99TH GENERAL ASSEMBLY
State of Illinois
2015 and 2016
HB0374

 

Introduced , by Rep. Fred Crespo

 

SYNOPSIS AS INTRODUCED:
 
New Act
35 ILCS 5/224 new

    Creates the Interactive Digital Media Tax Credit Act. Entitles interactive digital media companies that meet certain requirements to an income tax credit based on the amount of the Illinois labor expenditure and Illinois production spending approved by the Department of Commerce and Economic Opportunity for the production. Authorizes taxpayers to take the credit beginning in the taxable year in which the company has met the investment requirement. Provides for the transfer of credits. Requires the Department to submit a report concerning the program to the General Assembly no later than July 1, 2020. Provides that the Act is repealed on July 1, 2021. Amends the Illinois Income Tax Act to make conforming changes. Effective immediately.


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FISCAL NOTE ACT MAY APPLY

 

 

A BILL FOR

 

HB0374LRB099 05686 HLH 25729 b

1    AN ACT concerning revenue.
 
2    Be it enacted by the People of the State of Illinois,
3represented in the General Assembly:
 
4    Section 1. Short title. This Act may be cited as the
5Interactive Digital Media Tax Credit Act.
 
6    Section 5. Definitions; rules.
7    (a) As used in this Act:
8    "Base Illinois production spending" is the average amount
9of expenses incurred by the applicant for all productions in
10calendar years 2013, 2014, and 2015, including, without
11limitation, all of the following:
12        (1) expenses to purchase, from vendors within
13    Illinois, tangible personal property that is used in the
14    accredited production;
15        (2) expenses to acquire services from vendors in
16    Illinois for an accredited production, including services
17    for editing and processing; and
18        (3) compensation paid to vendors for contractual or
19    salaried employees of the vendor who are Illinois residents
20    and who perform services with respect to the accredited
21    production, not to exceed $100,000 for any one employee.
22    "Base number of employees" is the average of all full-time
23employees who were employed by an applicant in calendar years

 

 

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12013, 2014, and 2015.
2    "Interactive digital media project" means: (1) a
3production of interactive entertainment which is produced for
4distribution in commercial or educational markets, including
5computer games, video games, and simulation or animation; or
6(2) a production intended for Internet or wireless
7distribution.
8    "Accredited production" means the production of an
9interactive digital media project that has been certified by
10the Department in which the Illinois production spending
11included in the cost of the production exceeds $100,000 per
12year.
13    "Accredited production certificate" means a certificate
14issued by the Department certifying that the interactive
15digital media production is an accredited production that meets
16the guidelines of this Act.
17    "Applicant" means a taxpayer that is an interactive digital
18media company that is operating or has operated an accredited
19production located within the State of Illinois and that (i)
20owns the copyright in the accredited production throughout the
21Illinois production period or (ii) has contracted directly with
22the owner of the copyright in the accredited production or a
23person acting on behalf of the owner to provide services for
24the production if the owner of the copyright is not an eligible
25production corporation.
26    "Credit" means, for an interactive digital media

 

 

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1accredited production commencing on or after January 1, 2016:
2        (1) an amount equal to 30% of the (i) Illinois
3    production spending and (ii) Illinois labor expenditure
4    for the taxable year; and
5        (2) an additional amount equal to 5% of the Illinois
6    production spending if the accredited production company
7    is located in a geographic area of high poverty or high
8    unemployment, as determined by the Department.
9    "Department" means the Department of Commerce and Economic
10Opportunity.
11    "Director" means the Director of Commerce and Economic
12Opportunity.
13    "Illinois labor expenditure" means salary or wages paid to
14employees of the applicant for services on the accredited
15production. To qualify as an Illinois labor expenditure, the
16expenditure must be all of the following:
17        (1) reasonable in the circumstances;
18        (2) included in the applicant's federal income tax
19    basis;
20        (3) incurred by the applicant for services performed on
21    or after January 1, 2016;
22        (4) incurred during the production stages of the
23    accredited production;
24        (5) limited to the first $100,000 of wages paid to or
25    incurred with respect to each new employee of a production
26    commencing on or after January 1, 2016;

 

 

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1        (6) directly attributable to the accredited
2    production;
3        (7) paid in the tax year for which the applicant is
4    claiming the credit or no later than 60 days after the end
5    of the tax year;
6        (8) paid to persons residing in Illinois at the time
7    the payments were made; and
8        (9) paid for services rendered in Illinois.
9    "Illinois production spending" means the expenses incurred
10by the applicant for an accredited production above the base
11Illinois production spending, including, without limitation,
12all of the following:
13        (1) expenses to purchase, from vendors located in
14    Illinois, tangible personal property that is used in the
15    accredited production;
16        (2) expenses to acquire services from vendors located
17    in Illinois for an accredited production, including
18    services related to editing or processing; and
19        (3) the compensation paid by a vendor, not to exceed
20    $100,000 for any one employee, for contractual or salaried
21    employees of the vendor who are Illinois residents
22    performing services with respect to the accredited
23    production.
24    "New employee" means a full-time employee who (i) is first
25employed by an applicant on or after January 1, 2016 and (ii)
26is in excess of, or in addition to, the applicant's base number

 

 

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1of employees. The term "new employee" does not include:
2        (1) an employee of the eligible employer who performs a
3    job that (i) existed for at least 6 months before the
4    employee was hired and (ii) was previously performed by
5    another employee; and
6        (2) an employee of the eligible employer who was
7    previously employed in Illinois by a related member of the
8    eligible employer and whose employment was shifted to the
9    eligible employer after the eligible employer entered into
10    the agreement; or
11        (3) a child, grandchild, parent, or spouse, other than
12    a spouse who is legally separated from the individual, of
13    any individual who has a direct or indirect ownership
14    interest of at least 5% in the profits, capital, or value
15    of the eligible employer.
16    "Qualified production facility" means a facility in the
17State in which interactive digital media projects are or are
18intended to be regularly produced.
19    (b) The Department may adopt rules necessary to implement
20this Act.
 
21    Section 10. Tax credit awards. Subject to the conditions
22set forth in this Act, an applicant is entitled to a credit
23against the tax imposed under subsections (a) and (b) of
24Section 201 of the Illinois Income Tax Act as approved by the
25Department under Section 25 of this Act.
 

 

 

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1    Section 15. Application for certification of accredited
2production. Any applicant proposing an interactive digital
3media production located or planned to be located in Illinois
4may request an accredited production certificate by formal
5application to the Department.
 
6    Section 20. Issuance of tax credit certificate.
7    (a) In order to qualify for a tax credit under this Act, an
8applicant must file an application, on forms prescribed by the
9Department, providing information necessary to calculate the
10tax credit and any additional information as required by the
11Department.
12    (b) Upon satisfactory review of the application, the
13Department shall issue a tax credit certificate stating the
14amount of the tax credit to which the applicant is entitled.
15The tax credit certificate shall be effective for expenditures
16made prior to the date of initial certification and shall be
17valid until the production is completed.
 
18    Section 25. Amount and duration of the credit. The amount
19of the credit awarded under this Act is based on the amount of
20the Illinois labor expenditure and Illinois production
21spending approved by the Department for the production as set
22forth under Section 5. The credit may be taken beginning with
23the taxable year in which the accredited production company has

 

 

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1met the investment requirement. For each year in which such
2accredited production company either claims or transfers the
3credit, the accredited production company shall attach a
4schedule to the accredited production company's Illinois
5income tax return.
 
6    Section 30. Transfer of tax credits.
7    (a) Upon application and granting of an accredited
8production certificate by the Department, an accredited
9production company, or a partner or member that has received a
10distribution under that certificate, may elect to transfer, in
11whole or in part, any unused credit amount granted under this
12Act. An election to transfer any unused credit amount must be
13made no later than 5 years after the date the credit is
14awarded, after which period the credit expires and may not be
15used. The Department shall notify the Department of Revenue of
16the election and transfer.
17    (b) An accredited production company that elects to apply a
18credit amount against taxes remitted is permitted a one-time
19transfer of unused credits to one transferee. An accredited
20production company that elects to apply a credit amount against
21taxes due is permitted a one-time transfer of unused credits to
22no more than 4 transferees, and such transfers must occur in
23the same taxable year.
24    (c) The transferee is subject to the same rights and
25limitations as the accredited production company awarded the

 

 

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1credit, except that the transferee may not sell or otherwise
2transfer the credit.
3    (d) The Department of Revenue may adopt rules to administer
4this Section.
 
5    Section 35. Interactive Digital Media Tax Credit Report.
6The Department shall submit to the General Assembly, no later
7than July 1, 2020, a report that includes, without limitation:
8        (1) an assessment of the economic impact of the tax
9    credit program created under this Act, including the number
10    of jobs created and retained, and whether the job positions
11    are entry level, management, vendor, or production
12    related;
13        (2) an assessment of the revenue impact of the program,
14    including, but not limited to, the amount of Illinois labor
15    expenditure and Illinois production expenditure brought to
16    Illinois, including the amount of spending and the type of
17    Illinois vendors hired in connection with an accredited
18    production company;
19        (3) in the discretion of the Department, a review of
20    the practices and experiences of other states or nations
21    with similar programs;
22        (4) a determination of whether those receiving
23    qualifying Illinois labor expenditure salaries or wages
24    reflect the geographical, racial, ethnic, gender, and
25    income level diversity of the State of Illinois; and

 

 

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1        (5) an assessment of the overall success of the
2    program.
 
3    Section 60. Repealer. This Act is repealed July 1, 2021.
 
4    Section 90. The Illinois Income Tax Act is amended by
5adding Section 224 as follows:
 
6    (35 ILCS 5/224 new)
7    Sec. 224. Interactive Digital Media Tax Credit. For tax
8years beginning on or after January 1, 2016, taxpayers who have
9been awarded a credit under the Interactive Digital Media Tax
10Credit Act are entitled to a credit against the tax imposed
11under subsections (a) and (b) of Section 201 of this Act as
12provided in the Interactive Digital Media Tax Credit Act.
13    The credit may not be carried back. If the amount of the
14credit exceeds the tax liability for the year, the excess may
15be carried forward and applied to the tax liability of the 5
16taxable years following the excess credit year. The credit
17shall be applied to the earliest year for which there is a tax
18liability. If there are credits from more than one tax year
19that are available to offset a liability, the earlier credit
20shall be applied first. In no event shall a credit under this
21Section reduce the taxpayer's liability to less than zero.
 
22    Section 99. Effective date. This Act takes effect upon
23becoming law.