H. B. 3100


(By Delegates Reynolds, Craig, Morgan, Stephens,
Sobonya and C. Miller)

[Introduced February 16, 2007; referred to the
Committee on Finance.]



A BILL to amend the Code of West Virginia, 1931, as amended, by adding thereto a new article, designated §11-13W-1, §11-13W-2, §11-13W-3, §11-13W-4, §11-13W-5, §11-13W-6, §11-13W-7, §11-13W-8, §11-13W-9 and §11-13W-10, all relating to providing a tax incentive for production companies; providing tax credits for private resident investors; providing for motion picture infrastructure development; and providing for related matters.

Be it enacted by the Legislature of West Virginia:
That the Code of West Virginia, 1931, as amended, be amended by adding thereto a new article, designated, §11-13W-1, §11-13W-2, §11-13W-3, §11-13W-4, §11-13W-5, §11-13W-6, §11-13W-7, §11-13W-8, §11-13W-9 and §11-13W-10, all to read as follows:
ARTICLE 13W. MOTION PICTURE TAX CREDIT.
§11-13W-1. Definitions.
When used in this article, unless the context clearly requires a different meaning:
(a) "State-certified production" means a production approved by the Governor's Office, the West Virginia Film Office, and the West Virginia Development Office produced by a motion picture or television production company filming in West Virginia which has a viable commercial distribution plan;
(b) "Motion picture" means a nationally distributed feature-length film, video, television series, or commercial made in West Virginia, in whole or in part, for theatrical or television viewing, or as a television pilot. The term "motion picture" does not include the production of television coverage of news and athletic events;
(c) "Motion picture production company" means a company engaged in the business of producing nationally distributed motion pictures as defined in this section. "Motion picture production company" does not mean or include any company owned, affiliated, or controlled, in whole or in part, by any company or person which is in default on a loan made by the state or a loan guaranteed by the state, nor with any company or person who has ever declared bankruptcy under which an obligation of the company or person to pay or repay public funds or moneys was discharged as a part of such bankruptcy;
(d) "Production expenditures" means preproduction, production, and postproduction expenditures directly incurred in this state that are directly used in a state-certified production, including costs associated with the following: Filming, acquiring or improving filming sets and locations, wardrobe, editing, cast and crew expenses incurred within the state, music: Provided, That the music is performed, composed, or recorded by a West Virginia resident musician, transportation, and repair services for which a separate charge is made. This term does not include postproduction expenditures for marketing and distribution, any indirect costs, or any amounts that are paid to persons or entities as a result of their participation in profits from the exploitation of the production;
(e) "State-certified infrastructure project" means an infrastructure project approved by the Governor's Office, the West Virginia Film Office, and the West Virginia Development Office, not including movie theaters or other commercial exhibition facilities;
(f) "Resident" means any person domiciled in West Virginia and any other person who maintains a permanent place of abode within the state and spends an aggregate of more than six months of each year within the state;
(g) "Expended in the state" means tangible property which is acquired from a source within the state and services procured and performed within the state;
(h) "Payroll" means all salary, wages, and other compensation, including related benefits sourced or apportioned to West Virginia;
(i) "Production" means, in the case of an episodic television series, an entire season of episodes.
§11-13W-2. Tax credits for motion picture companies.
(a) Credits are computed based on all of the taxpayer's qualifying expenses, incurred with respect to the production, not just the qualifying expenses incurred during the taxable year.
(b) A qualified production is eligible for a tax credit up to fifteen percent for persons employed in conjunction with a West Virginia production. The wages of all crew, cast and extras, loan-out corporations and personal service companies that meet the following requirements are eligible for the credit:
(1) An individual wage must be less than one million dollars for the production to be included;
(2) Wages must be subject to the West Virginia withholding tax;
(3) The credit shall be equal to ten percent for qualified productions when the total costs in West Virginia are between two hundred fifty thousand dollars and one million dollars.
(4) The credit shall be equal to fifteen percent for qualified productions when the total production costs in West Virginia exceed one million dollars.
(c) A qualified production is eligible for a tax credit up to fifteen percent of all goods and services purchased, rented, or leased by the production company from a West Virginia supplier. Qualified purchases include all production expenditures procured from a West Virginia company. Productions must spend at least one million dollars in the state to receive the fifteen percent credit. Productions spending between two hundred fifty thousand dollars and $999,999 in the state are eligible for a ten percent tax credit. Certain big-budget expenditures made "out-of-state" qualify for a ten percent tax credit, such as camera rental, film stock, catering, rolling stocks, and special equipment if the adequate purchase cannot be found in West Virginia.
(d) The maximum total tax credit is capped at $5 million for a feature film.
(e) A taxpayer may claim the credit on a tax return filed for the taxable year in which the production activities are completed. The return must state the name of the production, a description of production, and a detailed accounting of the qualifying expenses with respect to which a credit is claimed.
§11-13W-3. Restrictions.
This article does not apply to any production that satisfies one of the following conditions:
(a) It is political advertising;
(b) It is a television production of a news program or sporting event;
(c) It contains material that is obscene as defined in section five-b, article twelve, chapter eight; or
(d) It is a radio production.
§11-13W-4. Sales tax exemptions.
(a) State sales tax may not be charged for purchases, rentals, and leases for all production companies spending at least two hundred fifty thousand dollars or more in West Virginia.
(b) Production companies spending at least two hundred fifty thousand dollars in the state will be exempt from sales and occupancy tax on hotel rooms within the state that are occupied by a guest for thirty or more consecutive days.
(c) A detailed accounting of production expenses must be presented to the Governor's Office to receive the sales tax waiver certificate.
§11-13W-5. Location fee exemption.
For all state-owned properties, a location fee will not be charged. Production companies must spend at least two hundred fifty thousand dollars in the state to receive this exemption.
§11-13W-6. Investor tax credits.
A tax credit against state income tax is created for residents who invest in a state-certified production. The tax credit shall be earned by investors at the time expenditures are made by the motion picture production company. The tax credit shall be calculated as a percentage of the total base investment dollars certified per project. If the total base investment is greater than one hundred thousand dollars and less than or equal to five million dollars, each investor shall be allowed a tax credit of fifteen percent of the actual cash investment made by that taxpayer. To the extent that the base investment is expended on payroll for residents employed in connection with a state-certified production, each investor shall be allowed an additional tax credit of five percent of such payroll investment: Provided, That, if the payroll to any one person exceeds one million dollars, this additional tax credit shall exclude any salary for that person that exceeds one million dollars. Production wage earners are not eligible for this tax credit. Applicants for the motion picture investor tax credit shall submit an application to the Governor's Office providing detailed description of the project and the investment. The West Virginia Film Office will provide investors with applications on request.
§11-13W-7. Disclosure of information.
A taxpayer allowed credit or exemption under this article must maintain and make available for inspection any information or records required by the State Tax Department. The taxpayer has the burden of proving eligibility for a credit and the amount of the credit. The State Tax Department may consult with the Governor's Office and the West Virginia Film Office in order to determine the amount of qualifying expenses.
§11-13W-8. Certification.
Prior to the certification of a state-certified production, the motion picture production company shall submit to the Governor's Office a cost report of production expenditures audited and certified by an independent certified public accountant as determined by rule. The Governor's Office will review the production expenses and issue a tax credit certification letter upon approval. A unique identifying number will be assigned for each state-certified production. Motion picture production companies applying for the wage tax credit must remit a schedule to the State Tax Department including the names of all persons receiving salaries, wages, or other forms of compensation for services performed in the state in connection with the production, along with the address, taxpayer identification number, and the amount of compensation for services performed in the state received by each person. The Governor's Office shall submit a written report to the Joint Committee on Government and Finance annually sixty days prior to the start of the regular session detailing the overall impact of the tax credits, the amount of the tax credits issued, the number of new jobs created, the amount of new infrastructure developed in the state, the economic impact of the tax credits and film industry, and any other factors that describe the impact of the program.
§11-13W-9. Audit.
The Department of Revenue shall audit the cost report by the motion picture production company.
§11-13W-10. Continuation of tax credit.
The provisions of this section shall be of no force or effect after the thirty-first day of December, two thousand fourteen.



NOTE: The purpose of this bill is to create a tax credit for motion picture companies who spend at least $250,000 in West Virginia on state-certified productions. It also provides a tax credit for investors in motion pictures. This bill sets forth the qualifications for eligibility for the tax credit while providing restrictions and a maximum credit that may be obtained. Finally, the bill provides that motion picture companies have the burden of proving eligibility for this tax credit and for certifying their productions with the state.

Strike-throughs indicate language that would be stricken from the present law, and underscoring indicates new language that would be added.