HB 113 — An Act relating to a tax exemption for qualified small businesses; and providing for an effective date.

and (4) other information the film production promotion program may require to determine the producer's eligibility for a credit and the estimated amount of the credit.

(b) If the film production promotion program approves an application submitted under (a) of this section, the film production promotion program shall issue a notice of qualification to the producer.

The notice of qualification must include a determination by the film production promotion program of the estimated film production tax credit for which the production qualifies.

Sec.

43.98.034.

Award of film production tax credit.

(a) Subject to AS 43.98.031(f), the film production promotion program, in cooperation with the department, shall determine the amount of the tax credit under AS 43.98.031 available to a producer who has obtained a notice of qualification under AS 43.98.033(b), based on the qualified expenditures of the production under AS 43.98.036.

(b) The base amount of a tax credit awarded under this section is equal to 25 percent of the qualified expenditures of the production.

(c) In determining the amount of the tax credit, the percentage provided by (b) of this section shall be increased by the film production promotion program based on the following criteria:

(1) an additional 5 percent of qualified expenditures that are wages paid to Alaska residents;

(2) an additional two percent of qualified expenditures made in a rural area;

and (3) an additional two percent of qualified expenditures made in the state between October 1 and March 30.

(d) After completion of the production, the producer shall provide the film production promotion program with a production cost report detailing the qualified expenditures of the production, with verification by an independent certified public accountant approved by the film production promotion program that the costs claimed in the report are qualified expenditures under AS 43.98.036.

(e) Subject to (g) of this section, the film production promotion program, in CSHB 113(L&C) -4- HB0113b New Text Underlined [DELETED TEXT BRACKETED] 34-LS0641\N cooperation with the department, shall determine the amount of the tax credit based on the information provided by the producer under (d) of this section and shall award a tax credit in cooperation with the department if the producer has satisfied all requirements under AS 43.98.031 - 43.98.038.

(f) The award of a tax credit under this section is conditioned on the producer's and the production's full compliance with all applicable state laws and regulations.

At the request of the film production promotion program, a producer shall provide any information necessary for the film production promotion program to determine the producer's and production's compliance with this subsection.

(g) In determining the amount of a tax credit awarded under this section, the film production promotion program may reduce the amount of the tax credit by any amount the film production promotion program considers necessary to allow the state, or a political subdivision of the state, to recover the cost of any damages caused by any act or omission of the producer or production.

(h) The film production promotion program, in cooperation with the department, may withhold the award of a tax credit under this section if the program determines that there are filed, but unresolved, legal actions in the state involving the producer or production.

(i) To qualify for the tax credit under AS 43.98.031, a producer shall include, in the end credits of each qualified film, the logo designed under former AS 44.25.105(b) and the words, "Filmed in Alaska with the Support of the State of Alaska." Sec.

43.98.036.

Determination of qualified expenditures.

(a) Expenditures made by a production company in connection with a film production approved by the film production promotion program that shall be considered qualified expenditures must be directly related to the production and be incurred in the state.

Only expenditures that are ordinary, reasonable, and not in excess of fair market value and that are for real or tangible property, fees, services, or state or municipal taxes shall be considered.

Expenditures may include (1) costs of set construction and operation;

(2) costs of wardrobes, make-up, accessories, and related services;

HB0113b -5- CSHB 113(L&C) New Text Underlined [DELETED TEXT BRACKETED] 34-LS0641\N (3) costs associated with photography and sound synchronization;

(4) costs of lighting and related services and materials;

(5) costs of editing and related services;

(6) rental of facilities and equipment;

(7) leasing of vehicles;

(8) costs of food and lodging;

(9) costs of digital or tape editing, film processing, transfer of film to tape or digital format, sound mixing, and special and visual effects;

(10) the total aggregate payroll for services performed in Alaska, including all salaries, wages, compensation, and related benefits provided to producers, directors, writers, actors, and other personnel that are directly attributable to services performed in Alaska;

(11) the costs of the use of an Alaska business for processing qualified payroll and related expenditures;

(12) costs of music, if performed, composed, or recorded by an Alaska musician, or released or published by an Alaska business;

(13) costs of intrastate travel, if provided by an Alaska business;

(14) costs relating to the design, construction, improvement, or repair of a film, video, television, or digital production or postproduction facility or related property, infrastructure, or equipment, except commercial exhibition facilities, as determined by the film production promotion program;

or (15) other similar production expenditures as determined by the film production promotion program in cooperation with the Department of Revenue.

(b) Production costs that may not be considered qualified expenditures include (1) costs related to the acquisition, determination, transfer, or use of a film production tax credit under AS 43.98.031;

(2) postproduction expenditures for marketing and distribution;

(3) production financing, depreciation, and amortization costs, and other costs that are not cash or cash equivalent expenditures directly attributable to production costs incurred in the state;

(4) amounts that are later reimbursed or reasonably anticipated to be CSHB 113(L&C) -6- HB0113b New Text Underlined [DELETED TEXT BRACKETED] 34-LS0641\N reimbursed, resulting in a reduction in production costs;

(5) amounts that are reasonably anticipated to be recovered through subsequent sale or other realization of value by disposal of an asset that has been claimed as a qualified expenditure;

(6) amounts that are paid to a person or entity as a result of participation in profits from the exploitation of the production;

(7) costs incurred in the purchase of real or tangible property for which a qualified expenditure has, at any time, been claimed.

Sec.

43.98.037.

Recovery of film production tax credit.

(a) The film production promotion program, in cooperation with the department, may review, audit, and bring legal proceedings to recover any amount of a tax credit awarded under AS 43.98.034 from a producer or production to which a credit was awarded if the film production promotion program determines that the film producer or production is liable for damages to the state, or any political subdivision of the state.

(b) Legal proceedings may not be brought under (a) of this section more than one year after the date the tax credit was awarded under AS 43.98.034.

Sec.

43.98.038.

Definitions.

In AS 43.98.031 - 43.98.038, (1) "Alaska business" means (A) a person who holds a current Alaska business license;

(B) a person who provides goods or services under the name as appearing on the person's current Alaska business license;

(C) a person who has maintained a place of business within the state staffed by the person or an employee of the person for a period of six months immediately preceding the date the goods or services were provided;

(D) a person who is (i) incorporated or qualified to do business under the laws of the state;

(ii) a sole proprietorship, and the proprietor is a resident of the state;

(iii) a limited liability company organized under AS 10.50, and all members are residents of the state;

or HB0113b -7- CSHB 113(L&C) New Text Underlined [DELETED TEXT BRACKETED] 34-LS0641\N (iv) a partnership under former AS 32.05, AS 32.06, or AS 32.11, and all partners are residents of the state;

and (E) if the business is a joint venture, a joint venture composed entirely of ventures that qualify under (A) - (D) of this subsection;

(2) "department" means the Department of Revenue;

(3) "film" includes television, commercials, and videos;

(4) "film production promotion program" means the film production promotion program created under AS 44.33.231;

(5) "producer" means a person who arranges financing for or supervises the production of a film, video, commercial, or television production or pilot;

(6) "rural area" means a community with a population of 1,500 or less or a community with a population of 7,500 or less that is not connected by road or rail to Anchorage or Fairbanks.

* Sec.

4.

AS 44.33.231(b) is amended to read:

(b) The purpose of the film production promotion program is to (1) work with organizations in the private sector for the expansion and development of film production industries in the state;

(2) promote Alaska as an appropriate location for film production;

(3) provide production assistance through connecting film directors, makers, and producers with Alaska location scouts and contractors, including contractors providing assistance with permit applications;

[AND] (4) certify Alaska film production internship training programs and promote the employment of program interns by eligible productions;

and (5) in cooperation with the Department of Revenue, administer the Alaska film production promotion program.

* Sec.

5.

AS 44.33.231 is amended by adding new subsections to read:

(d) Subject to appropriations for the purpose, the film production promotion program shall administer, in cooperation with the Department of Revenue, the Alaska film production promotion program to provide a tax credit under AS 43.98.031 for certain film production expenditures incurred in the state.

CSHB 113(L&C) -8- HB0113b New Text Underlined [DELETED TEXT BRACKETED] 34-LS0641\N (e) The film production promotion program, in cooperation with the Department of Revenue, may adopt procedures and regulations to carry out its functions under this section.

* Sec.

6.

AS 43.20.012(a)(5), 43.20.012(e), 43.20.012(f), 43.20.012(g), and 43.20.012(h) are repealed July 1, 2035.

* Sec.

7.

1 of this Act, and AS 43.20.012(e) -and (h),(f), enacted by sec.

2 of this Act, apply to the tax year of a corporation beginning on or after the effective date of this ActAct. and before the repeal in sec.

6 of this Act.

8.4.

The uncodified law of the State of Alaska is amended by adding a new section to read:

NOTIFICATION.

When the number of tax credits provided under AS 43.98.031(f), enacted by sec.

3 of this Act, in the aggregate and the estimated amount of tax credits that could be claimed based on notices of qualification issued by the film production promotion program under AS 44.33.234(b), together equal $20,000,000, the commissioner of revenue shall notify the presiding officers of each house of the legislature in writing.

* Sec.

9.

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