Governor, Economic Development

Rule R357-5

Motion Picture Incentive Fund

Notice of Proposed Rule

(New Rule)

DAR File No.: 34762
Filed: 05/02/2011 10:56:02 AM

RULE ANALYSIS

Purpose of the rule or reason for the change:

The purpose of this rule is to establish the standards that a motion picture company and/or a digital media company must meet to qualify to receive a post-performance incentive. This amendment is being filed to address H.B 99 from the 2011 General Session of the Utah State Legislature which changed certain parts of the Motion Picture Incentive Fund and added an incentive for digital media projects. (DAR NOTE: H.B. 99 is effective as of 05/10/2011.)

Summary of the rule or change:

This rule establishes the standards companies must meet to qualify to receive an incentive for a motion picture project and/or digital media project.

State statutory or constitutional authorization for this rule:

• Section 63M-1-1804

Anticipated cost or savings to:

the state budget:

There are no immediate anticipated costs or savings to the state budget due to this rule. However, should companies receive an incentive, a tax credit will be paid out based on the criteria outlined in the rule which can result in costs to the state. It is worth noting that this incentive is post-performance and the percentage paid out is less than a company actually pays in to the economy.

local governments:

There are no immediate anticipated costs or savings to local government. However, should these companies receive an incentive and do a project in Utah, the local government(s) where they decide to do their projects should greatly benefit economically.

small businesses:

There are no direct anticipated costs or savings on small businesses. However, many small businesses will positively benefit from projects done by these companies due to increased wages, travel, dining, lodging, and other expenditures.

persons other than small businesses, businesses, or local governmental entities:

There are no direct anticipated costs or savings to persons other than small businesses. However, once projects are approved they could result in positive economic benefits for all persons in the state of Utah.

Compliance costs for affected persons:

There are no anticipated compliance costs.

Comments by the department head on the fiscal impact the rule may have on businesses:

The motion picture incentive fund is used by the State of Utah to attract motion picture and television productions as well as digital media projects to do business in the state. Having these productions and projects will result in positive impacts to Utah's economy. The previous five-year cumulative fiscal impact from productions of the Motion Picture Incentive, from 2005 to 2010, equaled $164,000,000 and 4,474 jobs. That was the result of 51 total productions and 1,687 production days.

Spencer P. Eccles, Executive Director

The full text of this rule may be inspected, during regular business hours, at the Division of Administrative Rules, or at:

Governor
Economic Development
324 S State
5th Floor
SALT LAKE CITY, UT 84111

Direct questions regarding this rule to:

• Greg Hartley at the above address, by phone at 801-538-8743, by FAX at 801-538-8888, or by Internet E-mail at ghartley@utah.gov

Interested persons may present their views on this rule by submitting written comments to the address above no later than 5:00 p.m. on:

06/14/2011

This rule may become effective on:

06/21/2011

Authorized by:

Spencer Eccles, Executive Director

R357. Governor, Economic Development.

R357-5. Motion Picture Incentive Fund.

R357-5-1. Authority.

(1) Subsection 63M-1-1804 requires the office to make rules establishing the standards that a motion picture company, and digital media, company must meet to qualify for a motion picture incentive and the criteria for determining the amount of the motion picture incentive under Part 18 of the Utah Code Annotated.

 

R357-5-2. Definitions.

(1) Terms in these rules are used as defined in UCA 63M-1-1802.

 

R357-5-3. Motion Picture Incentive Conditions -- Motion Picture Company.

(1) A motion picture company may qualify for a motion picture incentive under Part 18 only if:

(a) the motion picture company is producing a production within the state that is:

(i) a television series; or

(ii) a made-for-television movie; or

(iii) a motion picture, including feature films and independent films; and

(b) the motion picture company has obtained financing and financing is in place for the production; and

(c) the economic impact of the production's dollars left in the state represents new incremental economic activity in the state; and

(d) as of the motion picture incentive application date, as determined the office, has not started principle photography of the production in the state; and

(e) is a state-approved production.

(2) The office may give preference to a production that:

(a) stimulates economic activity in rural areas of the state; or

(b) has Utah content, such as recognizing that a production was made in the state or uses Utah as Utah in the production.

(3) The office, with advice from the board, may enter into an agreement with a motion picture company authorizing a motion picture incentive if the motion picture company meets the standards under subsection (1) and:

(a) the motion picture incentive does not exceed 20% of the dollars left in the state by the motion picture company; and

(b) if post-performance cash, the post-performance cash motion picture incentive does not exceed $500,000 per production under Part 18 and is issued in accordance with Part 18; and

(c) if a post-performance refundable tax credit, the post-performance refundable tax credit certificate is issued in accordance with Part 18 and Section 59-7-614.5 or 59-10-1108; and

(d) the motion picture incentive amount approved for the motion picture production follows the motion picture incentive application policy established by the office, which shall be posted on the office's public website.

(4) A motion picture company may be eligible for an additional 5% post-performance refundable tax credit motion picture incentive, in addition to the 20% post-performance refundable tax credit motion picture incentive under subsection (3) if:

(a) the motion picture company employs a significant, as determined by the office, percentage of cast and crew from Utah; or

(b) highlights the State of Utah and the Utah Film Commission in the motion picture production credits; or

(c) other promotional opportunities as agreed upon by the office and the motion picture company; and

(d) the total motion picture incentive granted to the motion picture company for a state-approved motion picture production does not exceed 25% of the dollars left in state.

(5) A motion picture company is eligible for a motion picture incentive only if the office has entered into an agreement under subsection (3) with the motion picture company under Part 18.

 

R357-5-4. Motion Picture Incentive Conditions -- Digital Media Company.

(1) A digital media company may qualify for a motion picture incentive under Part 18 only if:

(a) the digital media project is producing all or part of production within the state that is:

(i) an interactive entertainment production; or

(ii) an animated production; and

(b) the digital media company has obtained financing and financing is in place for the production; and

(c) the economic impact of the digital media project's new state revenue represents new incremental economic activity in the state; and

(d) is produced for distribution in commercial or education markets, which shall include projects intended for Internet or wireless distribution; and

(e) as of the motion picture incentive application date, as determined the office, has not started project production in the state; and

(f) is a state-approved production.

(2) The office, with advice from the board, may enter into an agreement with a digital media company authorizing a motion picture incentive if the digital media company meets the standards under subsection (1) and (2) and:

(a) the motion picture incentive does not exceed 20% of the new state revenue paid by the digital media company; and

(b) does not exceed 20% of the dollars left in state by the digital media company; and

(c) is in the form of a post-performance refundable tax credit certificate under Part 18 and under Section 59-7-614.5 or 59-10-1108; and

(d) economic modeling is considered to evaluate the costs and benefits of the digital media project to the state and local governments in determining the motion picture incentive amount; and

(e) the motion picture incentive amount approved for the digital media production follows the motion picture incentive application policy established by the office, which shall be posted on the office's public website.

(3) A digital media company is eligible for a motion picture incentive only if the office has entered into an agreement under subsection (2) with the digital media company under Part 18.

 

R357-5-5. Funding -- Post-Performance Refundable Tax Credit.

(1) The office may issue up to $6,793,700 in post-performance refundable tax credit certificates under 59-7-614.5 or 59-10-1108 in a fiscal year to either a motion picture, or digital media, company.

(2) If the office does not issue post-performance refundable tax credit certificates in a fiscal year totaling the amount authorized under Part 18, it may carry over that amount for issuance in subsequent fiscal years.

(3) Post-performance refundable tax credits are nontransferable and can only be issued to the state-approved motion picture, or digital media, company who submits the motion picture incentive application and is approved by the office with advice from the Board.

 

R357-5-6. Funding -- Post-Performance Cash.

(1) The office may only issue funds appropriated by the state legislature to the restricted account created with the general fund known as the Motion Picture Incentive Account to a motion picture company.

(2) Post-performance cash is nontransferable and can only be issued to the state-approved motion picture company who submits the motion picture incentive application and is approved by the office with advice from the Board.

 

KEY: economic development, motion picture, digital media, new state revenue

Date of Enactment or Last Substantive Amendment: 2011

Authorizing, and Implemented or Interpreted Law: 63M-1-1804