HOUSE BILL 379
51st legislature - STATE OF NEW MEXICO - first session, 2013
Antonio "Moe" Maestas
RELATING TO TAXATION; AMENDING SECTIONS OF THE FILM PRODUCTION TAX CREDIT ACT TO PROVIDE FOR AN INCREASED FILM PRODUCTION TAX CREDIT; PROVIDING FOR THE CARRYFORWARD OF FILM PRODUCTION TAX CREDITS TO FUTURE YEARS; PROVIDING FOR THE TRANSFER OF FILM PRODUCTION TAX CREDITS; RECONCILING MULTIPLE AMENDMENTS TO SECTIONS OF LAW IN LAWS 2011.
BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF NEW MEXICO:
SECTION 1. Section 7-2F-1 NMSA 1978 (being Laws 2002, Chapter 36, Section 1, as amended by Laws 2011, Chapter 165, Section 1 and by Laws 2011, Chapter 177, Section 2) is amended to read:
"7-2F-1. FILM PRODUCTION TAX CREDIT.--
A. The tax credit created by this section may be referred to as the "film production tax credit". An eligible film production company may apply for, and the taxation and revenue department may allow, subject to the limitation in [Subsection D of] this section, a tax credit in an amount equal to the percentage specified in Subsection B of this section of:
(1) direct production expenditures made in New Mexico that:
(a) are directly attributable to the production in New Mexico of a film or commercial audiovisual product;
(b) are subject to taxation by the state of New Mexico;
(c) exclude direct production expenditures for which another taxpayer claims the film production tax credit; and
(d) do not exceed the usual and customary cost of the goods or services acquired when purchased by unrelated parties. The secretary of taxation and revenue may determine the value of the goods or services for purposes of this section when the buyer and seller are affiliated persons or the sale or purchase is not an arm's length transaction; and
(2) postproduction expenditures made in New Mexico that:
(a) are directly attributable to the production of a commercial film or audiovisual product;
(b) are for services performed in New Mexico;
(c) are subject to taxation by the state of New Mexico;
(d) exclude postproduction expenditures for which another taxpayer claims the film production tax credit; and
(e) do not exceed the usual and customary cost of the goods or services acquired when purchased by unrelated parties. The secretary of taxation and revenue may determine the value of the goods or services for purposes of this section when the buyer and seller are affiliated persons or the sale or purchase is not an arm's length transaction.
B. Except as otherwise provided in [Subsections C and P of] this section, the percentage to be applied in calculating the amount of the film production tax credit is twenty-five percent.
C. With respect to expenditures attributable to a production for which the film production company receives a tax credit pursuant to the federal new markets tax credit program, the percentage to be applied in calculating the film production tax credit is twenty percent.
D. In addition to the twenty-five percent credit stipulated in Subsection B of this section, another five percent credit shall be applied to qualified direct New Mexico production expenditures on series television production intended for commercial distribution with an order for at least six episodes in a single season or on a production that spends at least five hundred thousand dollars ($500,000) on building, rigging and lighting of at least one set in New Mexico.
[D.] E. A claim for film production tax credits shall be filed as part of a return filed pursuant to the Income Tax Act or the Corporate Income and Franchise Tax Act. [The date a credit claim is received by the department shall determine the order that a credit claim is authorized for payment by the department.] Applications for a film production tax credit shall be assigned queue numbers on a first-come, first-served basis as determined by the date the applications are received by the department. In the event that more than one application is received on any one date, a random selection process shall determine the order of all applications, if received by 3:00 p.m. on the same date. Principal photography shall commence within sixty days of the date that a production agreement is signed by the department. The department may extend this period at its discretion by no more than thirty days. If a production does not commence principal photography within the time appointed pursuant to this subsection, the production shall forfeit its position in the queue. The aggregate amount of the film production tax credit claims that may be authorized for payment in any fiscal year is fifty million dollars ($50,000,000) with respect to the direct production expenditures or postproduction expenditures made on film or commercial audiovisual products. Any amounts unexpended in any fiscal year under the fifty-million-dollar ($50,000,000) annual limit may be carried forward for expenditure against film production tax credit claims in subsequent fiscal years; provided that the amounts carried forward shall not count against subsequent years' fifty-million-dollar ($50,000,000) annual limitation. A film production company that submits a claim for a film production tax credit that is unable to receive the tax credit because the claims for the fiscal year exceed the limitation in this subsection shall be placed for the subsequent fiscal year at the front of a queue of film production tax credit claimants submitting claims in the subsequent fiscal year in the order of the date on which the credit was authorized for payment.
[E.] F. Credit claims authorized for payment pursuant to the Film Production Tax Credit Act shall be paid pursuant to provisions of the Tax Administration Act to the taxpayer as follows:
(1) a credit claim amount of less than two million dollars ($2,000,000) per taxable year shall be paid immediately upon authorization for payment of the credit claim;
(2) a credit claim amount of two million dollars ($2,000,000) or more but less than five million dollars ($5,000,000) per taxable year shall be divided into two equal payments, with the first payment to be made immediately upon authorization of the payment of the credit claim and the second payment to be made twelve months following the date of the first payment; and
(3) a credit claim amount of five million dollars ($5,000,000) or more per taxable year shall be divided into three equal payments, with the first payment to be made immediately upon authorization of payment of the credit claim, the second payment to be made twelve months following the date of the first payment and the third payment to be made twenty-four months following the date of the first payment.
[F.] G. Any amount of a credit claim that is carried forward pursuant to [Subsection E of] this section shall be subject to the limit on the aggregate amount of credit claims that may be authorized for payment pursuant to Subsection [D] E of this section in the fiscal year in which that amount is paid.
[G.] H. A credit claim shall only be considered received by the department if the credit claim is made on a complete tax return filed timely after the close of the taxable year. All direct production expenditures and postproduction expenditures incurred during the taxable year by a film production company shall be submitted as part of the same income tax return and paid pursuant to this section. A credit claim shall not be divided and submitted with multiple returns or in multiple years.
[H.] I. For purposes of determining the payment of credit claims pursuant to [Subsection E of] this section, the secretary of taxation and revenue may require that credit claims of affiliated persons be combined into one claim if necessary to accurately reflect closely integrated activities of affiliated persons.
[I.] J. The film production tax credit shall not be claimed with respect to direct production expenditures or postproduction expenditures for which the film production company has delivered a nontaxable transaction certificate pursuant to Section 7-9-86 NMSA 1978.
[J.] K. A long-form narrative film production for which the film production tax credit is claimed pursuant to Paragraph (1) of Subsection A of this section shall contain an acknowledgment that the production was filmed in New Mexico.
[K.] L. To be eligible for the film production tax credit, a film production company shall submit to the division information required by the division to demonstrate conformity with the requirements of the Film Production Tax Credit Act, including detailed information on each direct production expenditure and each postproduction expenditure. A film production company shall provide to the division a projection of the film production tax credit claim the film production company plans to submit in the fiscal year. In addition, the film production company shall agree in writing:
(1) to pay all obligations the film production company has incurred in New Mexico;
(2) to post a notice at completion of principal photography on the web site of the division that:
(a) contains production company information, including the name of the production, the address of the production company and contact information that includes a working phone number, fax number and email address for both the local production office and the permanent production office to notify the public of the need to file creditor claims against the film production company; and
(b) remains posted on the web site until all financial obligations incurred in the state by the film production company have been paid;
(3) that outstanding obligations are not waived should a creditor fail to file;
(4) to delay filing of a claim for the film production tax credit until the division delivers written notification to the taxation and revenue department that the film production company has fulfilled all requirements for the credit; and
(5) to submit a completed application for the film production tax credit and supporting documentation to the division within one year of making the final expenditures in New Mexico that are included in the credit claim.
[L.] M. The division shall determine the eligibility of the company and shall report this information to the taxation and revenue department in a manner and at times the economic development department and the taxation and revenue department shall agree upon. The division shall also post on its web site all information provided by the film production company that does not reveal revenue, income or other information that may jeopardize the confidentiality of income tax returns, including that the division shall report monthly the projected amount of credit claims for the fiscal year.
[M.] N. To provide guidance to film production companies regarding the amount of credit capacity remaining in the fiscal year, the taxation and revenue department shall post monthly on that department's web site the aggregate amount of credits claimed and processed for the fiscal year.
[N.] O. To receive a film production tax credit, a film production company shall apply to the taxation and revenue department on forms and in the manner the department may prescribe. The application shall include a certification of the amount of direct production expenditures or postproduction expenditures made in New Mexico with respect to the film production for which the film production company is seeking the film production tax credit; provided that for the film production tax credit, the application shall be submitted within one year of the date of the last direct production expenditure in New Mexico or the last postproduction expenditure in New Mexico. If the amount of the requested tax credit exceeds five million dollars ($5,000,000), the application shall also include the results of an audit, conducted by a certified public accountant licensed to practice in New Mexico, verifying that the expenditures have been made in compliance with the requirements of this section. If the requirements of this section have been complied with, subject to the provisions of Subsection [D] E of this section, the taxation and revenue department shall approve the film production tax credit and issue a document granting the tax credit.
[O.] P. The film production company may apply all or a portion of the film production tax credit granted against personal income tax liability or corporate income tax liability. If the amount of the film production tax credit claimed exceeds the film production company's tax liability for the taxable year in which the credit is being claimed, the excess shall be refunded. Upon application to the taxation and revenue department, the film production company may sell, transfer or assign all or a portion of the refunds due under this section to another entity on a one-time basis; they may not be further sold, transferred or assigned. The film production company must identify the buyer company or individual, and the buyer must sign the application to sell the refund.
[P.] Q. As applied to direct production expenditures for the services of performing artists, the film production tax credit authorized by this section shall not exceed five million dollars ($5,000,000) for services rendered by all performing artists in a production for which the film production tax credit is claimed."
SECTION 2. Section 7-2F-2 NMSA 1978 (being Laws 2003, Chapter 127, Section 2, as amended by Laws 2011, Chapter 165, Section 3 and by Laws 2011, Chapter 177, Section 4) is amended to read:
"7-2F-2. DEFINITIONS.--As used in the Film Production Tax Credit Act:
A. "affiliated person" means a person who directly or indirectly owns or controls, is owned or controlled by or is under common ownership or control with another person through ownership of voting securities or other ownership interests representing a majority of the total voting power of the entity;
B. "commercial audiovisual product" means a film or a videogame intended for commercial exploitation;
C. "direct production expenditure":
(1) except as provided in Paragraph (2) of this subsection, means a transaction that is subject to taxation in New Mexico, including:
(a) payment of wages, fringe benefits or fees for talent, management or labor to a person who is a New Mexico resident;
(b) payment to a personal services business or the direct hire of a performing artist, for the services of a performing artist, if the personal services business or that performing artist: 1) pays gross receipts tax in New Mexico on the portion of those payments qualifying for the tax credit; and 2) deducts and remits withheld income tax pursuant to Subsection I of Section 7-3A-3 NMSA 1978; and
(c) any of the following provided by a vendor: 1) the story and scenario to be used for a film; 2) set construction and operations, wardrobe, accessories and related services; 3) photography, sound synchronization, lighting and related services; 4) editing and related services; 5) rental of facilities and equipment; 6) leasing of vehicles, not including the chartering of aircraft for out-of-state transportation; however, New Mexico-based chartered aircraft for in-state transportation directly attributable to the production shall be considered a direct production expenditure; provided that only the first one hundred dollars ($100) of the daily expense of leasing a vehicle for passenger transportation on roadways in the state may be claimed as a direct production expenditure; 7) food or lodging; provided that only the first one hundred fifty dollars ($150) of lodging per individual per day is eligible to be claimed as a direct production expenditure; 8) commercial airfare if purchased through a New Mexico-based travel agency or travel company for travel to and from New Mexico or within New Mexico that is directly attributable to the production; 9) insurance coverage and bonding if purchased through a New Mexico-based insurance agent, broker or bonding agent; and 10) other direct costs of producing a film in accordance with generally accepted entertainment industry practice; and
(2) does not include an expenditure for:
(a) a gift with a value greater than twenty-five dollars ($25.00);
(b) artwork or jewelry, except that a work of art or a piece of jewelry may be a direct production expenditure if: 1) it is used in the film production; and 2) the expenditure is less than two thousand five hundred dollars ($2,500); or
(c) entertainment, amusement or recreation;
D. "division" means the New Mexico film division of the economic development department;
E. "federal new markets tax credit program" means the tax credit program codified as Section 45D of the United States Internal Revenue Code of 1986, as amended;
F. "film" means a single medium or multimedia program, excluding advertising messages other than national or regional advertising messages intended for exhibition, that:
(1) is fixed on film, digital medium, videotape, computer disc, laser disc or other similar delivery medium;
(2) can be viewed or reproduced;
(3) is not intended to and does not violate a provision of Chapter 30, Article 37 NMSA 1978; and
(4) is intended for reasonable commercial exploitation for the delivery medium used;
G. "film production company" means a person that produces one or more films or any part of a film;
H. "fiscal year" means the state fiscal year beginning on July 1;
I. "New Mexico resident" means an individual who is domiciled in this state during any part of the taxable year or an individual who is physically present in this state for one hundred eighty-five days or more during the taxable year; but any individual, other than someone who was physically present in the state for one hundred eighty-five days or more during the taxable year and who, on or before the last day of the taxable year, changed the individual's place of abode to a place without this state with the bona fide intention of continuing actually to abide permanently without this state is not a resident for the purposes of the Film Production Tax Credit Act for periods after that change of abode;
J. "personal services business" means a business organization that receives payments for the services of a performing artist;
K. "physical presence" means a physical address in New Mexico [but does not include a post office box or other mail drop enterprise unless the physical presence is for a business and the business is providing mail services to a film production company] from which a vendor conducts business, stores inventory or otherwise creates, assembles or offers for sale the product purchased or leased by a film production company;
L. "postproduction expenditure" means an expenditure for editing, Foley recording, automatic dialogue replacement, sound editing, special effects, including computer-generated imagery or other effects, scoring and music editing, beginning and end credits, negative cutting, soundtrack production, dubbing, subtitling or addition of sound or visual effects; but not including an expenditure for advertising, marketing, distribution or expense payments; and
M. "vendor" means a person selling goods or services that has a physical presence in New Mexico and is subject to gross receipts tax pursuant to the Gross Receipts and Compensating Tax Act and income tax pursuant to the Income Tax Act or corporate income tax pursuant to the Corporate Income and Franchise Tax Act."
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