Sec. 12-217jj. Film production tax credit. Regulations.
Sec. 12-217jj. Film production tax credit. Regulations. (a) As used in this
section:
(1) "Commissioner" means the Commissioner of Revenue Services.
(2) "Commission" means the Connecticut Commission on Culture and Tourism.
(3) (A) "Qualified production" means entertainment content created in whole or
in part within the state, including motion pictures; documentaries; long-form, specials,
mini-series, series, sound recordings, videos and music videos and interstitials television
programming; interactive television; interactive games; videogames; commercials; infomercials; any format of digital media, including an interactive web site, created for
distribution or exhibition to the general public; and any trailer, pilot, video teaser or
demo created primarily to stimulate the sale, marketing, promotion or exploitation of
future investment in either a product or a qualified production via any means and media
in any digital media format, film or videotape, provided such program meets all the
underlying criteria of a qualified production.
(B) "Qualified production" shall not include any ongoing television program created primarily as news, weather or financial market reports, a production featuring current events, sporting events, an awards show or other gala event, a production whose
sole purpose is fundraising, a long-form production that primarily markets a product or
service, a production used for corporate training or in-house corporate advertising or
other similar productions, or any production for which records are required to be maintained under 18 USC 2257 with respect to sexually explicit content.
(4) "Eligible production company" means a corporation, partnership, limited liability company, or other business entity engaged in the business of producing qualified
productions on a one-time or ongoing basis, and qualified by the Secretary of the State
to engage in business in the state.
(5) "Production expenses or costs" means all expenditures clearly and demonstrably
incurred in the state in the development, preproduction, production or postproduction
costs of a qualified production, including:
(A) Expenditures incurred in the state in the form of either compensation or purchases including production work, production equipment not eligible for the infrastructure tax credit provided in section 12-217kk, production software, postproduction work,
postproduction equipment, postproduction software, set design, set construction, props,
lighting, wardrobe, makeup, makeup accessories, special effects, visual effects, audio
effects, film processing, music, sound mixing, editing, location fees, soundstages and
any and all other costs or services directly incurred in connection with a state-certified
qualified production;
(B) Expenditures for distribution, including preproduction, production or postproduction costs relating to the creation of trailers, marketing videos, commercials, point-of-purchase videos and any and all content created on film or digital media, including
the duplication of films, videos, CDs, DVDs and any and all digital files now in existence
and those yet to be created for mass consumer consumption; the purchase, by a company
in the state, of any and all equipment relating to the duplication or mass market distribution of any content created or produced in the state by any digital media format which
is now in use and those formats yet to be created for mass consumer consumption; and
(C) "Production expenses or costs" does not include the following: (i) On and after
January 1, 2008, compensation in excess of fifteen million dollars paid to any individual
or entity representing an individual, for services provided in the production of a qualified
production; (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, but not limited to, producer fees, director fees,
talent fees and writer fees; (iv) costs relating to the transfer of the production tax credits;
and (v) any amounts paid to persons or businesses as a result of their participation in
profits from the exploitation of the qualified production.
(6) "Sound recording" means a recording of music, poetry or spoken-word performance, but does not include the audio portions of dialogue or words spoken and recorded
as part of a motion picture, video, theatrical production, television news coverage or
athletic event.
(7) "State-certified qualified production" means a qualified production produced
by an eligible production company that (A) is in compliance with regulations adopted
pursuant to subsection (g) of this section, (B) is authorized to conduct business in this
state, and (C) has been approved by the commission as qualifying for a production tax
credit under this section.
(8) "Interactive web site" means a web site, the production costs of which (A) exceed
five hundred thousand dollars per income year, and (B) is primarily (i) interactive games
or end user applications, or (ii) animation, simulation, sound, graphics, story lines or
video created or repurposed for distribution over the Internet. An interactive web site
does not include a web site primarily used for institutional, private, industrial, retail or
wholesale marketing or promotional purposes, or which contains obscene content.
(9) "Post-certification remedy" means the recapture, disallowance, recovery, reduction, repayment, forfeiture, decertification or any other remedy that would have the
effect of reducing or otherwise limiting the use of a tax credit provided by this section.
(b) (1) The Connecticut Commission on Culture and Tourism shall administer a
system of tax credit vouchers within the resources, requirements and purposes of this
section for eligible production companies producing a state-certified qualified production in the state. For income years commencing on or after January 1, 2006, any eligible
production company incurring production expenses or costs in excess of fifty thousand
dollars shall be eligible for a credit against the tax imposed under chapter 207 or this
chapter equal to thirty per cent of such production expenses or costs, provided (A) on
and after January 1, 2009, fifty per cent of such expenses or costs shall be counted toward
such credit when incurred outside the state and used within the state, and one hundred
per cent of such expenses or costs shall be counted toward such credit when incurred
within the state and used within the state, and (B) on and after January 1, 2012, no
expenses or costs incurred outside the state and used within the state shall be eligible
for a credit, and one hundred per cent of such expenses or costs shall be counted toward
such credit when incurred within the state and used within the state.
(2) On and after July 1, 2006, and for income years commencing on or after January
1, 2006, any credit allowed pursuant to this subsection may be sold, assigned or otherwise
transferred, in whole or in part, to one or more taxpayers, provided no credit, after
issuance, may be sold, assigned or otherwise transferred, in whole or in part, more than
three times.
(3) On and after July 1, 2006, and for income years commencing on or after January
1, 2006, any such credit allowed under this subsection shall be claimed against the tax
imposed under chapter 207 or this chapter for the income year in which the production
expenses or costs were incurred, and may be carried forward for the three immediately
succeeding income years. Any production tax credit allowed under this subsection shall
be nonrefundable.
(c) (1) An eligible production company shall apply to the commission for a tax
credit voucher on an annual basis, but not later than ninety days after the first production
expenses or costs are incurred in the production of a qualified production, and shall
provide with such application such information as the commission may require to determine such company's eligibility to claim a credit under this section. No production
expenses or costs may be listed more than once for purposes of the tax credit voucher
pursuant to this section, or pursuant to section 12-217kk or 12-217ll, and if a production
expense or cost has been included in a claim for a credit, such production expense or
cost may not be included in any subsequent claim for a credit.
(2) Not earlier than three months after the application in subdivision (1) of this
subsection, an eligible production company may apply to the commission for a production tax credit voucher, and shall provide with such application such information and
independent certification as the commission may require pertaining to the amount of
such company's production expenses or costs to date. If the commission determines
that such company is eligible to be issued a production tax credit voucher, the commission shall enter on the voucher the amount of production expenses or costs that has been
established to the satisfaction of the commission, and the amount of such company's
credit under this section. The commission shall provide a copy of such voucher to the
commissioner, upon request.
(3) Not later than ninety days after the end of the annual period, or after the last
production expenses or costs are incurred in the production of a qualified production,
an eligible production company shall apply to the commission for a production tax credit
voucher, and shall provide with such application such information and independent
certification as the commission may require pertaining to the amount of such company's
production expenses or costs. If the commission determines that such company is eligible
to be issued a production tax credit voucher, the commission shall enter on the voucher
the amount of production expenses or costs that has been established to the satisfaction
of the commission, minus the amount of any credit issued pursuant to subdivision (2)
of this subsection, and the amount of such company's credit under this section. The
commission shall provide a copy of such voucher to the commissioner, upon request.
(d) If an eligible production company sells, assigns or otherwise transfers a credit
under this section to another taxpayer, the transferor and transferee shall jointly submit
written notification of such transfer to the commission not later than thirty days after
such transfer. If such transferee sells, assigns or otherwise transfers a credit under this
section to a subsequent transferee, such transferee and such subsequent transferee shall
jointly submit written notification of such transfer to the commission not later than thirty
days after such transfer. The notification after each transfer shall include the credit
voucher number, the date of transfer, the amount of such credit transferred, the tax
credit balance before and after the transfer, the tax identification numbers for both the
transferor and the transferee, and any other information required by the commission.
Failure to comply with this subsection will result in a disallowance of the tax credit until
there is full compliance on the part of the transferor and the transferee, and for a second
or third transfer, on the part of all subsequent transferors and transferees. The commission shall provide a copy of the notification of assignment to the commissioner upon
request.
(e) Any eligible production company that wilfully submits information to the commission that it knows to be fraudulent or false shall, in addition to any other penalties
provided by law, be liable for a penalty equal to the amount of such company's credit
entered on the production tax credit certificate issued under this section.
(f) The issuance by the commission of a tax credit voucher with respect to an amount
of tax credits stated thereon shall mean that none of such tax credits are subject to a
post-certification remedy, and that the commission and the commissioner shall have no
right, except in the case of possible material misrepresentation or fraud, to conduct any
further or additional review, examination or audit of the expenditures or costs for which
such tax credits were issued. If at any time after the issuance of a tax credit voucher the
commission or the commissioner determines that there was a material misrepresentation
or fraud on the part of an eligible production company in connection with the submission
of an expense report and the result of such material misrepresentation or fraud was that
(1) a specific amount of tax credits was reflected on the tax credit voucher issued in
response to such expense report that would not have otherwise been so reflected, and
(2) such tax credits would otherwise be subject to a post-certification remedy, such tax
credits shall not be subject to any post-certification remedy and the sole and exclusive
remedy of the commission and the commissioner shall be to seek collection of the amount
of such tax credits from the eligible production company that committed the fraud or
misrepresentation, not from any transferee of such tax credits.
(g) The commission, in consultation with the commissioner, shall adopt regulations,
in accordance with the provisions of chapter 54, as may be necessary for the administration of this section.
(P.A. 06-83, S. 20; 06-186, S. 83; 06-187, S. 79; P.A. 07-236, S. 1; June Sp. Sess. P.A. 07-4, S. 69, 70; June Sp. Sess.
P.A. 07-5, S. 13; P.A. 08-142, S. 1.)
History: P.A. 06-83 effective July 1, 2006, and applicable to income years commencing on or after January 1, 2006;
P.A. 06-186 amended Subsec. (a) to redefine "qualified production" by deleting exception and changing reference to
obscene material and to redefine "production expenses or costs" by eliminating requirement that they be in cash, requiring
intellectual property to be produced primarily in state, requiring expenditures to be incurred within state rather than paid
to persons authorized to do business in state, eliminating provision allowing commissioner to determine other production
expenses or costs, exempting talent fees and making technical changes, amended Subsec. (b) by replacing former provisions
with provisions allowing any eligible production company to receive 30% credit and allowing a three-year carryforward,
eliminated former Subsec. (c) re wage tax credit, redesignated existing Subsec. (d) as new Subsec. (c) and made conforming
changes therein, eliminated former Subsec. (e) re carryforward period, inserted new Subsec. (d) re procedure upon transfer
of credit, and redesignated existing Subsec. (f) as new Subsec. (e) and amended same to require the commission, in
consultation with the commissioner, to adopt regulations, effective July 1, 2006, and applicable to income years commencing on or after January 1, 2006; P.A. 06-187 amended Subsec. (f) to require the commission, in consultation with the
commissioner, to adopt regulations, effective July 1, 2006 (Revisor's note: In Subsec. (a)(6)(A), a reference to "subsection
(f) of this section" was changed editorially by the Revisors to "subsection (e) of this section", for accuracy); P.A. 07-236
amended Subsec. (a) to redefine "qualified production" and "production expenses or costs" and add definitions of "sound
recording", "interactive web site" and "post-certification remedy", amended Subsec. (b) to divide existing provisions into
Subdivs. (1) to (3) and, in Subdiv. (1), to apply credit to taxes due under chapter 207 and add Subpara. (A) re expenses or
costs on and after January 1, 2009, and Subpara. (B) re expenses or costs on and after January 1, 2012, and, in Subdiv. (2),
to limit credit transfers to three times, amended Subsec. (c) to add provisions in Subdiv. (1) to prohibit limit on listing
expenses or costs on a tax credit voucher more than one once, to add new Subdiv. (2) re requirements for applying for tax
credit vouchers, and to redesignate existing Subdiv. (2) as Subdiv. (3), amended Subsec. (d) to add provisions re second
or third transfers, added new Subsec (e) re submission of false or fraudulent information and Subsec. (f) re post-certification
remedy, redesignated existing Subsec. (e) as Subsec. (g) and made conforming changes throughout, effective July 1, 2007,
and applicable to income years commencing on or after January 1, 2007; June Sp. Sess. P.A. 07-4 amended Subsec. (a)
by making a technical change in Subdiv. (3)(A) and inserting "in the state" re expenditures incurred in Subdiv. (5), effective
July 1, 2007, and applicable to income years commencing on or after January 1, 2007, and amended Subsec. (c) by inserting
"and independent certification" in Subdivs. (2) and (3), effective July 1, 2007; June Sp. Sess. P.A. 07-5 amended Subsec.
(f) to substitute "commission" for "commissioner" re issuance of tax credit voucher and make technical changes, effective
October 6, 2007; P.A. 08-142 amended Subsec. (b) by changing eligibility date in Subdiv. (1) from income years commencing on or after January 1, 2007, to income years commencing on or after January 1, 2006, and amending Subdivs. (2) and
(3) to specify that provisions are applicable on and after July 1, 2006, for income years commencing on or after January
1, 2006, effective June 5, 2008.