A BILL TO BE ENTITLED
AN ACT to attract and retain film industry jobs in this state by providing for a tax incentive for production companies in the state.
The General Assembly of North Carolina enacts:
SECTION 1.  Part 1 of Article 4 of Chapter 105 of the General Statutes is amended by adding a new section to read:
"§ 105‑130.47.  Credit for qualifying expenses of a production company.
(a)	Definitions. – The following definitions apply in this section:
(1)	Highly compensated individual. – An individual who receives compensation in excess of one million dollars ($1,000,000) with respect to a single production.
(2)	Qualifying expenses. – The sum of the total amount spent in this State for the following by a production company in connection with a production:
a.	Goods and services purchased by the production company.
b.	Compensation and wages paid by the production company, other than amounts paid to a highly compensated individual, on which the production company remitted withholding payments to the Department of Revenue under Article 4A of this Chapter.
(3)	Production company. – Defined in G.S. 105‑164.3.
(b)	Credit. – A taxpayer that is a production company and has qualifying expenses of at least two hundred fifty thousand dollars ($250,000) with respect to a production is allowed a credit against the taxes imposed by this Part equal to fifteen percent (15%) of the production company's qualifying expenses that have been certified as required in subsection (c) of this section. For the purposes of this section, in the case of an episodic television series, an entire season of episodes is one production. The credit is computed based on all of the taxpayer's qualifying expenses incurred with respect to the production, not just the qualifying expenses incurred during the taxable year.
(c)	Certification. – In order to be eligible for a credit under this section, a taxpayer must submit a detailed accounting of its qualifying expenses to the North Carolina Film Office of the Department of Commerce. The North Carolina Film Office, with the assistance of the regional film commission for the location of the production, must make a written certification of the amount of the qualifying expenses.
(d)	Pass‑Through Entity. – Notwithstanding the provisions of G.S. 105‑131.8 and G.S. 105‑269.15, a pass‑through entity that qualifies for the credit provided in this section does not distribute the credit among any of its owners. The pass‑through entity is considered the taxpayer for purposes of claiming the credit allowed by this section. If a return filed by a pass‑through entity indicates that the entity is paying tax on behalf of the owners of the entity, the credit allowed under this section does not affect the entity's payment of tax on behalf of its owners.
(e)	Return. – A taxpayer may claim the credit allowed by this section on a return filed for the taxable year in which the production activities are completed. The return must state the name of the production, a description of the production, and the certification from the North Carolina Film Office of the qualifying expenses for which the credit is claimed.
(f)	Credit Refundable. – If the credit allowed by this section exceeds the amount of tax imposed by this Part for the taxable year reduced by the sum of all credits allowable, the Secretary must refund the excess to the taxpayer. The refundable excess is governed by the provisions governing a refund of an overpayment by the taxpayer of the tax imposed in this Part. In computing the amount of tax against which multiple credits are allowed, nonrefundable credits are subtracted before refundable credits.
(g)	Limitation. – No credit is allowed under this section for any production that satisfies one of the following conditions:
(1)	It is political advertising.
(2)	It is a television production of a news program or sporting event.
(3)	It contains material that is obscene, as defined in G.S. 14‑190.1.
(h)	Substantiation. – A taxpayer allowed a credit under this section must maintain and make available for inspection any information or records required by the Secretary of Revenue or the regional film commissions. The taxpayer has the burden of proving eligibility for a credit and the amount of the credit.
(i)	Report. – The Department of Revenue must publish by May 1 of each year the following information, itemized by taxpayer for the 12‑month period ending the preceding April 1:
(1)	The location of sites used in a production for which a credit was claimed.
(2)	The qualifying expenses for which a credit was claimed, classified by whether the expenses were for goods, services, or compensation paid by the production company.
(3)	The number of people employed in the State with respect to credits claimed.
(4)	The total cost to the General Fund of the credits claimed.
(j)	Sunset. – This section is repealed for qualifying expenses occurring on or after January 1, 2010."
SECTION 2.  Part 2 of Article 4 of Chapter 105 of the General Statutes is amended by adding a new section to read:
"§ 105‑151.29.  Credit for qualifying expenses of a production company.
(a)	Definitions. – The following definitions apply in this section:
(1)	Highly compensated individual. – An individual who receives compensation in excess of one million dollars ($1,000,000) with respect to a single production.
(2)	Qualifying expenses. – The sum of the total amount spent in this State for the following by a production company in connection with a production:
a.	Goods and services purchased by the production company.
b.	Compensation and wages paid by the production company, other than amounts paid to a highly compensated individual, on which the production company remitted withholding payments to the Department of Revenue under Article 4A of this Chapter.
(3)	Production company. – Defined in G.S. 105‑164.3.
(b)	Credit. – A taxpayer that is a production company and has qualifying expenses of at least two hundred fifty thousand dollars ($250,000) with respect to a production is allowed a credit against the taxes imposed by this Part equal to fifteen percent (15%) of the production company's qualifying expenses that have been certified as required in subsection (c) of this section. For the purposes of this section, in the case of an episodic television series, an entire season of episodes is one production. The credit is computed based on all of the taxpayer's qualifying expenses incurred with respect to the production, not just the qualifying expenses incurred during the taxable year.
(c)	Certification. – In order to be eligible for a credit under this section, a taxpayer must submit a detailed accounting of its qualifying expenses to the North Carolina Film Office of the Department of Commerce. The North Carolina Film Office, with the assistance of the regional film commission for the location of the production, must make a written certification of the amount of the qualifying expenses.
(d)	Pass‑Through Entity. – Notwithstanding the provisions of G.S. 105‑131.8 and G.S. 105‑269.15, a pass‑through entity that qualifies for the credit provided in this section does not distribute the credit among any of its owners. The pass‑through entity is considered the taxpayer for purposes of claiming the credit allowed by this section. If a return filed by a pass‑through entity indicates that the entity is paying tax on behalf of the owners of the entity, the credit allowed under this section does not affect the entity's payment of tax on behalf of its owners.
(e)	Return. – A taxpayer may claim the credit allowed by this section on a return filed for the taxable year in which the production activities are completed. The return must state the name of the production, a description of the production, and the certification from the North Carolina Film Office of the qualifying expenses for which the credit is claimed.
(f)	Credit Refundable. – If the credit allowed by this section exceeds the amount of tax imposed by this Part for the taxable year reduced by the sum of all credits allowable, the Secretary must refund the excess to the taxpayer. The refundable excess is governed by the provisions governing a refund of an overpayment by the taxpayer of the tax imposed in this Part. In computing the amount of tax against which multiple credits are allowed, nonrefundable credits are subtracted before refundable credits.
(g)	Limitation. – No credit is allowed under this section for any production that satisfies one of the following conditions:
(1)	It is political advertising.
(2)	It is a television production of a news program or sporting event.
(3)	It contains material that is obscene, as defined in G.S. 14‑190.1.
(h)	Substantiation. – A taxpayer allowed a credit under this section must maintain and make available for inspection any information or records required by the Secretary of Revenue or the regional film commissions. The taxpayer has the burden of proving eligibility for a credit and the amount of the credit.
(i)	Report. – The Department of Revenue must publish by May 1 of each year the following information, itemized by taxpayer for the 12‑month period ending the preceding April 1:
(1)	The location of sites used in a production for which a credit was claimed.
(2)	The qualifying expenses for which a credit was claimed, classified by whether the expenses were for goods, services, or compensation paid by the production company.
(3)	The number of people employed in the State with respect to credits claimed.
(4)	The total cost to the General Fund of the credits claimed.
(j)	Sunset. – This section is repealed for qualifying expenses occurring on or after January 1, 2010."
SECTION 3.  G.S. 105‑259(b) is amended by adding a new subdivision to read:
"(b)	Disclosure Prohibited. – An officer, an employee, or an agent of the State who has access to tax information in the course of service to or employment by the State may not disclose the information to any other person unless the disclosure is made for one of the following purposes:
…
(32)	To exchange information concerning a tax credit claimed under G.S. 105‑130.47 or G.S. 105‑151.29 with the North Carolina Film Office of the Department of Commerce and with the regional film commissions."
SECTION 4.  G.S. 143B‑434.4 is repealed.
SECTION 5.  This section is effective for taxable years beginning on or after January 1, 2005.