No. 40460 (Repeal and Reenact): Rule R357-5. Motion Picture Incentive Fund

(Repeal and Reenact)

DAR File No.: 40460
Filed: 06/01/2016 03:04:01 PM

RULE ANALYSIS

Purpose of the rule or reason for the change:

The rule is currently up for its five-year review. The agency determined after the review that the current rule is not sufficient in providing all the criteria required to apply and receive an incentive. Therefore, the agency has updated the rule to provide a comprehensive view of the criteria, process, and procedures for the incentive.

Summary of the rule or change:

The rule has been changed to: 1) provide clarification on definitions relevant to the incentive program; 2) delineate the Motion Picture Incentive applications: Procedures and Minimum Requirements for a Motion Picture Company; 3) add film categories and conditions; and 4) disburse incentive awards. This is different from the current rule.

State statutory or constitutional authorization for this rule:

• Section 63N-8-104

Anticipated cost or savings to:

the state budget:

There will be no cost or savings to the state associated with this rule because the amount of new incentive allocation is fixed every year, and this rule does not create a process or procedures that will create a cost or savings.

local governments:

There will be no cost or savings to any local government because they cannot apply for the incentive and there are no processes or procedures that would create a cost or savings.

small businesses:

Small film businesses will be impacted by this rule because it creates the process to apply and the criteria for an incentive. There is no anticipated cost or savings to those small businesses outside of costs related to applying and complying with the rule changes.

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

There are no other entities that will be affected by this rule because only film production companies and digital media companies can apply for this tax credit, and the rule outlines criteria for applying. It does not create any new regulation for other persons or production companies.

Compliance costs for affected persons:

The compliance costs for affected persons is minimal and should be easily absorbed in already existing costs. The cost cannot be estimated because the cost will strictly be a cost associated with the time it takes to collect the requisite documents for the application and requirements outlined in the rule. Each recipient will have varying levels of expertise, and each award varies in size, scope, and requirements pursuant to statute and this proposed rule's criteria. Thus, times and subsequent costs will vary.

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

The only cost and impact should be to those who apply and receive the incentive in terms of costs for applying and compliance, which should be small.

Val Hale, 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
60 E SOUTH TEMPLE 3RD FLR
SALT LAKE CITY, UT 84111

Direct questions regarding this rule to:

• Jeffrey Van Hulten at the above address, by phone at 801-538-8694, by FAX at 801-538-8888, or by Internet E-mail at [e-mail]

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:

07/15/2016

This rule may become effective on:

07/22/2016

Authorized by:

Val Hale, Executive Director

RULE TEXT

R357. Governor, Economic Development.

[R357-5. Motion Picture Incentive Fund.

R357-5-1. Authority.

(1) Subsection 63N-8-104 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 63N-8 of the Utah Code Annotated.

 

R357-5-2. Definitions.

(1) Terms in these rules are used as defined in UCA 63N-8-102.

 

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

(1) A motion picture company may qualify for a motion picture incentive under 63N-8 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 63N-8; and

(c) if a post-performance refundable tax credit, the post-performance refundable tax credit certificate is issued in accordance with 63N-8 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 63N-8.

 

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

(1) A digital media company may qualify for a motion picture incentive under 63N-8 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 63N-8 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 63N-8.

 

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 63N-8, 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.]

R357-5. Motion Picture Incentive.

R357-5-1. Authority.

(1) Subsection 63N-8-104(1) 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.

 

R357-5-2. Definitions.

(1) The definitions below are in addition to or serve to clarify the definitions found in Utah Code Section 63N-8-102.

(2) "Low Budget Film Production" means a production where a motion picture company has a maximum budget of under $500,000.

(3) "Motion Pictures" means, but is not limited to, narrative or documentary films or high definition digital production, and originally intended for commercial distribution to motion picture theaters, directly to the home video and/or DVD markets, cable television, broadcast television or video on demand.

(a) The term "Motion Picture" does not include:

(i) News;

(ii) Commercials;

(iii) Live Broadcasts;

(iv) Digital Media Products;

(v) Discrete Sporting events;

(vi) Live Coverage of other theatrical or entertainment events; or

(vii) Programs that solicit funds.

(4) "Rural Utah" means all counties of the 4th, 5th, and 6th class, and municipalities in a county of the 3rd class that has a population under 20,000 and a median household income under $70,000 as reflected in the most recently available data collected and reported by the United States Census Bureau.

(5) "Significant Percentage of cast and crew from Utah" means

(a) For productions that have less than $500,000 dollars left in state: that at least 85% of the cast and crew are Utah residents.

(b) For productions that have more than $500,000 dollars left in state: that at least 75% of the cast and crew are Utah residents excluding extras and five principal cast.

(c) "Utah Resident" means that the individual files a Utah Resident tax return.

(6) "State-approved production" means a production that is:

(a) approved by the office and ratified by the Governor's Office of Economic Development Board; and

(b) all or a portion of the production is produced in the state.

(7) "Total budget for the product" means the total budget for Dollars left in state of pre-production, production and post-production.

(8) "Treatment" means: A written description of the production.

(9) "UFC" means: the Utah Film Commission, a sub-entity of the Utah Governor's Office of Economic Development.

(10) "Utah Resident" means a person who files a Utah State Tax Return as a resident of Utah.

 

R357-5-3. Motion Picture Incentive Applications: Procedures and Minimum Requirements for a Motion Picture Company.

(1) A motion picture company may qualify for a motion picture incentive only if all of the following requirements are met in addition to those listed throughout 63N-8:

(a) The motion picture company is making all or a portion of a motion picture in the state of Utah;

(b) The motion picture is a state approved production;

(c) The motion picture company guarantees UFC access to production's behind the scenes footage, interviews and still photography or allow the office to produce its own;

(d) The motion picture company guarantees the production will display the Utah logo as outlined in the incentive agreement and provide a screen shot of the logo as it appears in the credits.

(e) The motion picture company has obtained financing for at least 75% of the anticipated Dollars left in state for the project, and the applicant provides proof of financing in a form specified in the application documents.

(f) The motion picture company must retain financing as set forth in subsection (e) for the life of the contract with the State.

(g) The motion picture company intends to report at least $500,000 dollars left in state if applying for a film incentive pursuant to R357-5-5(1) or a maximum of under $500,000 if applying for an incentive pursuant to R357-5-5(2);

(h) As of the date that the Office receives a completed motion picture incentive application, the motion picture production company has not started principle photography of the production in the state.

(i) If a production has initiated principal photography prior to the Office's receipt of a completed application, the application for incentive shall be denied.

(ii) An application for incentive may be submitted if the motion picture production company has initiated pre-production activities in the State of Utah, as long as principal photography has not been initiated.

(2) The motion picture incentive application shall not be construed as a property right and neither the Office nor the Board is required to approve an application.

(3) In order to receive state approval for an incentive application, a production must, in the State's sole discretion, reflect positively on the image of state of Utah.

(a) In determining whether or not a production reflects positively on the image of the state of Utah, the Office and Board may take into consideration:

(i) Whether and to what extent the motion picture promotes Utah as a tourist destination;

(ii) the overall strength and viability of the script of the production;

(iii) the industry reputation of the production or motion picture company;

(iv) the record of the motion picture company in matters of safety and responsible filmmaking; and

(v) the existence of any legal action or the likelihood of any legal action in relation to either the production or the motion picture company;

(vi) general standards of decency and respect for the diverse beliefs and values of Utahns; and

(vii) any other factors related to the production or the motion picture company that may reasonably affect the image of the state of Utah.

(4) The Office and Board may consider the relative merit of applications, and the need to reserve its allocations for future applications.

(a) Factors that contribute to the relative merit will be weighted by a point system available on the Utah Film Commission's website and include, but are not limited to:

(i) Number of anticipated jobs in Utah;

(ii) Number of production days in Utah;

(iii) Length of employment for Utah cast and crew;

(iv) Local cast and crew wages;

(v) Other economic development that the film contributes in the State of Utah;

(b) Applications shall be made in the form prescribed by the Office, including required attachments or additional information.

(i) Incomplete applications will not be considered received until the application is deemed complete by the UFC.

(ii) A script is required as part of the application.

(1) A treatment may only be submitted where a script for a project type is not possible for example, because the project is a documentary or reality based television show. The Utah Film Commission will determine in its sole discretion if a treatment can be substituted for a script.

(5) A production company may file more than one application if it has more than one production in the state, but a separate application must be filed for each production.

(6) Applications will be subject to submission deadlines, which will be posted on the Utah Film Commission Website and are available in other formats upon request.

(a) If the applicant fails to submit a completed application prior to the submission deadline, the application may be considered with the next round of submissions.

(7) Submitting an application does not guarantee approval of a film incentive.

(a) All film incentives are subject to and contingent upon the amount of available funding and/or tax credit allocation available in the Motion Picture Restricted account;

(b) Lack of state approval shall not be construed as prohibiting a production or prohibiting a motion picture company from filming in Utah.

 

R357-5-4. Motion Picture Incentive Applications: Award for a Motion Picture Production.

(1) Upon receipt of a completed application, the Office will align each project into incentive categories as set forth in R357-5-5.

 

R357-5-5. Film Categories and Conditions.

(1) Utah Motion Picture Incentive Program

(a) The Utah motion Picture Incentive program will have an incentive cap of 20% the dollars left in state, unless a higher cap is awarded pursuant to subsection (c).

(b) Incentives will only be awarded if the motion picture company meets criteria listed in statute, R357-5-3

(c) An additional cap of up to 5% may be granted if the motion picture company:

(i) Motion picture company has at least $1,000,000 in qualified dollars left in state, and

(ii) 75% of cast and crew are Utah residents excluding extras and five principal cast members, or

(iii) 75% of Dollars left in state occurs in rural Utah

(2) Low Budget Film Production Incentive

(a) The Low Budget Film Production Incentives Program will provide a maximum of a 20% post performance cash rebate or tax incentive for dollars left in state by a low budget production.

(b) Low Budget Film Production Program incentives will only be awarded if the motion picture company meets criteria listed in statute, R357-5-3, has a maximum budget of under $500,000, and meets following criteria:

(i) Minimum wage of 60% of area standard rates for each cast and crew member; and

(ii) 85% of cast and crew must be Utah residents;

(c) Applications for the Low Budget Film Production Incentive Program will be reviewed quarterly beginning in August of each calendar year.

(d) Awards will be made to motion picture companies based upon the scoring system outlined in the Low Budget Film Production Incentive Program application provided by UFC.

(3) For applications made under either (1) or (2), the motion picture company must provide all information and documentation to show measureable outcomes as outlined in the application for any incentive listed in R357-5-5.

 

R357-5-8. Funding -- Post-Performance Refundable Tax Credit.

(1) Post-performance refundable tax credits are nontransferable and can only be issued to the state-approved motion picture that submits the motion picture incentive application and is approved by the office with advice from the Board.

 

R357-5-9. Funding -- Post-Performance Cash.

(1) The office may only issue funds appropriated by the state legislature to the Motion Picture Incentive Account to a motion picture company

(2) Post-performance cash 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.

 

R357-5-10. Request for Incentive Amendment.

(1) A motion picture company may request an incentive amendment only under the conditions listed in the incentive application.

(2) Amendments will be reviewed and approved by the UFC on a case by case basis with a written explanation for the approval or denial provided to the applicant.

 

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

Date of Enactment or Last Substantive Amendment: [June 30, 2011]2016

Authorizing, and Implemented or Interpreted Law: 63N-8-104

 

---