PROPOSED
RI FILM & TV OFFICE RULES & REGULATIONS |
RULES AND REGULATIONS FOR THE CERTIFICATION OF Draft dated October 4, 2006 RHODE ISLAND FILM AND TELEVISION OFFICE STATE OF RHODE ISLAND AND PROVIDENCE PLANTATIONS TABLE OF CONTENTS RULE 1. PURPOSE RULE 2. AUTHORITY RULE 3. APPLICATION RULE 4. SEVERABILITY RULE 5. DEFINITIONS RULE 6. APPLICATIONS RULE 7. CERTIFICATION OF A PRODUCTION RULE 8. COMMENCEMENT OF PRODUCTION RULE 9. COST REPORT RULE 10. DETERMINATION OF TAX CREDIT RULE 11. ISSUANCE OF TAX CREDIT RULE 12. ASSIGNMENT OF MOTION PICTURE PRODUCTION TAX CREDIT RULE 13. EFFECTIVE DATE
RULE 1. PURPOSE These rules implement Chapter 44-31.2 of the Rhode Island General Laws. This Chapter, also referred to within as RIGL Chapter 44-31.2, provides for the issuance of Motion Picture Production Tax Credits. These rules govern the procedures for the application and certification of these tax credits. RULE 2. AUTHORITY These rules and regulations are promulgated pursuant to RIGL Chapter
44-31.2 as amended by Chapters 19 and 20 of the Public Laws of
2006. These rules have been prepared in accordance with the requirements
of RIGL Chapter 42-35, the Rhode Island Administrative Procedures Act. The terms and provisions of these rules and regulations shall be liberally construed to permit the Department of Administration to effectuate the purposes of RIGL Chapter 44-31.2 and other applicable state laws and regulations. RULE 4. SEVERABILITY If any provision of these Rules and Regulations, or the application thereof to any person or circumstances, is held invalid by a court of competent jurisdiction, the validity of the remainder of the Rules and Regulations shall not be affected thereby. RULE 5. DEFINITIONS A. “Act” means Chapter 44-31.2 of the Rhode Island General Laws, as amended. B. “Above-The-Line Person” means a motion picture director, writer, producer or featured actor. Motion picture directors, writers, producers, featured actors and their fees are grouped within the “pre-production” section of a typical motion picture budget, above a solid, bold line, separating these few “above-the-line” persons from the majority of the “below-the-line” crew, other production and post-production expenses. C. “Accountant’s Certification” means a certified audit by a Rhode Island certified public accountant licensed in accordance with Section 5-5- 3.1 of the Rhode Island General Laws, as amended. D. “Alternative Distribution Method” for the purposes of the Production Tax Credit means an executed agreement among all participants of a pass-through entity, or among all owners of a motion picture having multiple owners, setting forth the method for allocation of the Motion Picture Production Tax Credit agreed upon by and among the participants or co-owners. An alternative distribution method may include, without limitation, a partnership agreement, an operating agreement of a limited liability company, a shareholders agreement, or any other instrument executed by all participants or co-owners. E. “Amended Production” means one additional, final certification allowable for the same production for purposes such as “re-shoots” or any additional production expenditures incurred and paid within the State of Rhode Island (but not previously included in the cost report) provided that the motion picture has already met the conditions required for, and been approved for final certification by the Film Office. The additional production expenditures shall be included in a separate cost report and require a separate accountant’s certification. F. “Applicant” means a motion picture production company which is a corporation, partnership, limited partnership, or other entity or individual, submitting an application to the Film Office for initial or final certification of a production. G. “Certificate of Motion Picture Production Tax Credit” means a certificate issued by the Film Office which states the amount of the Motion Picture Production Tax Credit for which the production has qualified. The certificate shall include, but not be limited to, the following information: specific and unique certificate number, name and address of the approved applicant, name of the state certified production, name of the qualified film to which the credit applies, date in which production completed, date of final certification by the Film Office, the name and taxpayer identification number of production company that incurred and paid state certified Rhode Island production expenditures, total amount of state certified Rhode Island production expenditures, name of initial holder of this certificate, taxpayer identification number of initial holder of this certificate, and amount of credit allocated to initial holder of this Certificate. H. “Completion of a Production” means the date of completion of a motion picture’s production in the State of Rhode Island as certified to the Film Office as part of the production’s cost report. I. (a) “Costs” include
the following expenses which may qualify when incurred and paid within
the State of (b) The following expenses that do not qualify as state certified production costs, include without limitation: (1) any
salaries, wages, and other compensation, including related benefits
to individuals who are located outside of the State of Rhode Island
and performing services outside the State of Rhode Island; J. “Costs Incurred within the State” means, in the case of tangible property, property which is acquired from or through a source within the State of Rhode Island, and, in the case of services, shall mean services performed within the State of Rhode Island. K. “Division of Taxation” means that office within the Department of Revenue that operates under the authority and direction of the Tax Administrator, pursuant to Rhode Island General Laws Section 44-1-1, et seq. L. “Domiciled in Rhode Island” means a corporation incorporated in Rhode Island or a partnership, limited liability company, or other business entity formed under the laws of the State of Rhode Island for the purpose of producing motion pictures, or an individual who is a domiciled resident of Rhode Island as defined in the Rhode Island General Laws Section 44-30-1. Such individual, corporation, partnership, limited liability company, or other entity, is subject to the General Laws of the State of Rhode Island including, but not limited to Chapters 44-11, 44-12 and 44-30. M. “Feature-Length Film” means a production intended for commercial distribution to a motion picture theater or directly to the home video market that has a running time of at least seventy-five (75) minutes in length. N. “Film Office” means the Rhode Island Film and Television Office, as defined in Section 42-75-12 of the Rhode Island General Laws. O. “Film Office Director” means Director of the Rhode Island Film and Television Office. P. “Inspection” means a visit by an authorized representative of the Film Office to a property, including set, soundstage, location or production office. Q. “Loan-Out Company” means and includes a corporation, partnership, limited liability company, S-corporation, association, nominee trust, or any other entity through which a performer is loaned out to perform services for the motion picture production company. Regardless of structure, such “loan-out companies” shall be subject to all applicable provisions of the Rhode Island personal income tax and any applicable payroll or other tax provisions. R. “Motion picture” means feature-length film, video, video games, television series, or commercial made in Rhode Island, in whole or in part, for theatrical or television viewing or as a television pilot. Motion picture shall not include the production of television coverage of news or athletic events, nor shall it apply to any film, video, television series or commercial or production for which records are required under Section 2257 of Title 18, U.S.C., to be maintained with respect to any performer in such production or reporting of books, films, etc. with respect to sexually explicit conduct. S. “Motion
Picture Production Company” means a corporation, partnership,
limited liability company, or other business entity domiciled in Rhode
Island and engaged in the business of producing one or more motion
pictures. Generally the motion picture production company controls
the state certified motion picture during production and is responsible
for payment of the direction production expenses (including pre- and
post-production), and is a signatory to the state certified motion
picture’s contracts with its payroll company and facility operators.
Motion picture production company shall not mean or include: (b) any company or person who has ever declared bankruptcy under which an obligation of the company or person to pay or repay public funds or monies was discharged as a part of such bankruptcy. T. “Out of State Vendor” means a corporation not incorporated in Rhode Island or a partnership, limited liability company, or other business entity, not domiciled and not headquartered in Rhode Island that has sold and/or rented goods to the motion picture production company, for use within the State of Rhode Island. U. “Participant” means a partner in a partnership, member of limited liability
company, or shareholder of an S-corporation, a beneficial owner
of a trust, or any other
person having an interest in a pass-through entity. W. “Post-Production” means the final stage in a state certified motion picture’s production after principal and ongoing photography is completed, including, but not limited to, editing, Foley Recording, Automatic Dialogue Replacement, sound editing, special effects, scoring and music editing, beginning and end credits, negative cutting, soundtrack production, the addition of sound/visual effects, dubbing, and subtitling. Advertising and marketing activities and expenses are not included in post-production. X. “Pre-Production” means the process of preparation for actual physical production which begins after a state certified motion picture has received a firm agreement of financial commitment (“green-lit”) with, for example, the establishment of a dedicated production office, the hiring of key crew members such as a Unit Production Manager, Line Producer and Location Manager, and includes, but is not limited to, activities such as location scouting, hiring of crew, and execution of contracts with vendors of equipment and stage space. Y. “Primary Locations” means the locations within which at least fifty-one percent (51%) of the motion picture’s total principal photography days are filmed. Z. “Principal and Ongoing Photography” means the filming of major and significant portions of a state certified motion picture that involves the lead actors. AA. “State Certified Production” means a motion picture production approved by the Rhode Island Film & Television Office and is produced by a motion picture production company domiciled in Rhode Island, whether or not such company owns or controls the copyright and distribution rights in the motion picture; provided that such company has either: (a) signed a viable distribution plan; or (b) is producing the motion picture for: (i) a major motion picture distributor; (ii) a major theatrical exhibitor; (iii) television network; or (iv) cable television programmer. Additionally, the production must be produced with the motion picture’s “primary locations” filmed within the State of Rhode Island and with a “total production budget” of a minimum of three hundred thousand dollars ($300,000). BB. “State Certified Production Costs” means any pre-production, production, and post-production cost directly attributable to activity within this state that a motion picture company incurs and pays to the extent that it occurs within the State of Rhode Island. The term refers to a production certified by the State of Rhode Island under the Act and should not be taken to infer that the State of Rhode Island is certifying the production costs. CC. “Television pilot” means the initial episode produced for a proposed episodic television series. This category will include shorter formats which are known as “television presentation”, a production of at least fifteen (15) minutes in length, produced for the purposes of selling a proposed television series, but not intended for broadcast. DD. “Television series”, which may also be known as “episodic television series” is a regularly occurring production intended in its initial run for broadcast no more than once weekly, on television, whether free or via subscription-based service, that has a running time of at least thirty (30) minutes in length (inclusive of commercial advertisement and interstitial programming). EE. “Total Production budget” means and includes the motion picture production company’s pre-production, production and post-production costs incurred for the production activities of the production company in Rhode Island in connection with the making of the state certified production. The budget shall not include costs associated with the promotion or marketing of the film, video, or television product. RULE 6. APPLICATIONS A. Applications for designation of a motion picture production as a state certified production shall be made on State Certification Application forms. These forms are available from the Film Office at One Capitol Hill, Third Floor, Providence, Rhode Island, 02908 or from the Film Office’s website at www.film.ri.gov. The Initial Application is used to request initial certification of a motion picture production and must be filed with the Film Office before the commencement of principal and ongoing photography of the motion picture. The Final Application is used after the completion of the motion picture to request final certification of the production and the issuance by the Film Office of any credit documents relating to the completion of a state certified production. B. Application for Initial Certification of a Production. The applicant shall properly prepare, sign and submit the Initial Certification Application form to the Film Office. This part of the application, when completed, contains information regarding both the motion picture production company and a specific Rhode Island motion picture such that the Film Office may make a determination pertaining to the initial certification of the production. The information shall include the following and any other data the Film Office determines necessary for the proper evaluation and administration: (a) identification information: name and address of applicant, name of contact person, telephone numbers and email addresses; Federal Employer Identification number[s]; the production company’s Rhode Island address, (including Federal Employer Identification number, contact person, telephone numbers and email addresses); brief background and structure of the company, and information about other companies which are related, affiliated, or controlled by the motion picture production and which are expected to be involved in the production. (b) timing information: anticipated start date; anticipated completion date; proposed schedule; and estimated number of principal photography and ongoing photography days to be filmed in Rhode Island and outside of Rhode Island. (c) financial information: proposed total production budget, estimated disclosed motion picture budget (combined expenditures within the State of Rhode Island and outside the State of Rhode Island), and information for each of the “above the line” individuals as to whether they will be employees of the motion picture production company or, if not, the name of the entity by which they will be employed. Additionally, the applicant will estimate the anticipated amount of Rhode Island motion picture production tax credit from this production. (d) operational
information: brief description of the motion picture production,
including: (e) other information: the anticipated days each “above the line” person (i.e., producers, motion picture director, writers and featured actors) of the motion picture production plan to arrive and depart Rhode Island and approximate number of days each is scheduled to perform work in Rhode Island; copies of documents evidencing that the motion picture production company is formed under the laws of the State of Rhode Island; and one paragraph each regarding production plans for internship, diversity and training programs in Rhode Island. C. Application for Final Certification of a Production. When production is completed, the applicant shall submit a completed application for final certification to the Film Office. This application contains information regarding both the motion picture production company and the specific Rhode Island motion picture (which has previously been granted initial certification from the Film Office) and provides documentation that the completed state certified motion picture production is consistent with the work described in the initial certification. The final application must also contain a cost report and an “accountant’s certification” to evidence the motion picture production company’s compliance with all provisions of RIGL Section 44-31.2-2(5). The Film Office and the Division of Taxation may rely, without independent investigation, upon the accountant’s certification confirming the accuracy of the information included in the cost report. The application for final certification information shall, in addition to the items above, include all the following information, and any other information that the Film Office determines necessary for proper evaluation and administration: (a) identification data: name and address of applicant (including contact person, telephone numbers and email addresses); Federal Employer Identification number[s]; the production company’s Rhode Island address, (including Federal Employer Identification number, contact person, telephone numbers and email addresses); and, for compliance purposes the name, address and Federal Employer Identification number or Social Security number of each company related, affiliated or controlled by the production company as of the production’s completion date, a description and amount of the relationship, affiliation or control and a copy of the initial certification letter showing the unique identifying number assigned by the Film Office. (b) timing information: actual start date; actual completion date; the daily schedule of the entire production; and actual number of principal photography and ongoing photography days filmed in Rhode Island and outside of Rhode Island. (c) financial information: actual data for the total production budget, the disclosed motion picture budget (combined expenditures within the State of Rhode Island and outside the State of Rhode Island); (d) operational information: final script for the motion picture production; all travel schedules and data for “above-the-line” persons arriving and departing the State of Rhode Island including the actual number of days each performed work in Rhode Island; location of soundstage and one paragraph each regarding how the production applied internship, diversity and training programs. (e) maximum credit calculation: based on the production costs incurred and paid and other information in the application for final certification, the applicant will calculate an estimate of the total amount of production credits associated with the production and show a comparison between the estimated total credits and the total production budget. (f) miscellaneous information: a list of the loan out companies, temporary agencies, employee leasing companies, professional employee organizations that have provided services to the motion picture production company within the State of Rhode Island, and a list of “out of state vendors” that have sold and/or rented goods to the motion picture company for use within the State of Rhode Island. (g) signature of applicant including title and date. RULE 7. CERTIFICATION OF A PRODUCTION A. Initial Certification of a Production: Where necessary documentation is not provided, review and evaluation will be delayed and a denial of initial certification may be issued on the basis of lack of information. Because the circumstances of each production are unique, initial certifications that may have been granted to other productions are not specifically applicable and may not be relied on by applicants as applicable to other projects. The Film Office will complete its review for initial certification requests within 30 business days of receiving a complete, adequately documented application. Where adequate information is not provided, the Film Office will notify the applicant of the additional information needed to complete the review. The Film Office will adhere to this time period as closely as possible, but failure to complete a review within the designated period does not waive or alter any certification requirement or imply approval. B. Initial
Certification Letter: Once completed, the Film Office will issue
initial certification of the motion picture production in the form
of a letter issued to the motion picture production company and to
the Tax Administrator. The letter states that, after appropriate review,
the initial application meets the appropriate criteria for conditional
eligibility. The letter of initial certification is only a statement
of conditional eligibility for the production and, as such, does not
grant or convey any Rhode Island tax benefits. If the Film Office denies
initial certification, the applicant may appeal that decision under
the provisions of RIGL Section 44-31.2-8. C. Final Certification of a Production: Where necessary documentation is not provided, review and evaluation will be delayed and a denial of initial certification may be issued on the basis of lack of information. Because the circumstances of each production are unique, final certifications that may have been granted to other productions are not specifically applicable and may not be relied on by applicants as applicable to other projects. The Film Office will complete its review for final certification requests within ninety (90) business days of receiving a complete application. When adequate information is not provided, the Film Office will notify the applicant of the additional information needed to complete the review. The Film Office will adhere to this time period as closely as possible, but failure to complete a review within the designated period does not waive or alter any certification requirement or imply approval. The Film Office will determine the final certification of the production and issue a written determination to the applicant either denying or certifying the production. Depending upon the determination, the Film Office will determine the amount of Rhode Island Motion Picture Production Tax Credit and issue the Certificate[s] pursuant thereto. If the Film Office denies final certification, the applicant may appeal the Film Office’s decision under the provisions of RIGL Section 44-31.2-8. D. Film Office Decisions, Reliance on Application: Certifications are only issued in writing by the Film Office Director or other duly authorized representative of the Film Office. Decisions with respect to initial and final certifications are made on the basis of the information contained in the application form and other available information. The applicant’s signature on any application form is a representation to the Film Office that the facts contained therein are true and correct, and the Film Office is entitled to rely thereon. If, at any time, it comes to the attention of the Film Office that information is/was misstated, misrepresented or omitted or is materially inconsistent with representations made in an application, the Film Office may deny the requested certification or revoke a certification previously given. Upon revocation of any certification, the production company must surrender any and all issued certificates or remit payment equal to the face value of any previously transferred certificates. In such cases, the applicant may appeal the Film Office’s decision under the provisions of RIGL Section 44-31.2-8. Because the circumstances of each production are unique, certifications that may have been granted to other productions that are not specifically applicable may not be relied on by applicants as applicable to other projects. RULE 8. COMMENCEMENT
OF PRODUCTION B. Recurrent Productions: If a motion picture production company produces a television series, then production work on any given “season” of such series completed in any one calendar year shall be considered a separate and distinct state certified production for the purposes of certification. In the case that a motion picture production company produces a television “pilot” or “movies of the week”, then such “pilot” or “movie of the week” shall be considered a separate and distinct state certified production for the purpose of the issuance of credit certificates. Any additional “season”, “pilot,” or “movie of the week” will be treated as a separate production and the applicant must repeat the application process and the production must meet all appropriate criteria. C. Amended Productions: In the event that the production company requests the Film Office to approve an amended production for a motion picture that has already obtained final certification, applicant must repeat the application process and the amended production must meet all appropriate criteria. D. Film Office’s Inspection Rights: The Film Office shall have the right at reasonable times to enter upon any set, soundstage, location or production office that is the subject of an application for certification, whether the motion picture production is proposed, ongoing, or completed, to verify that the motion picture production is as represented RULE 9. COST REPORT A. As a part of
the completed application for final certification of the production and
the basis on which the credits are calculated, the production costs and
Cost Report are crucial to the Film Office’s deliberations concerning
the certification of the production. As part of the final certification,
the Cost Report must be accompanied by an “accountant’s certification”.
The Film Office and the Division of Taxation may rely, without independent
investigation, upon the accountant’s certification confirming the
accuracy of the information included in the Cost Report. RULE 10. DETERMINATION OF CREDIT The amount of the Motion Picture Production Company Tax Credit shall be determined by the Film Office to equal twenty-five percent (25%) of the state certified production costs of a completed state certified production, as shown in the application for final certification and as subjected to the accountant’s certification. RULE 11. ISSUANCE OF TAX CREDITS A. Concurrent with the final certification of the production, the Film Office, based upon the Certification shall also issue written, individual Motion Picture Production Tax Credit Certificate[s] to the motion picture production company, as allocated under its organizational documents, or to one or more transferees. The motion picture production company must provide the names, addresses and taxpayer identification numbers of such partners or transferees. Credits allowed to a motion picture production company which is a subchapter S-corporation, partnership, or limited liability company that is taxed as a partnership, shall be passed through respectively to persons designated as partners, members or owners on a pro rata basis or pursuant to an executed agreement among such persons designated as subchapter S-corporation shareholders, partners, or members. This writing documents an alternate distribution method without regard to their sharing of other tax or economic attributes of such entity. Each certificate will bear the identification number that was issued to the production as part of its initial certification. B. Film Office’s Right to Deny or Revoke Credit. If, at any time, it comes to the attention of the Film Office that information is/was misstated, misrepresented or omitted or is materially inconsistent with representations made in an application, the Film Office may deny the requested certification or revoke a certification previously given. In such cases, the applicant may appeal the Film Office’s decision under the provisions of RIGL Section 44-31.2-8. RULE 12. ASSIGNMENT OF MOTION PICTURE PRODUCTION TAX CREDIT A. Each Certificate
of Motion Picture Production Tax Credit may be assigned with or without
consideration, transferred, or sold if it has not been previously claimed
in whole or in part against the tax of the motion picture production
company or of the owner of the certificate. A single transfer or sale
may involve one or more transferees, assignees or purchasers. The transferees
and sellers must submit notice of the assignment, transfer or sale within
thirty (30) days to the Film Office and to the Tax Administrator. The
Film Office shall assess and collect an administrative fee of two hundred
dollars ($200) for issuing multiple tax credit certificates or for reissuing
certificates. In addition, the Film Office will also collect an administrative
fee of two hundred dollars ($200) on behalf of the Division of Taxation. C. Notification of Assignment - It shall be required that written notification is filed with the Division of Taxation and the Film and Television Office of the assignment, transfer or sale, of all or a portion the Motion Picture Production Tax Credit. Notification submitted to the Tax Division and the Film and Television Office shall be done in accordance with Rule 9A. Failure to comply will result in the disallowance of the credit until the taxpayer is in full compliance. Notice to the Tax Division shall include: (a) a copy of the Credit Certificate, endorsed to the assignee. The original Certificate shall not be included with the notification since it must be retained by the assignee, transferee or purchaser and attached to his/her/their/its tax return for the year for which credit is claimed; (b) the name, address and telephone number of the assignor, transferor or seller and those of the assignee, transferee or purchaser; (c) the taxpayer identification number or social security number of the parties; in addition, for non-resident corporations, partnerships, limited liability companies, or other entities the name and address of such entity’s registered agent in Rhode Island and evidence of qualification to do business in Rhode Island. D. Multiple Assignees; Re-issuance of Certificate - If the holder of a credit certificate has not used the credit certificate in whole or in part against its taxes and desires to assign, transfer or sell its interest in the credit to more than one party, the holder must request the Film Office to reissue the original certificate in such number of certificates as the holder requires. The request must be in writing, must specify the number of new certificates required and the amount to be specified on each certificate, and must attach the original certificate for cancellation by the Film Office. RULE 13. EFFECTIVE DATE These Rules and Regulations shall take effect 20 days after filing with the Secretary of State’s Office. |