SB563: Bill Text

LRB-4176/1

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2005 - 2006 LEGISLATURE

2005 Senate BILL 563

February 3, 2006 - Introduced by Senators Kanavas, Darling, Kedzie, Lassa, Risser and Plale, cosponsored by Representatives Gielow, Wasserman, Zepnick, Kerkman, F. Lasee, Vos, Loeffelholz, Strachota, Sherman, Lehman, Stone, Fields, Berceau, Sheridan, Pettis, Newcomer, Cullen, Seidel, Molepske, Toles, Pope-Roberts and Kleefisch. Referred to Committee on Job Creation, Economic Development and Consumer Affairs.

SB563,1,8 An Act to amend 71.05 (6) (a) 15., 71.08 (1) (intro.), 71.10 (4) (i), 71.21 (4), 71.26 (2) (a), 71.34 (1) (g), 71.45 (2) (a) 10. and 77.92 (4); and to create 20.835 (2) (bm), 71.07 (5f), 71.07 (5h), 71.10 (4) (en), 71.28 (5f), 71.28 (5h), 71.30 (3) (epp), 71.30 (3) (epr), 71.47 (5f), 71.47 (5h), 71.49 (1) (epp) and 71.49 (1) (epr) of the statutes; relating to: creating income and franchise tax credits for expenses related to film production services and for capital investments made by a film production company, requiring the exercise of rule-making authority, and making an appropriation.

Analysis by the Legislative Reference Bureau

This bill creates income and franchise tax credits for film production companies. Under the bill, a film production company may claim a credit that is equal to 25 percent of the salary or wages paid to the company's employees in the taxable year for services rendered in this state to produce a film, video, electronic game, broadcast advertisement, or television production, as approved by the Department of Commerce (Commerce), and paid to employees who were residents of this state at the time that they were paid. The total amount of the credits that may be claimed by a taxpayer may not exceed an amount that is equal to the first $25,000 of salary and wages paid to each of the taxpayer's employees in the taxable year, not including the salary or wages paid to the taxpayer's two highest paid employees in the taxable year. If the total amount of the credits claimed by a taxpayer exceeds the taxpayer's tax liability, the state will not issue a refund, but the taxpayer may carry forward any remaining credit to subsequent taxable years.

Under the bill, a film production company may claim an income and franchise tax credit in an amount that is equal to 25 percent of the production expenditures paid by the company in the taxable year to produce a film, video, electronic game, broadcast advertisement, or television production. If the total amount of the credits claimed by the company exceeds the company's tax liability, the state will issue a refund.

The bill also allows a film production company to claim an income and franchise tax credit, for the first 3 taxable years that the company is doing business in this state, in an amount that is equal to 15 percent of the amount that the claimant paid in the taxable year to purchase depreciable tangible personal property or to acquire, construct, rehabilitate, remodel, or repair real property.

Under the bill, a film production company may claim an income and franchise tax credit that is equal to the amount of sales and use taxes that the claimant paid for tangible personal property and taxable services that are used to produce a film, video, electronic game, broadcast advertisement, or television production in this state.

For further information see the state and local fiscal estimate, which will be printed as an appendix to this bill.

The people of the state of Wisconsin, represented in senate and assembly, do enact as follows:

SB563, s. 1 Section 1. 20.835 (2) (bm) of the statutes is created to read:

SB563,2,3 20.835 (2) (bm) Film production services credit. A sum sufficient to make the payments under ss. 71.07 (5f) (d) 2., 71.28 (5f) (d) 2., and 71.47 (5f) (d) 2.

SB563, s. 2 Section 2. 71.05 (6) (a) 15. of the statutes is amended to read:

SB563,2,9 71.05 (6) (a) 15. The amount of the credits computed under s. 71.07 (2dd), (2de), (2di), (2dj), (2dL), (2dm), (2dr), (2ds), (2dx), (3g), (3n), (3s), (3t), (5b), and (5d), (5f), and (5h) and not passed through by a partnership, limited liability company, or tax-option corporation that has added that amount to the partnership's, company's, or tax-option corporation's income under s. 71.21 (4) or 71.34 (1) (g).

SB563, s. 3 Section 3. 71.07 (5f) of the statutes is created to read:

SB563,3,1 71.07 (5f) Film production services credit. (a) Definitions. In this subsection:

SB563,3,9 1. "Accredited production" means a film, video, electronic game, broadcast advertisement, or television production, as approved by the department of commerce, for which the aggregate salary and wages included in the cost of the production for the period ending 12 months after the month in which the principal filming or taping of the production begins exceeds $100,000 for a production that is 30 minutes or longer or $50,000 for a production that is less than 30 minutes. "Accredited production" does not include any of the following, regardless of the production costs:

SB563,3,11 a. News, current events, or public programming or a program that includes weather or market reports.

SB563,3,12 b. A talk show.

SB563,3,13 c. A production with respect to a questionnaire or contest.

SB563,3,14 d. A sports event or sports activity.

SB563,3,15 e. A gala presentation or awards show.

SB563,3,16 f. A finished production that solicits funds.

SB563,3,19 g. A production for which the production company is required under 18 USC 2257 to maintain records with respect to a performer portrayed in a single media or multimedia program.

SB563,3,21 h. A production produced primarily for industrial, corporate, or institutional purposes.

SB563,4,2 2. "Claimant" means a film production company that operates an accredited production in this state, if the company owns the copyright in the accredited production or has contracted directly with the copyright owner or a person acting on the owner's behalf and if the company has a viable plan, as determined by the department of commerce, for the commercial distribution of the finished production.

SB563,4,16 3. "Production expenditures" means any expenditures that are incurred in this state and directly used to produce an accredited production, including expenditures for set construction and operation, wardrobes, make-up, clothing accessories, photography, sound recording, sound synchronization, sound mixing, lighting, editing, film processing, film transferring, special effects, visual effects, renting or leasing facilities or equipment, renting or leasing motor vehicles, food, lodging, and any other similar expenditure as determined by the department of commerce. "Production expenditures" include expenditures for music that is performed, composed, or recorded by a musician who is a resident of this state or published or distributed by an entity that has its headquarters in this state; air travel that is purchased from a travel agency or company that has its headquarters in this state; and insurance that is purchased from an insurance agency or company that has its headquarters in this state. "Production expenditures" do not include expenditures for the marketing and distribution of an accredited production.

SB563,4,19 (b) Filing claims. Subject to the limitations provided in this subsection, for taxable years beginning after December 31, 2005, a claimant may claim as a credit against the tax imposed under s. 71.02 any of the following amounts:

SB563,4,23 1. An amount equal to 25 percent of the salary or wages paid by the claimant to the claimant's employees in the taxable year for services rendered in this state to produce an accredited production and paid to employees who were residents of this state at the time that they were paid.

SB563,4,25 2. An amount equal to 25 percent of the production expenditures paid by the claimant in the taxable year to produce an accredited production.

SB563,5,5 3. An amount equal to the taxes imposed under ss. 77.52 and 77.53 that the claimant paid in the taxable year on the purchase of tangible personal property and taxable services that are used directly in producing an accredited production in this state, including all stages from the final script stage to the distribution of the finished production.

SB563,5,9 (c) Limitations. 1. No amount of the salary or wages paid under par. (b) 1. may be the basis for a credit under this subsection unless the salary or wages are paid for services rendered after December 31, 2005, and directly incurred to produce the accredited production.

SB563,5,14 2. The total amount of the credits that may be claimed by a claimant under par. (b) 1. shall not exceed an amount equal to the first $25,000 of salary or wages paid to each of the claimant's employees, as described in par. (b), in the taxable year, not including the salary or wages paid to the claimant's 2 highest paid employees, as described in par. (b), in the taxable year.

SB563,5,18 3. No credit may be allowed under this subsection unless the claimant files an application with the department of commerce, at the time and in the manner prescribed by the department of commerce, and the department of commerce approves the application.

SB563,6,2 4. Partnerships, limited liability companies, and tax-option corporations may not claim the credit under this subsection, but the eligibility for, and the amount of, the credit are based on their payment of wages and salaries. A partnership, limited liability company, or tax-option corporation shall compute the amount of credit that each of its partners, members, or shareholders may claim and shall provide that information to each of them. Partners, members of limited liability companies, and shareholders of tax-option corporations may claim the credit in proportion to their ownership interest.

SB563,6,6 (d) Administration. 1. Section 71.28 (4) (e), (g), and (h), as it applies to the credit under s. 71.28 (4), applies to the credits under this subsection. Section 71.28 (4) (f), as it applies to the credit under s. 71.28 (4), applies to the credits under par. (b) 1. and 3.

SB563,6,11 2. If the allowable amount of the claim under par. (b) 2. exceeds the tax otherwise due under s. 71.02 or no tax is due under s. 71.02, the amount of the claim not used to offset the tax due shall be certified by the department of revenue to the department of administration for payment by check, share draft, or other draft drawn from the appropriation account under s. 20.835 (2) (bm).

SB563, s. 4 Section 4. 71.07 (5h) of the statutes is created to read:

SB563,6,14 71.07 (5h) Film production company investment credit. (a) Definitions. In this subsection:

SB563,6,16 1. "Claimant" means a person who files a claim under this subsection and who does business in this state as a film production company.

SB563,6,19 2. "Film production company" means an entity that creates films, videos, electronic games, broadcast advertisement, or television productions, not including the productions described under s. 71.07 (5f) (a) 1. a. to h.

SB563,6,22 3. "Physical work" does not include preliminary activities such as planning, designing, securing financing, researching, developing specifications, or stabilizing property to prevent deterioration.

SB563,7,2 4. "Previously owned property" means real property that the claimant or a related person owned during the 2 years prior to doing business in this state as a film production company and for which the claimant may not deduct a loss from the sale of the property to, or an exchange of the property with, the related person under section 267 of the Internal Revenue Code.

SB563,7,8 (b) Filing claims. Subject to the limitations provided in this subsection, for taxable years beginning after December 31, 2005, a claimant may claim as a credit against the tax imposed under s. 71.02, up to the amount of the taxes, for the first 3 taxable years that the claimant is doing business in this state as a film production company, an amount that is equal to 15 percent of the following that the claimant paid in the taxable year to establish a film production company in this state:

SB563,7,9 1. The purchase price of depreciable, tangible personal property.

SB563,7,11 2. The amount expended to acquire, construct, rehabilitate, remodel, or repair real property.