SB970: Bill Text

SB970,11,2 (c) Limitations. 1. No credit may be allowed under this subsection unless the claimant files an application with the department, at the time and in the manner prescribed by the department, and the department approves the application. The claimant shall submit a copy of the approved application with the claimant's return.

SB970,11,10 2. 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 amounts under par. (b). 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.

SB970,11,12 (d) Administration. 1. Subsection (4) (e), (g), and (h), as it applies to the credit under sub. (4), applies to the credits under this subsection.

SB970,11,17 2. If the allowable amount of the claim under par. (b) exceeds the tax otherwise due under this chapter or no tax is due under this chapter, 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) (de).

SB970,8 Section 8. 71.30 (3) (f) of the statutes is amended to read:

SB970,11,24 71.30 (3) (f) The total of farmland preservation credit under subch. IX, jobs credit under s. 71.28 (3q), enterprise zone jobs credit under s. 71.28 (3w), electronics and information technology manufacturing zone credit under s. 71.28 (3wm), business development credit under s. 71.28 (3y), research credit under s. 71.28 (4) (k) 1., digital interactive media credit under s. 71.28 (11), and estimated tax payments under s. 71.29.

SB970,9 Section 9. 71.34 (1k) (g) of the statutes is amended to read:

SB970,12,4 71.34 (1k) (g) An addition shall be made for credits computed by a tax-option corporation under s. 71.28 (1dm), (1dx), (1dy), (3), (3g), (3h), (3n), (3q), (3t), (3w), (3wm), (3y), (4), (5), (5e), (5g), (5i), (5j), (5k), (5r), (5rm), (6n), and (10), and (11) and passed through to shareholders.

SB970,10 Section 10. 71.45 (2) (a) 10. of the statutes is amended to read:

SB970,12,12 71.45 (2) (a) 10. By adding to federal taxable income the amount of credit computed under s. 71.47 (1dm) to (1dy), (3g), (3h), (3n), (3q), (3w), (3y), (5e), (5g), (5i), (5j), (5k), (5r), (5rm), (6n), and (10), and (11) and not passed through by a partnership, limited liability company, or tax-option corporation that has added that amount to the partnership's, limited liability company's, or tax-option corporation's income under s. 71.21 (4) or 71.34 (1k) (g) and the amount of credit computed under s. 71.47 (3), (3t), (4), (4m), and (5).

SB970,11 Section 11. 71.47 (11) of the statutes is created to read:

SB970,12,15 71.47 (11) Digital interactive media credit. (a) Definitions. In this subsection:

SB970,12,21 1. “Claimant” means a person who engages in qualified activities, owns a copyright in digital interactive media or entertainment or has contracted directly with the copyright owner or a person acting on behalf of the copyright owner, has a viable plan for the commercial distribution of the digital interactive media or entertainment, as determined by the department, and files a claim under this subsection.

SB970,12,24 2. “Digital interactive media or entertainment” means a product or platform intended for commercial production, use, or distribution, that has primarily an entertainment purpose, and that satisfies all of the following:

SB970,13,2 a. Contains at least 2 of the following types of data: text, sound, fixed images, animated images, video, or 3-dimensional geometry.

SB970,13,5 b. Uses discrete values that are ordinarily symbolized numerically to represent information for input, processing, transmission, and storage, including information input, processed, transmitted, and stored via the Internet.

SB970,13,9 c. Uses a system for inputting, processing, transmitting, or storing information or data in which users of the system are able to respond to the system by inputting, processing, transmitting, or storing information or data in response to the information or data provided to them through the system.

SB970,13,13 d. Uses communication tools to store, transmit, distribute, and deliver information and data, including distributed networks such as the Internet and physical media such as compact discs, CD-ROM, DVD, and other removable storage drives or devices.

SB970,13,15 3. “Digital interactive media or entertainment” does not include any of the following:

SB970,13,17 a. Software designed and developed primarily for the internal or operational purposes of an entity.

SB970,13,21 b. Largely static Internet sites designed primarily to provide information about a person, business, company, or firm, including Internet sites that are primarily social media, user generated videos, podcasting, interactive advertising, or journalism.

SB970,13,23 c. Products or services regulated under chs. 562 to 569 or any software or application primarily involving gambling or wagering.

SB970,13,24 d. Software or applications that contain content in violation of s. 944.21.

SB970,14,3 4. “Eligible expenditures” means expenditures in this state directly related to qualified activities and that have economic substance and a business purpose, including all of the following:

SB970,14,7 a. Testing software, source code development, patches, updates, sprites, 3-dimensional models, engine development and other back-end programming activities, performance and motion capture, audio production, tool development, original scoring, and level design.

SB970,14,8 b. Photography, sound synchronization, lighting, and related services.

SB970,14,10 c. Information technology support, data analysis, and activities related to a community of users of digital interactive media or entertainment.

SB970,14,11 d. Leases of facilities and equipment.

SB970,14,12 e. Prepackaged audio files, video files, photographic files, or libraries.

SB970,14,13 f. Licenses to use prerecorded audio files, video files, or photographic files.

SB970,14,15 g. Development associated with producing audio files and video files used in the production of end products of digital interactive media or entertainment.

SB970,14,17 h. Accountants and lawyers whose work is directly related to qualified activities and who are licensed or otherwise authorized to practice in this state.

SB970,14,18 5. “Eligible expenditures” does not include any of the following:

SB970,14,19 a. Expenditures related to marketing, promotion, or distribution.

SB970,14,21 b. Administrative, payroll, or management services that are not directly related to management of qualified activities.

SB970,14,22 c. Any expenditure that is later reimbursed by the state.

SB970,14,23 d. Costs related to the transfer of tax credits.

SB970,14,25 e. Amounts that are paid to persons as a result of their participation in profits from a digital interactive media or entertainment production.

SB970,15,1 f. Any reimbursement required under s. 71.748 (2).

SB970,15,2 g. Interest expenses for loans.

SB970,15,4 h. Any expenditure incurred solely to increase the amount of the credit under this subsection and that involves self-dealing or the claimant inflating prices.

SB970,15,6 i. Costs incurred for food or entertainment expenses not involved in qualified activities.

SB970,15,8 6. “Qualified activities” means creating digital interactive media or entertainment, including updates, subsequent editions, new seasons, and sequels.

SB970,15,11 (b) Filing claims. Subject to the limitations provided in this subsection, for taxable years beginning after December 31, 2023, a claimant may claim as a credit against the tax imposed under s. 71.43 any of the following amounts:

SB970,15,15 1. An amount equal to 30 percent of the salary or wages paid by the claimant in the taxable year to the claimant's employees who were residents of this state at the time that they were paid for services rendered in this state to produce digital interactive media or entertainment.

SB970,15,17 2. An amount equal to 30 percent of the eligible expenditures, other than salary or wages described in subd. 1., paid by the claimant in the taxable year.

SB970,15,21 (c) Limitations. 1. No credit may be allowed under this subsection unless the claimant files an application with the department, at the time and in the manner prescribed by the department, and the department approves the application. The claimant shall submit a copy of the approved application with the claimant's return.

SB970,16,4 2. 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 amounts under par. (b). 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.

SB970,16,6 (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.

SB970,16,11 2. If the allowable amount of the claim under par. (b) exceeds the tax otherwise due under this chapter or no tax is due under this chapter, 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) (de).

SB970,12 Section 12. 71.49 (1) (f) of the statutes is amended to read:

SB970,16,17 71.49 (1) (f) The total of farmland preservation credit under subch. IX, jobs credit under s. 71.47 (3q), enterprise zone jobs credit under s. 71.47 (3w), business development credit under s. 71.47 (3y), research credit under s. 71.47 (4) (k) 1., digital interactive media credit under s. 71.47 (11), and estimated tax payments under s. 71.48.

SB970,13 Section 13. 71.748 of the statutes is created to read:

SB970,16,21 71.748 Digital interactive media credit audits. (1) In this section, “claimant” has the meaning given in s. 71.07 (11) (a) 1., 71.28 (11) (a) 1., or 71.47 (11) (a) 1., as the context requires.

SB970,17,2 (2) A claimant shall reimburse the department for any audit initiated by the department, and for all costs incurred by the department in reviewing an audit conducted by an auditor certified under sub. (3) (a), relating to the credits under s. 71.07 (11), 71.28 (11), or 71.47 (11), including audits required under s. 73.03 (78) (a) 2. This subsection does not apply to routine audits of a claimant's entire return that include review of credits claimed under s. 71.07 (11), 71.28 (11), or 71.47 (11).

SB970,17,6 (3) (a) The department shall certify as eligible to conduct an audit required under s. 73.03 (78) (a) 2. a certified public accountant that submits an application to the department in the form and manner prescribed by the department and satisfies all of the following:

SB970,17,7 1. The applicant is licensed as a certified public accountant under ch. 442.

SB970,17,10 2. The applicant is capable of conducting audits required under s. 73.03 (78) (a) 2. according to the requirements under s. 73.03 (78) (b) and any rules promulgated related to the conduct of those audits and agrees to comply with those rules.

SB970,17,12 3. The applicant successfully completes any training required by the department.

SB970,17,13 4. The applicant pays to the department the fee established under par. (c).

SB970,17,15 5. The applicant posts and maintains any bond or insurance required by the department.

SB970,17,17 (b) The department shall revoke the certification of an auditor certified under par. (a) if any of the following apply:

SB970,17,18 1. The auditor no longer satisfies a requirement under par. (a) 1. or 5.

SB970,17,20 2. The auditor violates s. 73.03 (78) (b) or any rules related to the conduct of audits required under s. 73.03 (78) (a) 2.

SB970,17,21 (c) The department shall do all of the following:

SB970,17,22 1. Establish a fee for granting certifications under par. (a).

SB970,17,23 2. Publish and regularly update a list of all auditors certified under par. (a).

SB970,17,24 3. Publish on its website all of the following:

SB970,17,25 a. The application for certification under par. (a).

SB970,18,1 b. The requirements for certification under par. (a).

SB970,18,2 c. The requirements for audits under s. 73.03 (78) (b).

SB970,18,3 d. The amount of the fee established under subd. 1.

SB970,14 Section 14. 73.03 (78) of the statutes is created to read:

SB970,18,8 73.03 (78) (a) To implement a program to approve applications for a certificate for purposes of ss. 71.07 (11), 71.28 (11), and 71.47 (11). Application shall be made to the department in each taxable year for which a certificate is desired. The department may not approve an application unless all of the following apply:

SB970,18,11 1. The department determines that the applicant's qualified activities, as defined in s. 71.47 (11) (a) 6., will result in eligible expenditures, as defined in s. 71.47 (11) (a) 4., in excess of $25,000 for the taxable year.

SB970,18,15 2. The department, or an auditor certified by the department under s. 71.748, conducts an audit of the applicant. The department shall review an audit conducted by an auditor certified under s. 71.748 and shall conduct any additional audit necessary and make necessary adjustments.

SB970,18,17 3. The applicant reimburses the department for the cost of the audit conducted under subd. 2.

SB970,18,19 (b) 1. In conducting an audit required under par. (a) 2., the department or auditor certified by the department under s. 71.748 shall do all of the following:

SB970,18,20 a. Comply with any rules promulgated under par. (d).

SB970,18,21 b. Use any sampling methods adopted by the department.

SB970,18,24 c. Verify each reported expenditure that is included in the audit and identify and exclude each expenditure that does not satisfy the requirements under s. 71.07 (11), 71.28 (11), or 71.47 (11).

SB970,19,6 2. No audit of an applicant required under par. (a) 2. may be performed by an auditor that is part of an accounting entity that is not determined by the department to be independent of the applicant, consistent with s. 442.10 and as provided in the code of professional conduct of the American Institute of Certified Public Accountants, or its successor organization, or as otherwise determined by the department.

SB970,19,11 3. The department shall determine whether a sampling method is required for audits required under par. (a) 2., and if a sampling method is required, an appropriate sample method and size that accurately captures a truly representative sample of all expenditures for which a credit is claimed under s. 71.07 (11), 71.28 (11), or 71.47 (11).

SB970,19,15 4. The department shall conduct an audit required under par. (a) 2. when no eligible auditor is able to access information necessary to conduct the audit because the information is confidential and the department is able to access the confidential information.

SB970,19,19 (c) At least once every 2 years, beginning not later than December 31, 2025, the department shall submit a report to the governor and the standing committees of the legislature with jurisdiction over taxation under s. 13.172 (3) that includes all of the following:

SB970,19,20 1. The number of applications approved under this subsection.

SB970,19,22 2. The amount of the credits claimed under ss. 71.07 (11), 71.28 (11), and 71.47 (11).

SB970,19,24 3. The number of people employed in this state in the industries eligible for the credits under ss. 71.07 (11), 71.28 (11), and 71.47 (11).

SB970,20,2 4. The economic impact of the credits under ss. 71.07 (11), 71.28 (11), and 71.47 (11).