Public Act 93-0543

SB785 Enrolled                       LRB093 02893 SJM 02909 b

    AN ACT in relation to taxation.

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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