
7. Modifies the minimum production cost threshold for a period of qualification
that is less than six months to $125,000.
8. Modifies the minimum resident employment requirements to 25 percent in the
first year, 35 percent in the second year and 50 percent for any subsequent year.
9. Allows DOR to release confidential taxpayer information to ADOC for the purposes
of qualifying companies for the incentives.
10. Requires ADOC and DOR to cooperatively adopt rules relating to the motion
picture production tax incentives.
11. Exempts sales or gross income from leases or rentals of lodging space to
a motion picture production company with a Certificate from the transient lodging
classification and exempts sales of catered food, drink and condiment to a motion
picture production company with a Certificate from the restaurant classification.
12. Specifies that a taxpayer can choose the income tax credit or a deduction
for expenses, but not both.
13. Requires ADOC to:
a) keep annual records on the application forms.
b) maintain annual data on Arizona-based motion picture industry company growth
and motion picture industry employment and wages.
c) prepare and publish an annual report summarizing the above information by
December 1.
14. Makes technical, clarifying and conforming changes.
Amendments Adopted by FIN Committee
1. Prohibits DOR from granting Certificate or income tax credit for any production
that constitutes an obscene motion picture film.
2. Clarifies the minimum resident employment requirements.
3. Establishes a cap on the credits of $20 million in 2006, increasing by $10
million each year until 2010, which permanently caps the credit at $60 million.
4. Requires DOR to establish a preapproval process for production companies.
Amendments Adopted by Committee of the Whole
1. Incorporates the provisions of the Finance Committee amendment.
2. Transfers the requirement to establish a preapproval process from DOR to ADOC.
3. Limits the availability of the tax incentives to five years.
4. Adds a severability clause.
5. Clarifies minimum employment requirements.
6. Makes technical and conforming changes.
Correction
· Modifies background information.
Senate Action
CED 2/16/05 DPA 7-1-0
FIN 2/17/05 DPA 5-3-1
3rd Read 3/3/05 21-8-1
Prepared by Senate Research
March 28, 2005
SL/jas
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