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COMMITTEE REPORT
April 20, 2006
H. 4966
Introduced by Reps. Hinson, Merrill, Hodges, Jefferson, Thompson, McGee, Bailey, Cooper, Dantzler, Hagood, Harrell, Hosey, Limehouse, Scarborough, J.R. Smith and Umphlett
S. Printed 4/20/06--H. [SEC 4/24/06 4:03 PM]
Read the first time April 6, 2006.
To whom was referred a Bill (H. 4966) to amend Sections 12-62-50 and 12-62-60, both as amended, Code of Laws of South Carolina, 1976, and both relating to tax rebates, etc., respectfully
That they have duly and carefully considered the same and recommend that the same do pass with amendment:
Amend the bill, as and if amended, by deleting all after the enacting words and inserting:
/ SECTION 1. Chapter 62 of Title 12 of the 1976 Code is amended to read:
"Section 12-62-10. This chapter may be cited as the "South Carolina Motion Picture Incentive Act".
Section 12-62-20. For purposes of this chapter:
(1) 'Company' means a corporation, partnership, limited liability company, or other business entity.
(2) 'Department' means the South Carolina Department of Commerce, including the South Carolina Film Commission and the Coordinating Council for Economic Development.
(3) 'Live sporting event' means a scheduled sporting competition, game, or race that is not originated by a production company, but originated solely by an amateur, collegiate, or professional organization, institution, or association for live or tape-delayed television or satellite broadcast. The term does not include commercial advertising, an episodic television series, a television pilot, music video, motion picture, or documentary production in which sporting events are presented through archived historical footage or similar footage depicting earlier live sporting events that originated more than thirty days before the time of such usage.
(3) (4) 'Motion picture' means a feature-length film, video, television series, or commercial made in whole or in part in South Carolina, and intended for national theatrical or television viewing or as a television pilot produced by a motion picture production company. The term 'motion picture' does not include the production of television coverage of news and athletic live sporting events or a production produced by a motion picture production company if records, as required by 18 U.S.C. 2257, are to be maintained by that motion picture production company with respect to any performer portrayed in that single media or multimedia program. For purposes of this definition, in the case of an episodic television series, an entire season of episodes is one production. The credit is computed based on all of the motion picture production company's qualifying expenses incurred with respect to the production.
(4) (5) 'Motion picture production company' means a company engaged in the business of producing motion pictures intended for a national theatrical release or for television viewing. 'Motion picture production company' does not mean or include a company owned, affiliated, or controlled, in whole or in part, by a company or person that is in default on taxes owed or a loan made by the State, or any of its political subdivisions, or a loan guaranteed by the State or any of its political subdivisions.
(5) (6) 'Payroll' means salary, wages, or other compensation subject to South Carolina income tax withholdings.
(6) (7) 'Secretary' means the Secretary of the Department of Commerce or his designee.
SECTION 12-62-30. A motion picture production company that intends to expend in the aggregate two hundred fifty thousand dollars or more in connection with the filming or production of one or more motion pictures in the State of South Carolina within a consecutive twelve-month period, upon making application for, meeting the requirements of, and receiving written certification of that designation from the department as provided in this chapter, shall be relieved from the payment of state and local sales and use taxes administered and collected by the Department of Revenue on funds expended in South Carolina in connection with the filming or production of a motion picture or pictures. The production of television coverage of news and athletic live sporting events is specifically excluded from the provisions of this chapter.
SECTION 12-62-40. (A) A motion picture production company that intends to film all or parts of a motion picture in South Carolina and desires to be relieved from the payment of the state and local sales and use taxes, administered and collected by the Department of Revenue, as provided in this chapter shall provide an estimate of total expenditures expected to be made in South Carolina in connection with the filming or production of the motion picture. The estimate of expenditures must be filed with the department before the commencement of filming in South Carolina.
(B) At the time the motion picture production company provides the estimate of expenditures to the department, it also shall designate a member or representative of the motion picture production company to work with the department and the Department of Revenue on reporting of expenditures and other information necessary to take advantage of the tax relief afforded by this chapter.
(C)(1) An application for the tax relief provided by this chapter must be accepted only from those motion picture production companies that report anticipated expenditures in the State in the aggregate equal to or exceeding two hundred fifty thousand dollars in connection with the filming or production of one or more motion pictures in the State within a consecutive twelve-month period.
(2) The application must be approved by the secretary.
(3) Once the application is approved by the secretary, the Department of Revenue shall issue a sales and use tax exemption certificate to the motion picture production company as evidence of the exemption. The exemption is effective on the date the application is approved by the secretary.
(D) A motion picture production company that is approved and receives a sales and use tax exemption certificate but fails to expend two hundred fifty thousand dollars in South Carolina within a consecutive twelve-month period is liable for the sales and use taxes that would have been paid had the approval not been granted; except, that the motion picture production company must be given a sixty-day period in which to pay the sales and use taxes without incurring penalties. The sales and use taxes are considered due as of the date the tangible personal property was purchased in or brought into South Carolina for use, storage, or consumption.
(E) Upon completion of the motion picture, the motion picture production company must return the sales and use tax exemption certificate to the Department of Revenue and submit a report to the department of the actual expenditures made in South Carolina in connection with the filming or production of the motion picture in South Carolina.
SECTION 12-62-50. (A)(1) The South Carolina Film Commission department may rebate to a motion picture production company a portion of the South Carolina payroll of the employment of persons subject to South Carolina income tax withholdings in connection with production of a motion picture or pictures. The rebate may not exceed fifteen thirty percent of the total aggregate South Carolina payroll for persons subject to South Carolina income tax withholdings employed in connection with the production when total production costs in South Carolina equal or exceed one million dollars during the taxable year. The rebates issued to all motion picture production companies in total may not annually exceed ten million dollars and shall come from the state's general fund. For purposes of this section, "total aggregate payroll" does not include the salary of an employee whose salary is equal to or greater than one million dollars for each motion picture.
(2)(a) For purposes of this section, an employee is an individual directly involved in the filming physical production or post-production of a motion picture in South Carolina and who is an employee of a:
(i) motion picture production company that is directly involved in the filming physical production or post-production of a motion picture in South Carolina; or (ii) personal service corporation retained by a motion picture production company to provide persons used directly in the filming physical production or post-production of a motion picture in South Carolina; or (iii) payroll services or loan out company that is retained by a motion picture production company to provide employees who work directly in the filming physical production or post-production of a motion picture in South Carolina.
(b) For his wages to qualify for the rebate, the employee must be certified by the department as a qualifying employee and the employee must have had South Carolina income tax withholding withheld and remitted to the Department of Revenue by a company described in Item (2)(a).
(3) The rebate applies with respect to an employee described in subitem (a)(ii) or (iii) only if, before commencement of filming physical production in South Carolina, the personal services corporation, payroll services company, or loan out company is approved and certified by the department, and makes an irrevocable assignment of its rebate to the motion picture production company that produced the motion picture. The assignment must be made on a form provided by the Department of Revenue department, which must include a waiver of confidentiality pursuant to Section 12-54-240. Upon assignment, the rebate may be paid only to the motion picture production company.
(B)(1) The rebate provided in subsection (A) is available to the motion picture production company at the end of all filming physical production or post-production activity in South Carolina in connection with the motion picture, whichever is later. The motion picture production company producing the motion picture must apply to the department for a certificate of completion once filming physical production or post-production activity in South Carolina is complete. The motion picture production company must provide the information the department considers necessary to determine if the one million dollar expenditure requirement has been met.
(2) A motion picture production company may claim the rebate by filing a request for rebate with the department once the certificate of completion is obtained. The request for rebate must be filed by the last day of February of the year following the year in which the certificate of completion is obtained. To claim the rebate, the motion picture production company and all companies described in subsection (A)(2)(a)(ii) or (iii) must be current with respect to all taxes or loans due and owing the State or any of its political subdivisions at the time of filing the request for rebate. If the motion picture production company or a company described in subsection (A)(2)(a)(ii) or (iii) is not current with respect to all taxes due and owing the State or any of its political subdivisions, the motion picture production company is permanently barred from claiming the rebate.
(3) The motion picture production company must attach to its request for rebate a copy of the certificate of completion and a copy of all assignments of the rebate, if applicable.
(C) A motion picture production company claiming a rebate pursuant to this section, and all companies described in subsection (A)(2)(a)(ii) or (iii), must make payroll books and records available for inspection to the commission and the department at the times requested by the commission or the department. Each motion picture production company claiming the rebate, at the time of filing, must provide a report to both the commission and the department that includes the project's name, the name of each employee that worked on the motion picture, the social security number for each employee, the dates employed, the dates number of days the employee worked on the motion picture, a job description for each employee, the total gross wages for each employee, the South Carolina taxable wages subject to withholding for each employee, the amount of rebate attributable to that employee, and other information considered necessary by the commission or the department. The report also must contain the total amount of withholding attributable to all employees that worked on the motion picture in South Carolina.
(D) For purposes of this section, and as an exception to Section 12-54-240, a motion picture production company and a company described in subsection (A)(2)(a)(ii) or (iii) agree that the commission and the department and the Department of Revenue may share or provide information concerning the request for rebate and the certificate of completion among the respective taxpayers and the respective agencies.
SECTION 12-62-55. At the time the motion picture production company is certified by the department, it may make, with the approval of the coordinating council department, an irrevocable assignment of future payments attributable to the rebates made pursuant to Section 12-62-40 or 12-62-50 or 12-62-60 to a designated trustee. For purposes of this chapter, 'designated trustee' means the single financier or financial institution designated by the council motion picture production company to receive all assignments of payments made pursuant to this chapter and to the terms of an agreement entered into by the qualifying motion picture production company. If a qualifying motion picture production company elects to assign payments to the designated trustee, the election must be made on a form provided by the department, including a waiver of confidentiality pursuant to Section 12-54-240, and the payments may be paid only to the designated trustee. The qualifying motion picture production company must file an application for the assignment with the secretary no later than thirty days after filming begins in South Carolina department.
SECTION 12-62-60. (A)(1) An amount equal to twenty-six percent of the general fund portion of admissions tax collected by the State of South Carolina for the previous fiscal year must be funded annually by September first to the department for the exclusive use of the South Carolina Film Commission. The department may rebate to a motion picture production company up to fifteen thirty percent of the expenditures made by the motion picture production company in the State if the motion picture production company has a minimum in-state expenditure in the aggregate of at least of one million dollars. The distribution of rebates may not exceed the amount annually funded to the department for the South Carolina Film Commission from the admissions tax collected by the State. Unexpended funds from this source may be carried over to the next and succeeding fiscal years.
(2) This subsection does not apply to payroll paid for motion picture production employees subject to Section 12-62-50 or money paid to the companies described in Section 12-62-50(A)(2)(a)(ii) or (iii). Unexpended funds from this source may be carried over to the next and succeeding fiscal years.
(B) Up to seven percent of the amount provided to the department in subsection (A) may be used exclusively for marketing and special events.
(C) The allocations to motion picture production companies contemplated by this chapter must be made by the Coordinating Council for Economic Development department. The Coordinating Council for Economic Development department may adopt rules and promulgate regulations for the application for and award of the rebate.
(D) One percent of the general fund portion of admissions tax collected by the State of South Carolina must be funded to the department for the exclusive use of the South Carolina Film Commission for the promotion of collaborative production and educational efforts between institutions of higher learning in South Carolina and motion picture related entities. The department, in conjunction with the South Carolina Film Commission, shall may adopt rules and promulgate regulations necessary to administer this section. Unexpended funds from this source may be carried over to the next and succeeding fiscal years.
(E) The department shall report annually to the coordinating council on the use of all funds pursuant to this section. The report is a public record pursuant to the Freedom of Information Act, Chapter 4 of Title 30, and must be posted annually on the commission's website by January first.
SECTION 12-62-70. (A)(1) Upon a determination by the Director of the Office of General Services Division of the South Carolina Budget and Control Board of the underutilization of state property by a state agency, the department may negotiate below-market rates for temporary use, no more than twelve months, of space for the underutilized property. The negotiations and temporary use are exempt from the provisions of the State Consolidated Procurement Code. The motion picture production company shall reimburse costs at normal and customary rates incurred by the state agency to the state agency, including costs required to repair any damage caused by the motion picture production company to real or personal property of the State.
(2) The state agency or local political subdivision that owns the property determined to be underutilized may appeal within three business days that determination of underutilization to the Budget and Control Board.
(B) The State or its political subdivisions may not charge a location or facility fee for properties they own if the properties are used for seven or fewer days as a location or facility in the production of a motion picture. A property may be used for a total of only twenty-one thirty days without location or facility fees in a calendar year. The qualifying motion picture production company may be on site no longer than seven days within a thirty-day period without a location or facility fee charge. State-owned or political subdivision-owned properties may recoup all costs they expend on behalf and at the direction of the qualifying motion picture production company. State-owned or political subdivision-owned properties also may recoup a location or facility fee, after the first seven days, not to exceed two thousand five hundred dollars a day. State-owned or political subdivision-owned properties also may recoup costs required to repair damage caused by the qualifying motion picture production company to real or personal property of the state agency or political subdivision. The qualifying motion picture production company shall reimburse all costs, at the property's normal and customary rates, to the state agency or political subdivisions incurring the costs within twenty-one calendar days of completion of production activities on site. The motion picture production company may use the publicly-owned property only on the days agreed to and approved by the state agency or political subdivision.
SECTION 12-62-80. The department may form a South Carolina Film Foundation to solicit donations for the recruitment and development of motion pictures and the motion picture industry in furtherance of the purposes of this chapter.
SECTION 12-62-90. The end credit roll of a motion picture that utilizes a South Carolina tax credit or rebate must recognize the State of South Carolina with the following statement: 'Filmed in South Carolina pursuant to the South Carolina Motion Picture Incentive Act', except that the State of South Carolina reserves the right to refuse the use of South Carolina's name in the credits of a motion picture filmed or produced in the State.
SECTION 12-62-100. To the extent not already provided, the department may adopt rules and promulgate regulations to carry out the intent and purposes of this chapter."
SECTION 2. A motion picture production company that has been approved for a rebate at the maximum percentage of fifteen percent pursuant to the previous provisions of Sections 12-62-50(A)(1) and 12-62-60(A)(1) may reapply for the rebate at the maximum percentage of thirty percent if the approved project is still in production in South Carolina upon the effective date of this act.
SECTION 3. This act takes effect upon approval by the Governor. /
Renumber sections to conform.
Amend title to conform.
DANIEL T. COOPER for Committee.
REVENUE IMPACT 1/
This bill would reduce general fund individual income tax revenue by $4,500,000 in FY 2006-07.
Explanation
This bill would allow the South Carolina Film Commission to compensate motion picture production companies up to 30% of the total payroll for persons employed in connection with a film production. Currently under Section 12-62-50, the film commission can compensate motion picture production companies an amount equal to 15% of the total aggregate payroll for persons employed in connection with a motion picture production where total production costs in South Carolina equal or exceed $1 million per year. Analysis of Department of Commerce data on expected motion picture spending in South Carolina suggests that $30 million in payroll would be eligible the 30% rebate of total compensation. Consequently, we expect that the additional 15% compensation of total payroll to motion picture production companies would reduce general fund individual income tax revenue by $4,500,000 million in FY 2006-07.
From the money set aside pursuant to Section 12-62-60, the Department of Commerce from their allocated admissions tax collections may compensate motion picture production companies up to 30% of their expenditures. Currently, the Department of Commerce may use the allocated 26% of admission tax collections to compensate up to 15% of the motion picture productions companies' expenditures. As the bill does not increase the expected $7.9 million in admission tax revenue allocated to the Department of Commerce for these purposes, we expect no impact on the general fund from this part of the bill.
Approved By:
William C. Gillespie
Board of Economic Advisors
1/ This statement meets the requirement of Section 2-7-71 for a state revenue impact by the BEA, or Section 2-7-76 for a local revenue impact or Section 6-1-85(B) for an estimate of the shift in local property tax incidence by the Office of Economic Research.
TO AMEND SECTIONS 12-62-50 AND 12-62-60, BOTH AS AMENDED, CODE OF LAWS OF SOUTH CAROLINA, 1976, AND BOTH RELATING TO TAX REBATES TO MOTION PICTURE PRODUCTION COMPANIES DOING BUSINESS IN SOUTH CAROLINA, SO AS TO INCREASE THE MAXIMUM PERCENTAGES OF THE TAX REBATES FROM FIFTEEN TO THIRTY PERCENT AND TO PROVIDE FOR PRE-EXISTING REBATE APPROVALS.
Be it enacted by the General Assembly of the State of South Carolina:
SECTION 1. Section 12-62-50(A)(1) of the 1976 Code, as last amended by Act 56 of 2005, is further amended to read:
"(1) The South Carolina Film Commission may rebate to a motion picture production company a portion of the South Carolina payroll of the employment of persons subject to South Carolina income tax withholdings in connection with production of a motion picture. The rebate may not exceed fifteen thirty percent of the total aggregate South Carolina payroll for persons subject to South Carolina income tax withholdings employed in connection with the production when total production costs in South Carolina equal or exceed one million dollars during the taxable year. The rebates in total may not annually exceed ten million dollars and shall come from the state's general fund. For purposes of this section, 'total aggregate payroll' does not include the salary of an employee whose salary is equal to or greater than one million dollars for each motion picture."
SECTION 2. Section 12-62-60(A)(1) of the 1976 Code, as last amended by Act 56 of 2005, is further amended to read:
"(1) An amount equal to twenty-six percent of the general fund portion of admissions tax collected by the State of South Carolina for the previous fiscal year must be funded annually by September first to the department for the exclusive use of the South Carolina Film Commission. The department may rebate to a motion picture production company up to fifteen thirty percent of the expenditures made by the motion picture production company in the State if the motion picture production company has a minimum in-state expenditure of one million dollars. The distribution of rebates may not exceed the amount annually funded to the department for the South Carolina Film Commission from the admissions tax collected by the State."
SECTION 3. A motion picture production company that has been approved for a tax rebate at the maximum percentage of fifteen percent pursuant to the previous provisions of Sections 12-62-50(A)(1) and 12-62-60(A)(1) may reapply for the rebate at the maximum percentage of thirty percent if the approved project is still in production in South Carolina upon the effective date of this act.
SECTION 4. This act takes effect upon approval by the Governor.
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