SB1286eng 97TH GENERAL ASSEMBLY

SB1286 Engrossed LRB097 08202 HLH 48327 b

AN ACT concerning revenue.

Be it enacted by the People of the State of Illinois, represented in the General Assembly:

Section 5. The Film Production Services Tax Credit Act of 2008 is amended by changing Sections 10 and 40 and by adding Section 42 as follows:

(35 ILCS 16/10)

Sec. 10. Definitions. As used in this Act:

"Accredited production" means: (i) for productions commencing before May 1, 2006, a film, video, or television production that has been certified by the Department in which the aggregate Illinois labor expenditures included in the cost of the production, in the period that ends 12 months after the time principal filming or taping of the production began, exceed $100,000 for productions of 30 minutes or longer, or $50,000 for productions of less than 30 minutes; and (ii) for productions commencing on or after May 1, 2006, a film, video, or television production that has been certified by the Department in which the Illinois production spending included in the cost of production in the period that ends 12 months after the time principal filming or taping of the production began exceeds $100,000 for productions of 30 minutes or longer or exceeds $50,000 for productions of less than 30 minutes. "Accredited production" does not include a production that:

(1) is news, current events, or public programming, or a program that includes weather or market reports;

(2) (blank) is a talk show;

(3) is a production in respect of a game, questionnaire, or contest;

(4) is a sports event or activity;

(5) is a gala presentation or awards show;

(6) is a finished production that solicits funds;

(7) is a production produced by a film production company if records, as required by 18 U.S.C. 2257, are to be maintained by that film production company with respect to any performer portrayed in that single media or multimedia program; or

(8) is a production produced primarily for industrial, corporate, or institutional purposes.

"Accredited production" includes an accredited animated production, a talk show, or a reality program.

"Accredited animated production" means fully animated feature with a total production period of more than 12 months.

"Accredited production certificate" means a certificate issued by the Department certifying that the production is an accredited production that meets the guidelines of this Act.

"Applicant" means a taxpayer that is a film production company that is operating or has operated an accredited production located within the State of Illinois and that (i) owns the copyright in the accredited production throughout the Illinois production period or (ii) has contracted directly with the owner of the copyright in the accredited production or a person acting on behalf of the owner to provide services for the production, where the owner of the copyright is not an eligible production corporation.

"Credit" means:

(1) for an accredited production approved by the Department on or before January 1, 2005 and commencing before May 1, 2006, the amount equal to 25% of the Illinois labor expenditure approved by the Department. The applicant is deemed to have paid, on its balance due day for the year, an amount equal to 25% of its qualified Illinois labor expenditure for the tax year. For Illinois labor expenditures generated by the employment of residents of geographic areas of high poverty or high unemployment, as determined by the Department, in an accredited production commencing before May 1, 2006 and approved by the Department after January 1, 2005, the applicant shall receive an enhanced credit of 10% in addition to the 25% credit; and

(2) for an accredited production commencing on or after May 1, 2006, the amount equal to:

(i) 20% of the Illinois production spending for the taxable year; plus

(ii) 15% of the Illinois labor expenditures generated by the employment of residents of geographic areas of high poverty or high unemployment, as determined by the Department; and

(3) for an accredited production commencing on or after January 1, 2009, other than an accredited animated production qualifying under item (4) or a talk show or reality program qualifying under item (5), the amount equal to:

(i) 30% of the Illinois production spending for the taxable year; plus

(ii) 15% of the Illinois labor expenditures generated by the employment of residents of geographic areas of high poverty or high unemployment, as determined by the Department; .

(4) for an accredited animated production commencing on or after January 1, 2012:

(i) 30% of the anticipated Illinois production spending for the entire production period; plus

(ii) 15% of the anticipated Illinois labor expenditures generated by the employment of residents of geographic areas of high poverty or high unemployment, as determined by the Department, during the entire production period;

the credits awarded for an accredited animated production commencing on or after January 1, 2012 shall be awarded as provided in Section 42; and

(5) for an accredited talk show or reality program commencing its first season in Illinois on or after May 1, 2011, the amount equal to:

(i) 30% of the Illinois production spending for the taxable year; plus

(ii) 15% of the Illinois labor expenditures generated by the employment of residents of geographic areas of high poverty or high unemployment, as determined by the Department.

"Department" means the Department of Commerce and Economic Opportunity.

"Director" means the Director of Commerce and Economic Opportunity.

"Illinois labor expenditure" means salary or wages paid to employees of the applicant for services on the accredited production;

To qualify as an Illinois labor expenditure, the expenditure must be:

(1) Reasonable in the circumstances.

(2) Included in the federal income tax basis of the property.

(3) Incurred by the applicant for services on or after January 1, 2004.

(4) Incurred for the production stages of the accredited production, from the final script stage to the end of the post-production stage.

(5) Limited to the first $25,000 of wages paid or incurred to each employee of a production commencing before May 1, 2006 and the first $100,000 of wages paid or incurred to each employee of a production commencing on or after May 1, 2006.

(6) For a production commencing before May 1, 2006, exclusive of the salary or wages paid to or incurred for the 2 highest paid employees of the production.

(7) Directly attributable to the accredited production.

(8) Except for expenditures paid with respect to an accredited animated production, paid Paid in the tax year for which the applicant is claiming the credit or no later than 60 days after the end of the tax year.

(9) Paid to persons resident in Illinois at the time the payments were made.

(10) Paid for services rendered in Illinois.

"Illinois production spending" means the expenses incurred by the applicant for an accredited production, including, without limitation, all of the following:

(1) expenses to purchase, from vendors within Illinois, tangible personal property that is used in the accredited production;

(2) expenses to acquire services, from vendors in Illinois, for film production, editing, or processing; and

(3) the compensation, not to exceed $100,000 for any one employee, for contractual or salaried employees who are Illinois residents performing services with respect to the accredited production.

"Qualified production facility" means stage facilities in the State in which television shows and films are or are intended to be regularly produced and that contain at least one sound stage of at least 15,000 square feet.

Rulemaking authority to implement this amendatory Act of the 95th General Assembly, if any, is conditioned on the rules being adopted in accordance with all provisions of the Illinois Administrative Procedure Act and all rules and procedures of the Joint Committee on Administrative Rules; any purported rule not so adopted, for whatever reason, is unauthorized.

(Source: P.A. 95-720, eff. 5-27-08; 95-1006, eff. 12-15-08.)

(35 ILCS 16/40)

Sec. 40. Amount and duration of the credit. The amount of the credit awarded under this Act is based on the amount of the Illinois labor expenditure and Illinois production spending approved by the Department for the production as set forth under Section 10. The duration of the credit may not exceed (i) one taxable year for productions other than accredited animated productions or (ii) for accredited animated productions, the period beginning with the taxable year in which the production commences and ending with the taxable year in which the final audit required under Section 42 is complete.

(Source: P.A. 95-720, eff. 5-27-08.)

(35 ILCS 16/42 new)

Sec. 42. Accredited animated productions. Each applicant requesting credits for an accredited animated production commencing on or after January 1, 2012 must enter into an agreement with the Department detailing (i) the applicant's anticipated Illinois production spending for the entire production period and (ii) the anticipated Illinois labor expenditures generated by the employment of residents of geographic areas of high poverty or high unemployment. The accredited production certificate for an accredited animated production shall list those amounts. An applicant that is awarded a credit for an accredited animated production is entitled to take (i) 25% of the total credit awarded in the taxable year in which Stage 1 of the production is completed, (ii) 25% of the total credit awarded in the taxable year in which Stage 2 of the production is completed, (iii) 25% of the total credit awarded in the taxable year in which Stage 3 of the production is completed, and (iv) 25% of the total credit awarded in the taxable year in which Stage 4 of the production is completed, including the final audit.

For the purposes of this Section:

Stage 1 of the production is considered complete upon review and approval by the Department of an animatic reel in QuickTime format (with watermark). "Animatic reel" means a timed and edited compilation of images/storyboard pre-visualising the final feature from first to last scene, including dialogue from the first pass voice recording or "scratch track". The completion of Stage 1 is the end of pre-production and includes the culmination of the following:

(1) conclusion of the screenplay;

(2) conclusion of the initial dialogue record;

(3) asset design (2D); and

(4) conclusion of the storyboard stage.

Stage 2 of the production is considered complete upon review and approval by the Department of a pre-visualization/blocking reel in QuickTime format (with watermark). "Pre-visualization/blocking reel" means a timed and edited compilation of rendered 3D pre-visualization from the first to last scene, including any and all motion capture. The completion of Stage 2 includes the completion of asset modeling and asset rigging.

Stage 3 of the production is considered complete upon review and approval by the Department of the first animation pass in QuickTime format (with watermark). "First animation pass" means a timed and edited compilation of rendered animation from the first to last scene, including the second dialogue pass. The completion of Stage 3 means the completion of asset surfacing: color and texture, pre-visualization/motion capture, and the progress of animation stage.

Stage 4 of the production is considered complete upon review and approval by the Department of a final rendered feature in QuickTime format (with watermark). The completion of Stage 4 includes the completion of the entire post-production process.

Upon the completion of Stage 4, the applicant shall submit to a final audit by the Department. If the Department finds that the actual Illinois production spending is less than the applicant's anticipated Illinois production spending, as set forth in the agreement with the Department, then the final tax credit award shall be reduced accordingly.

Section 99. Effective date. This Act takes effect upon becoming law.