SB0785enr 93rd General Assembly


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 1        AN ACT in relation to taxation.

 2        Be  it  enacted  by  the People of the State of Illinois,
 3    represented in the General Assembly:

 4        Section 1. Short title. This Act may be cited as the Film
 5    Production Services Tax Credit Act.

 6        Section 5. Purpose. The General Assembly finds  that  the
 7    Illinois  economy  is  highly  vulnerable to other states and
 8    nations that have major financial incentive programs targeted
 9    to the motion picture  industry.  Because  of  the  incentive
10    programs  of  these  competitor locations, Illinois must move
11    aggressively with new business development  investment  tools
12    so  that  Illinois  is  more  competitive  in  site  location
13    decision-making  for  film  productions.  In  an increasingly
14    global economy, Illinois' long-term development will  benefit
15    from rational, strategic use of State resources in support of
16    film  production development and growth. It is the purpose of
17    this  Act  to  preserve  and  expand   the   existing   human
18    infrastructure  for  the motion picture industry in Illinois.
19    It shall be the policy of this State to promote and encourage
20    the training and hiring of Illinois residents  who  represent
21    the diversity of the Illinois population through the creation
22    and  implementation  of  training, education, and recruitment
23    programs organized in cooperation with Illinois colleges  and
24    universities,  labor  organizations,  and  the motion picture
25    industry.

26        Section 10. Definitions. As used in this Act:
27        "Accredited  production"  means   a   film,   video,   or
28    television   production   that  has  been  certified  by  the
29    Department in which the aggregate Illinois labor expenditures
30    included in the cost of the production, in  the  period  that
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 1    ends  12 months after the time principal filming or taping of
 2    the production began, exceed $100,000 for productions  of  30
 3    minutes or longer, or $50,000 for productions of less than 30
 4    minutes; but does not include a production that:
 5             (1)  is news, current events, or public programming,
 6        or a program that includes weather or market reports;
 7             (2)  is a talk show;
 8             (3)  is   a   production   in  respect  of  a  game,
 9        questionnaire, or contest;
10             (4)  is a sports event or activity;
11             (5)  is a gala presentation or awards show;
12             (6)  is a finished production that solicits funds;
13             (7)  is a production produced by a  film  production
14        company if records, as required by 18 U.S.C. 2257, are to
15        be  maintained  by  that  film  production  company  with
16        respect  to  any performer portrayed in that single media
17        or multimedia program; or
18             (8)  is  a   production   produced   primarily   for
19        industrial, corporate, or institutional purposes.
20        "Accredited  production  certificate" means a certificate
21    issued by the Department certifying that the production is an
22    accredited production that meets the guidelines of this Act.
23        "Applicant" means a taxpayer that is  a  film  production
24    company  that  is  operating  or  has  operated an accredited
25    production located within the State of Illinois and that  (i)
26    owns  the  copyright  in the accredited production throughout
27    the  Illinois  production  period  or  (ii)  has   contracted
28    directly  with  the  owner of the copyright in the accredited
29    production or a person acting  on  behalf  of  the  owner  to
30    provide  services  for the production, where the owner of the
31    copyright is not an eligible production corporation.
32        "Credit" means the amount equal to 25%  of  the  Illinois
33    labor  expenditure  approved by the Department. The applicant
34    is deemed to have paid, on its balance due day for the  year,
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 1    an  amount  equal  to  25%  of  its  qualified Illinois labor
 2    expenditure for the tax year.
 3        "Department"  means  the  Department  of   Commerce   and
 4    Community Affairs.
 5        "Director"  means  the Director of Commerce and Community
 6    Affairs.
 7        "Illinois labor expenditure" means salary or  wages  paid
 8    to  employees of the applicant for services on the accredited
 9    production;
10        To  qualify  as  an  Illinois  labor   expenditure,   the
11    expenditure must be:
12             (1)  Reasonable in the circumstances.
13             (2)  Included in the federal income tax basis of the
14        property.
15             (3)  Incurred  by  the  applicant for services on or
16        after January 1, 2004.
17             (4)  Incurred  for  the  production  stages  of  the
18        accredited production, from the final script stage to the
19        end of the post-production stage.
20             (5)  Limited to the first $25,000 of wages  paid  or
21        incurred to each employee of the production.
22             (6)  Exclusive  of  the  salary  or wages paid to or
23        incurred  for  the  2  highest  paid  employees  of   the
24        production.
25             (7)  Directly   attributable   to   the   accredited
26        production.
27             (8)  Paid in the tax year for which the applicant is
28        claiming  the  credit  or no later than 60 days after the
29        end of the tax year.
30             (9)  Paid to persons resident  in  Illinois  at  the
31        time the payments were made.
32             (10)  Paid for services rendered in Illinois.

33        Section  15. Powers of the Department. The Department, in
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 1    addition  to   those   powers   granted   under   the   Civil
 2    Administrative  Code  of Illinois, is granted and has all the
 3    powers necessary or convenient to carry  out  and  effectuate
 4    the  purposes  and provisions of this Act, including, but not
 5    limited to, power and authority to:
 6        (a)  Adopt rules deemed necessary and appropriate for the
 7    administration of the tax credit program; establish forms for
 8    applications,  notifications,   contracts,   or   any   other
 9    agreements;  and  accept  applications at any time during the
10    year.
11        (b)  Assist applicants pursuant to the provisions of this
12    Act to promote, foster, and support film production  and  its
13    related job creation or retention within the State.
14        (c)  Gather  information  and  conduct  inquiries, in the
15    manner and by the methods as it deems  desirable,  including,
16    without  limitation,  gathering  information  with respect to
17    applicants for the purpose  of  making  any  designations  or
18    certifications   necessary   or   desirable   or   to  gather
19    information to assist the Department with any  recommendation
20    or  guidance  in the furtherance of the purposes of this Act,
21    including, but not limited to, information as to whether  the
22    applicant    participated   in   training,   education,   and
23    recruitment programs that are organized in  cooperation  with
24    Illinois  colleges and universities, labor organizations, and
25    the motion picture industry, and are designed to promote  and
26    encourage  the  training and hiring of Illinois residents who
27    represent the diversity of the Illinois population.
28        (d)  Provide   for   sufficient   personnel   to   permit
29    administration,  staffing,  operation,  and  related  support
30    required   to   adequately   discharge   its    duties    and
31    responsibilities  described  in this Act from funds as may be
32    appropriated by the General Assembly for  the  administration
33    of this Act.
34        (e)  Require  applicants,  upon written request, to issue
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 1    any  necessary  authorization  to  the  appropriate  federal,
 2    state, or local authority  for  the  release  of  information
 3    concerning a project being considered under the provisions of
 4    this  Act, with the information requested to include, but not
 5    be  limited  to,  financial  reports,  returns,  or   records
 6    relating to the applicant or the accredited production.
 7        (f)  Require  that  an  applicant  must at all times keep
 8    proper  books  of  record  and  account  in  accordance  with
 9    generally   accepted   accounting   principles   consistently
10    applied, with the books, records, or papers  related  to  the
11    accredited  production  in  the  custody  or  control  of the
12    taxpayer  open  for  reasonable  Department  inspection   and
13    audits,  and  including,  without  limitation,  the making of
14    copies of the books, records, or papers, and  the  inspection
15    or  appraisal  of  any  of the assets of the applicant or the
16    accredited production.
17        (g)  Take whatever actions are necessary  or  appropriate
18    to  protect  the State's interest in the event of bankruptcy,
19    default, foreclosure, or noncompliance  with  the  terms  and
20    conditions  of financial assistance or participation required
21    under this Act, including the power to sell, dispose,  lease,
22    or rent, upon terms and conditions determined by the Director
23    to  be  appropriate,  real  or  personal  property  that  the
24    Department may receive as a result of these actions.

25        Section  20. Tax credit awards. Subject to the conditions
26    set forth in this Act, an applicant is entitled to  a  credit
27    of  25%  of  the  Illinois  labor expenditure approved by the
28    Department under Section 40 of this Act.

29        Section 25. Application for certification  of  accredited
30    production.  Any  applicant  proposing  a  film or television
31    production located or planned to be located in  Illinois  may
32    request   an  accredited  production  certificate  by  formal
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 1    application to the Department.

 2        Section  30.  Review  of   application   for   accredited
 3    production certificate.
 4        (a)  In   determining  whether  to  issue  an  accredited
 5    production certificate, the Department must determine that  a
 6    preponderance of the following conditions exist:
 7             (1)  The  applicant's production intends to make the
 8        expenditure in the State required for certification.
 9             (2)  The  applicant's  production  is   economically
10        sound  and  will  benefit  the  people  of  the  State of
11        Illinois by increasing opportunities for  employment  and
12        strengthen the economy of Illinois.
13             (3)  The applicant's production application includes
14        a provision setting  forth  the  percentage  of  minority
15        workers  that  the  production  company  plans to employ,
16        subject   to   any   applicable   collective   bargaining
17        agreements  with  a  labor  organization  to  which   the
18        applicant  is  a  signatory,    to  perform  work  on the
19        production. This provision should stress  the  importance
20        of hiring the percentage of minorities that is set out in
21        the application.
22             (4) The applicant's production application indicates
23        whether the applicant intends to participate in training,
24        education, and recruitment programs that are organized in
25        cooperation  with  Illinois  colleges  and  universities,
26        labor  organizations, and the motion picture industry and
27        are designed to promote and encourage  the  training  and
28        hiring  of Illinois residents who represent the diversity
29        of the Illinois population.
30             (5)  That, if not for the  credit,  the  applicant's
31        production  would  not  occur  in  Illinois, which may be
32        demonstrated by any means including, but not limited  to,
33        evidence   that   the   applicant   has   multi-state  or
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 1        international location options and could  reasonably  and
 2        efficiently locate outside of the State, or demonstration
 3        that  at  least  one  other  state  or  nation  is  being
 4        considered  for  the  production,  or  evidence  that the
 5        receipt  of  the  credit  is  a  major  factor   in   the
 6        applicant's  decision  and  that  without  the credit the
 7        applicant likely would  not  create  or  retain  jobs  in
 8        Illinois,  or  demonstration that receiving the credit is
 9        essential to the applicant's decision to create or retain
10        new jobs in the State.
11             (6)  Awarding the credit will result in  an  overall
12        positive  impact  to  the  State,  as  determined  by the
13        Department using the best available data.
14        (b)  If any of the provisions in  this  Section  conflict
15    with any existing collective bargaining agreements, the terms
16    and  conditions  of  those  collective  bargaining agreements
17    shall control.

18        Section 35.  Issuance of Tax Credit Certificate.
19        (a) In order to qualify for a tax credit under this  Act,
20    an applicant must file an application, on forms prescribed by
21    the  Department, providing information necessary to calculate
22    the tax credit, and any additional information as required by
23    the Department.
24        (b) Upon satisfactory  review  of  the  application,  the
25    Department  shall  issue a Tax Credit Certificate stating the
26    amount of the tax credit to which the applicant is entitled.

27        Section 40. Amount and duration of the credit. The amount
28    of the credit awarded under this Act is based on  the  amount
29    of  the Illinois labor expenditure approved by the Department
30    for the production. The duration of the credit may not exceed
31    one taxable year.
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 1        Section  45.  Evaluation  of  tax  credit  program.   The
 2    Department   shall  evaluate  the  tax  credit  program.  The
 3    evaluation must include an assessment of the effectiveness of
 4    the program in creating and retaining new  jobs  in  Illinois
 5    and  of  the revenue impact of the program, and may include a
 6    review of the practices and experiences of  other  states  or
 7    nations  with  similar  programs.   Upon  completion  of this
 8    evaluation,  the  Department  shall  determine  the   overall
 9    success  of  the  program,  and  may make a recommendation to
10    extend, modify, or not  extend  the  program  based  on  this
11    evaluation.

12        Section 50. Program terms and conditions. Any documentary
13    materials  or data made available or received by any agent or
14    employee of the  Department  are  confidential  and  are  not
15    public  records  to  the  extent  that  the materials or data
16    consist of commercial or financial information regarding  the
17    operation of the production of the applicant for or recipient
18    of any tax credit under this Act.

19        Section 90. Repeal. This Act is repealed 1 year after its
20    effective date.

21        Section  905.  The  Illinois Income Tax Act is amended by
22    adding Section 213 as follows:

23        (35 ILCS 5/213 new)
24        Sec. 213. Film production services credit. For tax  years
25    beginning  on  or  after  January 1, 2004, a taxpayer who has
26    been awarded a tax credit under the Film Production  Services
27    Tax  Credit  Act  is  entitled  to a credit against the taxes
28    imposed under subsections (a) and (b) of Section 201 of  this
29    Act in an amount determined by the Department of Commerce and
30    Community  Affairs  under  the  Film  Production Services Tax
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 1    Credit Act. If the taxpayer is a partnership or Subchapter  S
 2    corporation,  the  credit  is  allowed  to  the  partners  or
 3    shareholders  in  accordance with the determination of income
 4    and distributive share of income under Sections 702  and  704
 5    and   Subchapter   S   of  the  Internal  Revenue  Code.  The
 6    Department, in cooperation with the  Department  of  Commerce
 7    and  Community  Affairs,  must prescribe rules to enforce and
 8    administer the provisions of this Section.  This  Section  is
 9    exempt from the provisions of Section 250 of this Act.
10        The  credit  may  not  be carried forward or back.  In no
11    event shall a credit under this Section reduce the taxpayer's
12    liability to less than zero.

13        Section 999. Effective date. This  Act  takes  effect  on
14    January 1, 2004.