58.1-439.12:03 - Motion picture production tax credit.
§ 58.1-439.12:03. Motion picture production tax credit.
A. For taxable years beginning on and after January 1, 2011, any motionpicture production company with qualifying expenses of at least $250,000 withrespect to a motion picture production filmed in Virginia shall be allowed arefundable credit against the taxes imposed by § 58.1-320 or 58.1-400 in anamount equal to 15 percent of the production company's qualifying expenses or20 percent of such expenses if the production is filmed in an economicallydistressed area of the Commonwealth. The Virginia Economic DevelopmentPartnership Authority shall designate which areas of the Commonwealth aredeemed to be economically distressed areas. The credit shall be computedbased on all of the taxpayer's qualifying expenses incurred with respect tothe production, not just the qualifying expenses incurred during the taxableyear. The refundable tax credits allowed under this section are for one taxyear only. Where a motion picture production continues for more than oneyear, a separate application for each tax year the production continues mustbe made. The grant of a refundable tax credit for a motion picture filmproduction does not create a presumption that the production will receive arefundable tax credit for subsequent tax years. Effective on January 1, 2013,for purposes of eligibility for refundable tax credits, a motion picture filmproduction shall include digital interactive media production.
"Qualifying expenses" means the sum of the following amounts spent in theCommonwealth by a production company in connection with the production of amotion picture filmed in the Commonwealth:
1. Goods and services leased or purchased. For goods with a purchase price of$25,000 or more, the amount included in qualifying expenses is the purchaseprice less the fair market value of the good at the time the production iscompleted.
2. Compensation and wages, except in the case of each individual who directlyor indirectly receives compensation in excess of $1 million for personalservices with respect to a single production. In such a case, only the first$1 million of salary shall be considered a qualifying expense. An individualis deemed to receive compensation indirectly when a production company pays apersonal service company or an employee leasing company that pays theindividual.
B. 1. In addition to the refundable credit authorized under subsection A,such production company shall be allowed an additional refundable creditequal to 10 percent of the total aggregate payroll for Virginia residentsemployed in connection with the production of a film in the Commonwealth whentotal production costs in the Commonwealth are at least $250,000 but not morethan $1 million. This additional credit shall be equal to 20 percent of thetotal aggregate payroll for Virginia residents employed in connection withsuch production when total production costs in the Commonwealth exceed $1million.
2. In addition to the credits authorized under subsection A and subdivision B1, such production company shall be allowed an additional refundable creditequal to 10 percent of the total aggregate payroll for Virginia residentsemployed for the first time as actors or members of a production crew inconnection with the production of a film in the Commonwealth.
C. 1. For purposes of this section, in the case of an episodic televisionseries, an entire season of episodes shall be deemed to be one production.
2. No credit shall be allowed under this section for any production that (i)is political advertising, (ii) is a television production of a news programor live sporting event, (iii) contains obscene material, or (iv) is a realitytelevision production.
D. 1. The issuance of refundable tax credits under this section shall be inaccordance with procedures, qualifying criteria, and deadlines established bythe Department and the Virginia Film Office. The qualifying criteriaestablished by the Virginia Film Office shall take into account whether theproduction involves physical production within the Commonwealth of Virginia,the number of residents of Virginia that will be employed in the productionand the level of compensation they will be paid, the extent to which theproduction will contribute to the support and expansion of existingproduction companies in Virginia, the extent to which the production willimpact existing local businesses and the local economy, the extent to whichthe production will involve existing and new companies located in Virginia,and other relevant considerations. The taxpayer shall apply for a credit bysubmitting such forms as prescribed by the Virginia Film Office, prior to thestart of production in Virginia.
2. Any taxpayer seeking credits under this section must enter into amemorandum of understanding with the Virginia Film Office that at a minimumprovides the requirements that the taxpayer must meet in order to receive thecredits, including but not limited to the estimated amount of money to bespent in Virginia, the timeline for completing production in Virginia, andthe maximum amount of credits allocated to the taxpayer.
3. Once the taxpayer has satisfied all of the requirements in the memorandumof understanding to the satisfaction of the Virginia Film Office andcompleted production in Virginia, the taxpayer may claim the applicableamount of credits up to the amount that has been allocated by the VirginiaFilm Office on a return filed for the taxable year in which the Virginiaproduction activities are completed. The return must state the name of theproduction, provide a description of the production, and include a detailedaccounting of the qualifying expenses with respect to which a credit isclaimed.
E. A taxpayer allowed a credit under this section must maintain and makeavailable for inspection any information or records required by the TaxCommissioner. The taxpayer has the burden of proving eligibility for a creditand the amount of the credit. The Tax Commissioner shall consult with theVirginia Film Office in order to determine the amount of qualifying expenses.
F. For purposes of this section, the amount of any credit attributable to apartnership, electing small business corporation (S corporation), or limitedliability company may be allocated to the individual partners, shareholders,or members, respectively, in proportion to their ownership or interest insuch business entities.
G. The total amount of credits allocated to all taxpayers under this sectionshall not exceed $2.5 million in the 2010-2012 biennium, and $5 million inany biennium thereafter.
H. The Department of Taxation, in consultation with the Virginia Film Office,must publish by November 1 of each year for the 12-month period ending thepreceding December 31 the following information:
1. Location of sites used in a production for which a credit was claimed;
2. Qualifying expenses for which a credit was claimed, classified by whetherthe expenses were for goods, services, or compensation paid by the productioncompany;
3. Number of people employed in the Commonwealth with respect to creditsclaimed; and
4. Total cost to the Commonwealth's general fund of the credits claimed.
I. The Tax Commissioner shall develop guidelines implementing the provisionsof this section, including but not limited to the definition of "qualifyingexpenses" and setting forth the recordkeeping requirements applicable toproduction companies claiming this credit. Such guidelines shall be exemptfrom the provisions of the Administrative Process Act (§ 2.2-4000 et seq.).
(2010, cc. 419, 599.)