HB-5842, As Passed House, March 12, 2008

SUBSTITUTE FOR

HOUSE BILL NO. 5842

A bill to amend 1933 PA 167, entitled

"General sales tax act,"

by amending section 4cc (MCL 205.54cc), as added by 2006 PA 657;

and to repeal acts and parts of acts.

THE PEOPLE OF THE STATE OF MICHIGAN ENACT:

Sec. 4cc. (1) For tax years that begin after December 31, 2006

through ~~December 31, 2010~~ February 29, 2008, the Michigan film

office, ~~in the department of history, arts, and libraries,~~ with the

concurrence of the state treasurer, may enter into an agreement

with a motion picture production company providing a credit against

the tax imposed by this act as provided under subsection (2). To

qualify for the credit under this section, a motion picture

production company shall meet all of the following requirements:

(a) Shall spend at least $200,000.00 in this state for

purposes related to the filming or production of a single motion

picture.

(b) Shall enter into an agreement as provided in this section.

under subsection (5).

(d) Shall submit a postproduction certificate of completion

issued under subsection (5) to the department of treasury under

subsection (7).

(e) Shall not be delinquent in a tax or other obligation owed

to this state or be owned or under common control of an entity that

is delinquent in a tax or other obligation owed to this state.

(2) An agreement under this section may provide for a motion

picture production company to claim a tax credit under this section

as follows:

(a) If the company incurs between $200,000.00 and

$1,000,000.00 in production spending, up to 12% of its production

spending.

(b) If the company incurs between $1,000,000.01 and

$5,000,000.00 in production spending, up to 16% of its production

spending.

$10,000,000.00 in production spending, up to 20% of its production

spending. However, if a company incurs more than $10,000,000.00 in

production spending, the agreement may provide tax credits based

only on the first $10,000,000.00 of its production spending.

(3) A motion picture production company intending to engage in

motion picture production in this state may submit an application

to enter into an agreement under this section to the Michigan film

office. The request shall be submitted in a form prescribed by the

~~department of history, arts, and libraries~~ Michigan film office and

shall be accompanied by all of the information and records

requested by the Michigan film office. The ~~department~~ Michigan film

office shall not process the application until it is complete. As

part of the application, the motion picture production company

shall estimate its expected production spending for an identified

motion picture. If the Michigan film office with the concurrence of

the state treasurer determines to enter into an agreement under

this section, the agreement shall provide for all of the following:

(a) A requirement that the motion picture production company

shall commence work in this state on the identified motion picture

within 90 days of the date of the agreement or else the agreement

shall expire. However, upon request submitted by the motion picture

production company based on good cause, the Michigan film office

may extend the period for commencement of production for an

additional 90 days.

(b) A statement identifying the motion picture production

company and the motion picture that the company intends to produce

in whole or in part in this state.

available to the motion picture production company for the motion

picture it plans to produce in whole or in part in this state.

(d) A unique number assigned to the motion picture production

project by the Michigan film office.

(e) A requirement that the motion picture not depict obscene

matter or an obscene performance.

(4) The film office and the state treasurer shall not enter

into an agreement with any motion picture production company

providing credits for more than 4 motion pictures for any 1 tax

year. In determining whether to enter into an agreement under this

section, the film office and the state treasurer shall consider all

of the following:

(a) The likelihood that in the absence of the credit the

filming will take place in a location other than this state.

(b) The extent to which the filming may have the effect of

promoting this state as a tourist destination.

completing commitments to engage in motion picture production.

(5) If the Michigan film office determines that a motion

picture production company has complied with the terms of an

agreement entered into under this section, the office shall issue a

postproduction certificate to that motion picture production

company. The motion picture production company shall submit a

request to the Michigan film office on a form prescribed by the

~~department of history, arts, and libraries~~ Michigan film office for

a postproduction certificate, along with any documentation the

Michigan film office requires. The office shall process each

request within 60 days after it is complete. However, the office

may request additional information and documentation before issuing

a postproduction certificate of completion and need not issue the

postproduction certificate until satisfied that production spending

is adequately established. Each postproduction certificate of

completion shall be signed by the ~~director~~ Michigan film

commissioner or his or her designee and shall include the following

information:

(a) The name of the motion picture production company.

(b) The name of the motion picture produced in whole or in

part in this state.

spending for the motion picture and the amount of the tax credit

the company is entitled to claim under this section.

(d) The date of completion for the motion picture production

in this state.

(e) The unique number assigned to the motion picture

production project by the Michigan film office under subsection

(3).

(f) The motion picture production company's federal employer

identification number or Michigan treasury number.

(6) Information and records submitted by a motion picture

production company to the Michigan film office under this section

shall be considered confidential and exempt from disclosure under

the freedom of information act, 1976 PA 442, MCL 15.231 to 15.246,

to the extent that they describe the commercial and financial

operations of the company, they have not been publicly disseminated

at any time, and their disclosure might put the company at a

competitive disadvantage. A company submitting materials under this

section shall specifically designate any information and records

that the company deems confidential. The ~~department~~ Michigan film

office may release any information and records submitted under this

section that have not been designated confidential by the company.

(7) A motion picture production company shall submit a

postproduction certificate of completion issued under subsection

(5) to the department of treasury. Subject to subsection (8), if

the credit allowed under this section exceeds the tax liability of

the motion picture production company for the tax year or if the

motion picture production company does not have a tax liability

under this act for the tax year, the department of treasury shall

refund the excess or pay the amount of the credit to that motion

picture production company.

(8) The total amount of tax credits available for all motion

picture production companies and their assignees under this section

shall not exceed $7,000,000.00 for any 1 tax year.

(9) The state school aid fund established in section 11 of

article IX of the state constitution of 1963 and all local units of

government shall be held harmless for any credit or refund paid

under this section. Any credit or refund paid under this section

shall be paid from the general fund in the state treasury.

(10) Not later than March 1 of each year, the ~~department of~~

~~history, arts, and libraries~~ Michigan film office shall submit to

the governor, the chairperson of the senate finance committee, and

the house tax policy committee an annual report concerning the

operation and effectiveness of the credit under this section. The

requirements of section 28(1)(f) of 1941 PA 122, MCL 205.28, do not

apply to disclosure of tax information required by this subsection.

The report shall include all of the following:

(a) A brief assessment of the overall effectiveness of the

credit under this section at attracting motion picture productions

to this state during the immediately preceding year.

(b) The number of motion picture productions requesting tax

credit ~~preproduction~~ approval ~~letters~~ during the immediately

preceding year, the names of the motion pictures produced in this

state for which credits were begun or completed in the immediately

preceding year, and the locations in this state that were used in

the production of approved motion pictures in the immediately

preceding year.

production company identified in subdivision (b) to produce the

motion pictures in this state and a breakdown of all production

spending by all companies classified as goods, services, or

salaries and wages.

(d) An estimate of the number of persons employed in this

state by motion picture production companies that qualify for the

credit under this section.

(e) The value of all tax credit certificates of completion

issued under this section.

(f) An estimate of the cost to the general fund resulting from

the tax credits claimed under this section and an estimate of

increased direct and indirect spending in this state due to motion

picture production.

~~(g) A brief review of the practices and experiences of other~~

~~states and provinces with similar incentive programs.~~

~~(h) Any other information deemed important by the department~~

~~to include in the report.~~

(11) As used in this section:

~~(a) "Department" means the department of history, arts, and~~

~~libraries.~~

~~(b) "Director" means the director of the department of~~

~~history, arts, and libraries.~~

(a) ~~(c)~~ "Michigan film office" or "office" means the Michigan

film office housed within the department of history, arts, and

libraries before May 4, 2008, and housed within the Michigan

strategic fund after May 3, 2008.

(b) ~~(d)~~ "Motion picture" means a feature-length film produced

for distribution in 2 or more states that is a production for which

records are not required to be maintained with respect to any

performer in the production under 18 USC 2257, or a television

series or a commercial or series of commercials made in this state

in whole or in part for theatrical or television viewing or as a

television pilot. Motion picture does not include the production of

any of the following:

(i) Televised news or current events programs.

(ii) Live sporting events.

(iii) Political advertising.

(iv) Radio programs.

(v) Weather shows.

(vi) Financial market reports.

(vii) Talk shows.

(viii) Game shows.

(ix) Product or service marketing.

(x) Awards shows or other events.

an entity in the business of producing motion pictures. However,

motion picture production company does not include an entity that

is more than 30% owned, affiliated, or controlled by an entity or

individual who is in default on a loan made by this state, a loan

guaranteed by this state, or a loan made or guaranteed by any other

state.

(d) ~~(f)~~ "Obscene matter or an obscene performance" means

matter described in 1984 PA 343, MCL 752.361 to 752.374.

(e) ~~(g)~~ "Production spending" means the following expenditures

made in this state to film or produce a single motion picture:

(i) Payments to vendors in this state to purchase tangible

personal property that is used in making the motion picture.

(ii) Payments to vendors doing business in this state for

services relating to motion picture production, editing, and

processing.

(iii) Payments and compensation, not to exceed $100,000.00 for

any 1 employee, for contractual or salaried employees who are

residents of this state who perform services with respect to the

production.

Enacting section 1. Section 4cc of general sales tax act, 1933

PA 167, MCL 205.54cc, is repealed effective December 31, 2009.