PA 10-107—sSB 176

Commerce Committee

Finance, Revenue and Bonding Committee

AN ACT CONCERNING THE FILM TAX CREDIT

SUMMARY: This act modifies the criteria for accessing the corporation business and insurance premium tax credits for producing films and developing infrastructure in Connecticut.

A company producing film or digital media qualifies for credits based on the money and time it spends here. By law, the company must spend at least $100,000 producing the film or media in Connecticut. The act retains this threshold but narrows the range of eligible expenses by excluding the money spent in Connecticut on developing the idea for the film or media and limiting compensation to base salaries and wages.

The law also requires the company to spend a certain amount of time or money in Connecticut on specific production tasks. Under prior law, the company had to conduct at least 50% of its principal photography days or incur at least 50% of the post-production costs in the state. The act reduces the minimum share of principal photography days in Connecticut to 25%. It also makes it easier for the company to qualify based on postproduction costs. Under the act, the company qualifies if it incurs at least 50% or $1 million of those costs here.

Lastly, the act tightens the criteria for determining eligible production and infrastructure costs. It also makes a conforming technical change.

EFFECTIVE DATE: July 1, 2010 and applicable to income years beginning on or after January 1, 2010.

FILM PRODUCTION CREDITS

Production Expenses

By excluding expenses and costs incurred in Connecticut to develop an idea for a film, the act limits the range of eligible expenses and costs to those incurred in planning (preproduction), filming (production), and editing (postproduction) a film.

The act also narrows the type of compensation that counts toward eligible production costs. By law, those costs include compensation under $20 million paid to people or entities for representing star talent. The act limits these costs to base salaries or wages and excludes bonus pay, stock options, restricted stock units, or similar arrangements.

INFRASTRUCTURE CREDITS

Besides authorizing film production credits, the law authorizes corporation business and insurance premium credits for developing the buildings, facilities, and installations needed to produce films here. A developer qualifies for the credit regardless of whether he or she intends to construct and sell the infrastructure or lease it under any type of lease agreement. With respect to leased facilities, the act limits the credits to those leased under a capital lease. Capital leases generally have longer terms, higher lease payments, and provisions for transferring the property to the lessee when the lease term ends.

BACKGROUND

Credit Amounts

Film and digital media production credits range from 10% to 30% depending on the total production expenses over $100,000 that a company incurs in Connecticut. The credit equals 10% for expenses between $100,000 and $500,000, 15% for expenses over $500,000 but less than $1 million, and 30% for expenses over the latter amount.

The film infrastructure tax credit equals 20% of the cost of developing buildings, facilities, and installations film and digital media production companies need to operate in Connecticut. A company qualifies for the credit if it spends at least $3 million developing this infrastructure.

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