This Act repeals the Film Production Rebate Program and creates the Film Production Activity Credit.
The Act defines most relevant terms, using the definitions contained in the former Subtitle 4 of the Economic Development Article. The Act defines "department" and "secretary" to be the Department of Business and Economic Development and its Secretary. The Act adds two more activities to what "film production activity" does not include. "Film production activity" does not include a video, computer, or social networking game or pornography. The Act defines pornography to mean any production for which records are required to be maintained under Section 2257 of Title 18, U.S.C. The Act also deletes the provision that "film production activity" does not include any other activity not necessary to or directly related to the making of a master film, tape, or image.
The definition for "total direct costs" provides that the costs are the total costs incurred in the State that are necessary to carry out the production activity. The Act expands the list of costs that are included in "total direct costs." These new additions include set construction and operation; wardrobe, makeup, and related services; editing and related services; travel; food and lodging, and legal and accounting services performed by attorneys or accountants licensed in Maryland.
The Act adds to the definition of "total direct costs" to provide that it does not include any salary, wages, or other compensation for personal services of an individual who receives more than $500,000 in salary, wages, or other compensation for personal services in connection with any film production activity.
In order to claim the credit, a film production entity must submit an application to DBED before beginning any film production activity. This application should describe the anticipated film production activity and must include a list provided for in §10-729(c)(2). To qualify as a film production entity for this credit, the estimated total direct costs incurred in the State must exceed $500,000.
After receiving the application, the Secretary shall determine if the entity qualifies for the credit under this section and then must notify the Comptroller of the estimated amount of total direct costs and taxable year the credit will be claimed. After the production activity is completed, the entity must apply to DBED for a tax credit certificate on the form required by DBED and include required information. The Secretary shall determine the total direct costs that qualify for the tax credit and issue a tax credit certificate. The tax credit certificate for a television series will be issued for 27% of the total direct costs that qualify. For all other activities, the tax credit certificate will be issued for 25% of the total direct costs that qualify for the tax credit. The Secretary must then notify the Comptroller of the amount of the tax credit certificate issued under this subsection.
The tax credit is capped at $7,500,000 for each fiscal year and the Secretary may not issue credit certificates exceeding this amount in the aggregate. However, if the Secretary issues less than the cap in any fiscal year, the excess amount may be carried forward and issued under tax credit certificates in a subsequent fiscal year.
The Act provides that a qualified film production entity may claim a tax credit against State income tax for film production activities in the state in an amount equal to the amount in the final tax credit certificate approved by the Secretary. The Act provides that this credit is refundable if the tax credit allowed exceeds the total tax otherwise payable by a qualified film production entity for that taxable year.
Effective Date: This Act shall take effect July 1, 2011 and be applicable to all taxable years beginning after December 31, 2010. This Act shall abrogate on July 1, 2014 without any further action required by the General Assembly.