II.
Definitions
(1) "Application for a rebate or a tax
credit" means the document required by the Film Office to begin the process for
obtaining a tax incentive under the Digital Product and Motion Picture Industry
Development Act;
(2)
"Below-the-line employees" means:
(A)
employees involved with a motion picture production including but not limited
to:
(i) Casting assistants,
(ii) Costume design,
(iii) Gaffers,
(iv) Grips,
(v) Location managers,
(vi) Production assistants,
(vii) Set construction staff, and
(viii) Set design staff.
(B) "Below-the-line employees" does not
include directors and producers;
(3) "Commission" means the Arkansas Economic
Development Commission
(4)
"DF&A" means the Department of Finance Administration;
(5) "Film" means a single media or
multi-media production that is fixed on film, digital medium, videotape,
computer disc, laser disc, or similar delivery medium;
(6) "Film and digital product" means video
images or other visual media entertainment content in digital format, film, or
videotape, provided the program meets all the underlying criteria of a
qualified production including but not limited to the following:
(A) Motion pictures,
(B) Documentaries,
(C) Long-form programs,
(D) Specials,
(E) Mini-series,
(F) Series,
(G) Music videos,
(H) Television programming,
(I) Interactive television,
(J) Interactive games,
(K) Videogames,
(L) Commercials,
(M) Digital media for distribution or
exhibition to the general public, or
(N) Trailer, pilot, video teaser, or demo
created primarily to stimulate the sale, marketing, promotion, or exploitation
of future investment;
(7) "Film Office" means the division of the
Arkansas Economic Development Commission charged with the responsibility of
promoting and assisting the digital content industry in Arkansas in order to
enhance Arkansas as a land of opportunity for digital and motion picture
filmmaking;
(8) "Film production
company" means a corporation, individual, limited liability company or
partnership that produces one (1) or more films or any part of a
film;
(9) "Financial institution"
means any bank or savings and loan in the state which carries Federal Deposit
Insurance Corporation Insurance;
(10) "Highly compensated individual" means:
(A) An individual who directly or indirectly
receives compensation in excess of five hundred thousand dollars ($500,000) for
personal services with respect to a single production.
(B) An individual receives compensation
indirectly when a production company pays a personal service company or an
employee-leasing company that pays the individual;
(11) "Interactive television" means a
television production in which the viewer's action(s) may:
(A) Affect the program being watched,
or
(B) Affect the outcome of the
production;
(12)
"Post-production" means a final stage in the production of film or digital
content occurring after the action has been filmed or videotaped, including but
not limited to:
(A) Dialogue
replacement,
(B) Sound
editing,
(C) Addition or deletion
of special effects,
(D) Editing
music,
(E) Beginning and end
credits,
(F) Negative
cutting,
(G) Soundtrack
production,
(H) Dubbing,
(I) Subtitling,
(J) Addition or deletion of sound or visual
effects,
"Post-production" does not include expenditures for
advertising, marketing, or distribution.
(13) "Post-production costs" means all
expenditures incurred in the state associated with the post-production phase of
a state-certified production within the state;
(14) "Production" means:
(A) The process of producing a type of
entertainment content and includes film and digital content product.
(B) "Production" shall not include:
(i) News reports;
(ii) Weather reports;
(iii) Current events;
(v) Sporting events;
(vi) Fundraising events;
(vii) Gala events;
(viii) Marketing a product or
service;
(ix) Corporate
training;
(x) Corporate
advertising;
(xi) Non-scripted
reality show;
(xii) A production
containing any material or performance that is obscene; or
(xiii) Sexually explicit productions as
defined in
18 U.S.C §
2257, as it existed on January 1,
2009;
(15)
"Production company" means a corporation, partnership, limited liability
company, or other business entity engaged in the business of producing
qualified productions and is registered with the Arkansas Secretary of State to
engage in business in Arkansas;
(16) "Qualified production costs" means costs
associated with the development, preproduction, production, or postproduction
of a qualified production within the state, including but not limited to:
(A) Per diem expenditures by the cast or crew
for meals and lodging when accompanied by receipts, signed by the production
company and the cast or crew member, evidencing payment of the per
diem,
(B) Costs associated with
original music compositions produced by an Arkansas resident to be used as
incidental music, the score, or the soundtrack in film or video
games,
(C) Arkansas residents for
labor, wages, fees, talent or management,
(D) Arkansas businesses for personal
services,
(E) The story and
scenario used in the production,
(F) Set construction,
(G) Set operations,
(H) Wardrobe and accessory
services,
(I)
Photography,
(J) Sound,
(K) Lighting,
(L) Editing related services,
(M) Rentals of equipment and
facilities,
(N) Leasing of motor
vehicles,
(O) Chartering of
aircraft through an Arkansas-based businesses for in-state transportation
attributed to the production,
(P)
Commercial airfare purchased for travel to and from Arkansas attributed to the
production,
(Q) Insurance and
bonding costs,
(R) Costs to option
or purchase intellectual property, including without limitation books, scripts,
music, or trademarks relating to the development or purchase of a script,
screenplay, or format if:
(i) The intellectual
property was produced primarily in Arkansas or the creator of the intellectual
property is a resident of Arkansas;
(ii) At least seventy-five percent (75%) of
the subsequent film or digital content is produced in Arkansas; and
(iii) The production expenses or costs for
the optioning or purchase are less than twenty-five percent (25%) of the
production expenses or costs incurred in Arkansas. The expenses or costs
include all expenditures associated with the optioning or purchase of
intellectual property, including option money, agent fees, and attorney fees
relating to the transaction, but do not include deferrals, deferments,
royalties, profit participation, or recourse or nonrecourse loans which the
eligible production company may negotiate in order to obtain the rights to the
intellectual property;
(S) Other costs of the production in
accordance with generally accepted entertainment industry practices,
(T) Fringe contributions being paid for work
performed in Arkansas, including:
(i) Health
benefits,
(ii) Pension
contributions,
(iii) Welfare
contributions,
(iv) Stipends,
and
(v) Living
allowances.
(U) Food
catering services. When a production company hires a food catering service
company that is located outside the state, payments otherwise allowable that
are made by the out-of-state food catering service to food businesses located
in Arkansas shall be allowed as eligible expenditures,
(V) "Qualified production costs" does not
include:
(i) The optioning or purchase of
intellectual property that is not used in the production project;
(ii) Media buys, promotional events, or gifts
or public relations associated with the promotion or marketing of any qualified
production;
(iii) Deferred,
leveraged, or profit participation costs relating to any and all personnel
associated with any and all aspects of the production, including, without
limitation, producer fees, director fees, talent fees, and writer
fees;
(iv) Amounts paid to persons
or businesses as a result of their participation in profits from the
exploitation of the qualified production; and
(v) Payments for penalties or fines, payments
to nonprofit organizations, and payments to federal and state entities that do
not pay state taxes;
(17) "Resident" means natural persons and
includes; for the purpose of determining eligibility for the rebate incentive
provided by this program, a person domiciled in Arkansas and who maintains a
permanent residence within the state and spends at least six (6) months of the
taxable year within the state;
(18)
"Season" means production of at least six (6) episodes of a television
series;
(19) "State-certified
production" means a qualified production produced by an eligible production
company that is:
(A) In compliance with the
established rules of the Digital Content and Motion Picture Industry
Development Act;
(B) Authorized by
the Film Office to conduct business in this state; and
(C) Approved by the executive director of the
Commission as qualifying for a discretionary production tax incentive under
this section;
(20) "Tax
Incentive" means a rebate under A.C.A. §
15-4-2008
or a tax credit under § 15-4-2012;
(21) "Television mini-series" means a limited
run program of more than three (3) hours of programming or half-season block
associated with serial or series programming;
(22) "Television programming" means a long-
or short-form narrative production of a television series, television
mini-series or television special that is intended for commercial
broadcast;
(23) "Television series"
means at least six (6) hours of television programming exhibited by a
television station or network;
(24)
"Television specials" means major dramatized presentations broadcast during
times normally occupied by episodes of one or more weekly television
series.
(25) "Veteran" means an
individual who:
(A) Was honorably discharged
from a tour of active duty, other than active duty for training only, with the
United States Armed Forces; or
(B)
Has served honorably in the National Guard or reserve forces of the United
States Armed Forces for at least (6) years, regardless of whether the
individual has been discharged;
(26) "Veteran-owned small business" means a
business:
(A) With profits of less than one
million dollars ($1,000,000);
(B)
In which at least one (1) veteran owns more than fifty percent (50%) of the
business; and
(C) That has its
principal place of business or its headquarters in Arkansas.
IV.
Application for Project Approval
Requirements
(A) A production company
seeking a tax incentive under this program shall submit an application to
receive the benefit as a rebate or an application to receive the benefit as a
tax credit to the Commission. A production company that is seeking the tax
credit incentive benefit must include an income tax account number on the
application provided to the Commission.
(B) The application must include an estimate
of the production expenditures and shall be filed with the Commission and
approved by the executive director prior to incurring any production costs or
post-production costs in Arkansas.
(C) The application shall include the name,
phone number and address of a representative to work with the Commission and
the Film Office on the reporting of expenditures and other information
necessary to qualify for the tax incentive.
(D) Upon approval of the application by the
executive director, the production company and the executive director shall
sign a financial incentive agreement.
(E) The financial incentive agreement shall
define the provisions of the program, which shall include the:
(i) Effective date of the
agreement;
(ii) Terms of the
agreement;
(iii) Incentive for
which the production company may qualify;
(iv) Investment threshold requirements
necessary to qualify for eligibility;
(v) Production company's responsibilities for
certifying eligibility requirements;
(vi) Production company's responsibilities
for failure to meet or maintain eligibility requirements; and
(vii) Whether the tax incentive in the
agreement will be issued as a rebate or a tax credit.
V.
Production Tax
Incentive
To qualify for a tax incentive for post-production
expenditures, a production company shall spend at least two hundred thousand
dollars ($200,000) within a six-month period in connection with the production
of one (1) project.
Upon approval of the application by the executive director, a
production company may receive a discretionary tax incentive on all qualified
production costs in connection with the production of a state-certified film
project.
The amount of the tax incentive shall be twenty percent (20%)
on all qualified production costs associated with the post-production of a
state-certified film project.
If the executive director approves a project for a rebate or
tax credit of qualified production costs, the production company shall also
receive an additional rebate or tax credit of ten percent (10%) for:
(A) The payroll of below-the-line employees
involved in the production who are:
(i)
Full-time residents of Arkansas; or
(ii) Veterans;
(iii) If a production company hires a payroll
service company to handle the payroll of a production company, the payroll
payments and otherwise allowable shall be allowed an eligible expenditure if
all eligible income payment to employees and independent contractors done
through the payroll service are subject to Arkansas state income
taxes.
(iv) If approved by the
executive director, the employment incentive shall include the first five
hundred thousand dollars ($500,000) of a highly compensated individual's
salary.
(B) Expenditures
paid to a veteran-owned small business for qualified production costs.
To receive the enhanced ten percent (10%) incentive, a
production company must provide to the Film Office the following completed
forms for each individual or business that qualify:
* Declaration of Arkansas Residency form provided by the
Commission;
* Declaration of Veteran Status or Veteran-Owned Business
Status form provided by the Commission.
A production tax incentive shall not be processed until the
production company has met in full all obligations to each Arkansas institution
and vendor owned for products and services in the state.
VI.
Post-production Tax
Incentive
To qualify for a tax incentive for post-production
expenditures, a production company shall spend at least fifty thousand dollars
($50,000) within a six-month period in connection with the production of one
(1) project.
Upon approval of the application by the executive director, a
production company shall receive a tax incentive of twenty percent (20%) on all
qualified production costs associated with the post-production of a
state-certified film project.
An additional incentive of ten percent (10%) shall be granted
for:
(A) The aggregate payroll of
salaries and wages of below the line employees who are:
(i) Full-time residents of Arkansas;
or
(ii) Veterans;
(iii) If a production company hires a payroll
service company to handle the payroll of a production company, the payroll
payments and otherwise allowable shall be allowed an eligible expenditure if
all eligible income payment to employees and independent contractors done
through the payroll service are subject to Arkansas state income
taxes.
(iv) If approved by the
executive director, the employment incentive shall include the first five
hundred thousand dollars ($500,000) of a highly compensated individual's
salary.
(B) Expenditures
paid to a veteran-owned business for qualified production costs associated with
the state-certified post-production.
To receive the enhanced ten percent (10%) incentive, a
production company must provide to the Film Office the following completed
forms for each individual or business that qualify:
* Declaration of Arkansas Residency form provided by the
Commission;
* Declaration of Veteran Status or Veteran-Owned Business
Status form provided by the Commission.
A post-production incentive shall not be processed until the
production company has met in full all obligations to each Arkansas institution
and vendor owed for products and services in the state.
XI.
Transfer of
Tax Credit Earned
(A)
(i) An owner of a tax credit earned under the
Digital Products and Motion Picture Industry Development Act may transfer,
sell, or assign some or all of the amount of the tax credit certified as
outlined at A.C.A. § 15-4-2013.
(ii) A subsequent holder of some or all the
amount of the tax credit may transfer, sell, or assign some or all of the
remaining tax credit.
(B) A transferee from an original, approved
applicant may use the tax credit earned under this program only to the extent
the tax credit is available to and has not been previously used by the
transferor.
(C) If a transferee of
a tax credit earned under this program seeks to use the tax credit, they shall
obtain and attach to their income tax return for the years the tax credit is
claimed a certified statement from the transferor stating the:
(i) Name and address of the original
purchaser and all transferees;
(ii)
Tax identification number of all persons entitled to any portion of the
original tax credit;
(iii) Original
date the tax credit was approved;
(iv) Amount of the tax credit that was
transferred; and
(v) Remaining
amount of the tax credit that is available for use by the transferee.
(D) The amount of the tax credit
received by the transferee may be carried forward in whole or in part for five
(5) consecutive taxable years, beginning from the taxable year in which the tax
credit originated, to apply against the taxpayer's income taxes due.
(E) If any subsequent audits or adjustments
are made to a tax credit issued under this program that reduce the amount of
the tax credit, the transferor that originally received the tax credit shall
refund the difference between the original amount and the reduced amount to
DF&A.
(F) If an owner or holder
assigns some or all of a tax credit earned under this program, the owner shall:
(i) Notify DF&A in writing within thirty
(30) calendar days following the effective date of the transfer; and
(ii) Provide any information DF&A
requires to administer and carry out the transfer and ensure proper tracking of
the ownership of the unused tax credit.
