SENATE BILL 238
52nd legislature - STATE OF NEW MEXICO - second session, 2016
Lisa A. Torraco
RELATING TO THE FILM PRODUCTION TAX CREDIT ACT; CREATING AN ADDITIONAL CREDIT FOR A FILM PRODUCTION COMPANY THAT PROVIDES DISTRIBUTION SERVICES IN NEW MEXICO; CONFORMING REFERENCES IN LAW.
BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF NEW MEXICO:
SECTION 1. Section 7-2F-2.1 NMSA 1978 (being Laws 2015, Chapter 143, Section 4) is amended to read:
"7-2F-2.1. ADDITIONAL DEFINITIONS.--As used in Sections [5 through 11 of this 2015 act] 7-2F-6 through 7-2F-12 NMSA 1978:
A. "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 for standard industry craft inventory when provided by a resident industry crew in addition to its industry crew services;
(c) payment for wages and per diem for a performing artist who is not a New Mexico resident and who is directly employed by a film production company; provided that the film production company deducts and remits, or causes to be deducted and remitted, income tax from the first day of services rendered in New Mexico at the maximum rate pursuant to the Withholding Tax Act;
(d) payment to a personal services business on the wages and per diem paid to a performing artist of the personal services business if: 1) the personal services business pays gross receipts tax in New Mexico on the portion of those payments qualifying for the tax credit; and 2) the film production company deducts and remits, or causes to be deducted and remitted, income tax at the maximum rate in New Mexico pursuant to Subsection H of Section 7-3A-3 NMSA 1978 on the portion of those payments qualifying for the tax credit paid to a personal services business where the performing artist is a full or part owner of that business or subcontracts with a personal services business where the performing artist is a full or part owner of that business; and
(e) 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; 10) services for an external audit upon submission of an application for a film production tax credit by an accounting firm that submits the application pursuant to Subsection I of Section [5 of this 2015 act] 7-2F-6 NMSA 1978; and 11) 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);
(c) entertainment, amusement or recreation; or
(d) subcontracted goods or services provided by a vendor when subcontractors are not subject to state taxation, such as equipment and locations provided by the military, government and religious organizations;
B. "film production company" means a person that produces one or more films or any part of a film and that commences principal photography on or after January 1, 2016; and
C. "vendor" means a person who sells or leases goods or services that are related to standard industry craft inventory, who 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 but excludes a personal services business."
SECTION 2. A new section of the Film Production Tax Credit Act, Section 7-2F-9.1 NMSA 1978, is enacted to read:
"7-2F-9.1. [NEW MATERIAL] ADDITIONAL CREDIT--DISTRIBUTION SERVICES.--
A. A film production company that has a physical address in New Mexico from which the company conducts business may apply for, and the taxation and revenue department may allow, a tax credit in an amount equal to twenty-five percent of distribution costs for distribution services performed for a film or commercial audiovisual product of the company; provided that the amount of credit shall not exceed the combined amount of credit that the company is allowed in the same taxable year for direct production expenditures and postproduction expenditures for qualifying films shot in New Mexico; and provided further that the number of out-of-state films for which a company receives a credit shall not exceed the number of qualified films shot in New Mexico in the taxable year.
B. As used in this section:
(1) "designated in-house division or department" means a division or department located in New Mexico that has as its primary function the provision of distribution services for a film production company;
(2) "distribution costs" means payments of wages and fringe benefits to New Mexico residents:
(a) who are employees: 1) of a film production company; and 2) within that company's designated in-house division or department; and
(b) whose primary job responsibilities are: 1) to perform distribution services for the designated in-house division or department; and 2) those of standard industry distribution service positions, as determined by the division; and
(3) "distribution services" means services provided in New Mexico and directly attributable to the process of making a film or commercial audiovisual product available for commercial exhibition."
SECTION 3. APPLICABILITY.--The provisions of Section 2 of this act apply to film production companies that commence principal photography on or after July 1, 2016.
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