HOUSE BILL 469
46th legislature - STATE OF NEW MEXICO - second session, 2004
INTRODUCED BY
Ben Lujan
AN ACT
RELATING TO FINANCING OF FILMS; EXPANDING ELIGIBILITY AND ADDING REQUIREMENTS FOR THE FILM PRODUCTION TAX CREDIT; ADDING A REQUIREMENT TO THE PURCHASE BY THE STATE INVESTMENT OFFICER OF AN EXPECTED FILM PRODUCTION TAX CREDIT; PROVIDING FOR TAX REFUND INTERCEPT OF THE CREDIT.
BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF NEW MEXICO:
Section 1. Section 7-2C-2 NMSA 1978 (being Laws 1985, Chapter 106, Section 2, as amended) is amended to read:
"7-2C-2. PURPOSE.--
A. The purpose of the Tax Refund Intercept Program Act is to comply with federal law:
(1) by enhancing the enforcement of child support and medical support obligations;
(2) to aid collection of outstanding debts owed for overpayment of public assistance and overissuance of food stamps and overpayment of unemployment compensation benefits and nonpayment of contributions or payments in lieu of contributions or other amounts due under the Unemployment Compensation Law;
(3) to promote repayment of educational loans;
(4) to aid collection of fines, fees and costs owed to the district, magistrate and municipal courts; [and]
(5) to aid collection of fines, fees and costs owed to the Bernalillo county metropolitan court; and
(6) to aid in the payment to the state investment officer of film production tax credit amounts owed to the state investment officer due to purchase of the credit pursuant to Subsection D of Section 7-27-5.26 NMSA 1978.
B. Efforts to accomplish the purpose of the Tax Refund Intercept Program Act may be enhanced by establishing a system to collect debts, in particular, outstanding child support obligations, educational loans, amounts due under the Unemployment Compensation Law, fines, fees and costs owed to the district, magistrate and municipal courts, [and] fines, fees and costs owed to the Bernalillo county metropolitan court and film production tax credit amounts owed to the state investment officer, by setting off the amount of such debts against the state income tax refunds or film production tax credit amounts due the debtors."
Section 2. Section 7-2F-1 NMSA 1978 (being Laws 2002, Chapter 36, Section 1, as amended) 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, a tax credit in an amount equal to fifteen percent of:
(1) direct production expenditures made in New Mexico that are directly attributable to the production in New Mexico of a film and that are subject to taxation by the state of New Mexico; or
(2) technology expenditures made in New Mexico that are directly attributable to the production of a commercial audiovisual product are for services performed in New Mexico and are subject to taxation by the state of New Mexico.
B. The film production tax credit shall not be claimed with respect to expenditures for which the film production company has delivered a nontaxable transaction certificate pursuant to Section 7-9-86 NMSA 1978.
C. A long-form narrative film production for which the film production tax credit is claimed pursuant to the provisions of Paragraph (1) of Subsection A of this section shall contain an acknowledgment that the production was filmed in New Mexico, and the film production company shall provide access to a print of the film to the New Mexico film museum for the purpose of a New Mexico premiere.
D. Where applicable, a film production company shall agree to name the New Mexico film division of the economic development department and the state investment council as its agents with authority to file an application for the film production tax credit to which the film production company is entitled, as provided in Subsection D of Section 7-27-5.26 NMSA 1978.
[D.] E. To be eligible for the film production tax credit, a film production company shall submit to the New Mexico film division [of the economic development department] information required by the division to demonstrate conformity with the requirements of this section. 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.
[E.] F. 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 technology expenditures made in New Mexico with respect to the film production for which the film production company is seeking the film production tax credit. If the requirements of this section have been complied with, the taxation and revenue department shall approve the film production tax credit and issue a document granting the tax credit.
[F.] G. 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."
Section 3. Section 7-2F-2 NMSA 1978 (being Laws 2003, Chapter 127, Section 2) is amended to read:
"7-2F-2. DEFINITIONS.--As used in Chapter 7, Article 2F NMSA 1978:
A. "commercial audiovisual product" means a film or a videogame or other interactive video product intended for commercial exploitation;
[A.] B. "direct production expenditure" means a transaction that is subject to taxation in New Mexico, including:
(1) payment of wages, fringe benefits or fees for talent, management or labor to a person who is a New Mexico resident for purposes of the Income Tax Act;
(2) payment to a personal services corporation for the services of a performing artist if:
(a) the personal services corporation pays gross receipts tax in New Mexico on those payments; [or] and
(b) the performing artist receiving payments from the personal services corporation pays New Mexico income tax; and
(3) any of the following provided by a vendor:
(a) the story and scenario to be used for a film;
(b) set construction and operations, wardrobe, accessories and related services;
(c) photography, sound synchronization, lighting and related services;
(d) editing and related services;
(e) rental of facilities and equipment;
(f) leasing of vehicles;
(g) food or lodging;
(h) airfare if purchased through a New Mexico-based travel agency or travel company;
(i) insurance coverage and bonding if purchased through a New Mexico-based insurance agent; and
(j) other direct costs of producing a film in accordance with generally accepted entertainment industry practice;
[B.] C. "film" means a single media 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; [and]
[C.] D. "film production company" means a person that produces one or more films; and
E. "technology expenditure" means a transaction that is subject to taxation in New Mexico and is made to obtain technological services related to the process of creating a commercial audiovisual product, including expenditures for editing, music, sound, foley, computer-generated imaging, animation, three-dimensional modeling, motion capture, compositing, storyboarding, DVD and multimedia authoring, automatic dialogue replacement, miniatures, visual effects, mixing, color correction, credits, graphics, duplication film lab, distribution and other industry standard technological services."
Section 4. Section 7-27-5.26 NMSA 1978 (being Laws 2000 (2nd S.S.), Chapter 6, Section 2, as amended) is amended to read:
"7-27-5.26. INVESTMENT IN FILMS TO BE PRODUCED IN NEW MEXICO.--
A. No more than two and one-half percent of the market value of the severance tax permanent fund may be invested in New Mexico film private equity funds or a New Mexico film project under this section.
B. If an investment is made under this section, not more than seven million five hundred thousand dollars ($7,500,000) of the amount authorized for investment pursuant to Subsection A of this section shall be invested in any one New Mexico film private equity fund or any one New Mexico film project.
C. The state investment officer shall make investments pursuant to this section only upon approval of the state investment council after a review by the private equity investment advisory committee and the New Mexico film division of the economic development department. The state investment officer may make debt or equity investments pursuant to this section only in New Mexico film projects or New Mexico film private equity funds that invest only in film projects that:
(1) are filmed wholly or substantially in New Mexico;
(2) have shown to the satisfaction of the New Mexico film division that a distribution contract is in place with a reputable distribution company;
(3) have agreed that, while filming in
New Mexico, a majority of the production crew will be
New Mexico residents;
(4) have posted a completion bond that has been approved by the New Mexico film division; provided that a completion bond shall not be required if the fund or project is guaranteed pursuant to Paragraph (5) of this subsection; and
(5) have obtained a full, unconditional and irrevocable guarantee of repayment of the invested amount in favor of the severance tax permanent fund:
(a) from an entity that has a credit rating of not less than Baa or BBB by a national rating agency;
(b) from a substantial subsidiary of an entity that has a credit rating of not less than Baa or BBB by a national rating agency;
(c) by providing a full, unconditional and irrevocable letter of credit from a United States incorporated bank with a credit rating of not less than A by a national rating agency; or
(d) from a substantial and solvent entity as determined by the state investment council in accordance with its standards and practices; or
(6) if not guaranteed pursuant to Paragraph (5) of this subsection, have obtained no less than one-third of the estimated total production costs from other sources as approved by the state investment officer.
D. The state investment officer may purchase at a discount, from an eligible New Mexico film project, up to eighty percent of an expected and estimated film production tax credit available to a film production company pursuant to the provisions of Section 7-2F-1 NMSA 1978; provided that the film production company agrees to name the New Mexico film division of the economic development department and the state investment council as its agents with authority to file an application for the film production tax credit to which the company is entitled, should the company fail to apply for the credit. The New Mexico film division of the economic development department shall determine the estimated amount of a film production tax credit. The state investment council shall establish guidelines for the state investment officer's initiation of a purchase and the terms of the purchase.
E. As used in this section:
(1) "committed capital" means the sum of the fixed amounts of money that accredited investors have obligated for investment in a New Mexico film private equity fund, which fixed amounts may be invested in that fund in one or more payments over time;
(2) "film project" means a single media or multimedia program, including advertising messages, fixed on film, videotape, computer disc, laser disc or other similar delivery medium from which the program can be viewed or reproduced and that is intended to be exhibited in theaters; licensed for exhibition by individual television stations, groups of stations, networks, cable television stations or other means; or licensed for the home viewing market; and
(3) "New Mexico film private equity fund" means any limited partnership, limited liability company or corporation organized and operating in the United States that:
(a) has as its primary business activity the investment of funds in return for equity in film projects produced wholly or partly in New Mexico;
(b) holds out the prospects for capital appreciation from such investments; and
(c) accepts investments only from accredited investors as that term is defined in Section 2 of the federal Securities Act of 1933, as amended, and rules promulgated pursuant to that section."
Section 5. EFFECTIVE DATE.--The effective date of the provisions of this act is July 1, 2004.
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