STAND. COM. REP. NO. 1588

Honolulu, Hawaii

, 2005

RE: H.B. No. 1590

H.D. 2

S.D. 2

 

 

Honorable Robert Bunda

President of the Senate

Twenty-Third State Legislature

Regular Session of 2005

State of Hawaii

Sir:

Your Committee on Ways and Means, to which was referred H.B. No. 1590, H.D. 2, S.D. 1, entitled:

"A BILL FOR AN ACT RELATING TO THE HAWAII FILM AND DIGITAL MEDIA INDUSTRY,"

begs leave to report as follows:

The purpose of this measure is to diversify Hawaii's economy by expanding the State's current tax incentive packages for motion picture, television, and film production to include digital media and sound recording and support and build the local workforce and infrastructure needed to grow Hawaii's digital media industry.

Specifically, the measure:

(1) Amends section 235-7.3, Hawaii Revised Statutes, to add digital media to the definition of "performing arts products" so that it mirrors the definition of "performing arts products" added to section 235-110.9, Hawaii Revised Statutes;

(2) Amends section 235-110.9, Hawaii Revised Statutes, to add a new definition for "performing arts products" and to add language to the definition of "qualified high technology business", to clarify that businesses claiming the tax credit under this section in taxable years beginning after December 31, 2005, are required to provide proof to the Department of Business, Economic Development, and Tourism of: educational or in-kind support of Hawaii secondary or post-secondary performing arts programs; employment of Hawaii residents; and use of facilities in the State;

(3) Increases the existing four per cent income tax credit on Hawaii qualified production expenditures to fifteen per cent for productions on Oahu and twenty per cent for productions on the neighbor islands;

(4) Allows a qualified production to receive a wage reimbursement tax credit for an unspecified percentage of the wages paid to below-the-line hires that are Hawaii residents;

(5) Deletes the tax credit for transient accommodations taxes established under section 235-17(b), Hawaii Revised Statutes;

(6) Requires that motion picture or film productions expend a minimum of $200,000 in the State to qualify for the tax credit;

(7) Requires that a sound recording production expend a minimum of $20,000 in the State to qualify for the tax credit;

(8) Requires that a production that qualifies for the tax credit provide the State with a shared-card, end-title credit;

(9) Requires that productions interested in claiming the tax credit be pre-qualified by the Department of Business, Economic Development, and Tourism;

(10) Establishes record keeping and reporting requirements for the Departments of Business, Economic Development, and Tourism and Taxation;

(11) Defines terms such as "below-the-line hires", "commercials", "digital media", "post-production", "production", "qualified production", and "qualified production costs";

(12) Prohibits the claiming of tax credits under both the production expenditure tax credit established under section 235-17, Hawaii Revised Statutes, and the investment tax credit established under section 235-110.9, Hawaii Revised Statutes;

(13) Caps tax credit claims at $8,000,000 per production;

(14) Requires the Department of Business, Economic Development, and Tourism, in consultation with the Department of Taxation and the county film offices, to develop an appropriate revenue generation and economic benefit model to determine the economic impact of the enhanced film and digital media tax credits established under this Act;

(15) Requires the Department of Business, Economic Development, and Tourism, beginning with the 2006 Regular Session, to annually submit reports on the film and digital media production expenditure, revenue projection, and revenue realization information to the Legislature until the 2011 Regular Session; and

(16) Makes the amendments made to the enhanced film and digital media tax credits applicable to taxable years beginning after December 31, 2004.

Your Committee has amended the measure by:

(1) Changing the amount of the tax credit cap from $8,000,000 to $1; and

(2) Making technical nonsubstantive amendments for purposes of style;

thereby essentially making this bill identical to S.B. No. 541, S.D. 2, which was passed earlier by your Committee.

As affirmed by the record of votes of the members of your Committee on Ways and Means that is attached to this report, your Committee is in accord with the intent and purpose of H.B. No. 1590, H.D. 2, S.D. 1, as amended herein, and recommends that it pass Third Reading in the form attached hereto as H.B. No. 1590, H.D. 2, S.D. 2.

Respectfully submitted on behalf of the members of the Committee on Ways and Means,

____________________________

BRIAN T. TANIGUCHI, Chair