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AN ACT

RELATING TO TAXATION; INCREASING THE FILM PRODUCTION TAX

CREDIT; REPEALING THE NEW MEXICO FILMMAKER TAX CREDIT.

BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF NEW MEXICO:

Section 1. Section 7-2F-1 NMSA 1978 (being Laws 2002,

Chapter 36, Section 1, as amended) is amended to read:

"7-2F-1. FILM PRODUCTION TAX CREDIT.--

A. The tax credit created by this section may be

referred to as the "film production tax credit". An eligible

film production company may apply for, and the taxation and

revenue department may allow, a tax credit in an amount equal

to the percentage specified in Subsection B of this section

of:

(1) direct production expenditures made in

New Mexico that are directly attributable to the production in

New Mexico of a film or commercial audiovisual product and

that are subject to taxation by the state of New Mexico; and

(2) postproduction expenditures made in New

Mexico that are:

(a) directly attributable to the

production of a commercial film or audiovisual product;

(b) for services performed in New

Mexico; and

(c) subject to taxation by the state of

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New Mexico.

B. Except as provided in Subsection C of this

section, the percentage to be applied in calculating the

amount of the film production tax credit is:

(1) twenty percent; and

(2) for taxable years beginning prior to

January 1, 2009, an additional five percent.

C. The additional five percent tax credit amount

pursuant to Paragraph (2) of Subsection B of this section

shall not be available with respect to expenditures

attributable to a production for which the film production

company receives a tax credit pursuant to the federal new

markets tax credit program.

D. The film production tax credit shall not be

claimed with respect to direct production expenditures or

postproduction expenditures for which the film production

company has delivered a nontaxable transaction certificate

pursuant to Section 7-9-86 NMSA 1978.

E. A long-form narrative film production for which

the film production tax credit is claimed pursuant to

Paragraph (1) of Subsection A of this section shall contain an

acknowledgment that the production was filmed in New Mexico.

F. To be eligible for the film production tax

credit, a film production company shall submit to the New

Mexico film division of the economic development department

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information required by the division to demonstrate conformity

with the requirements of this section and shall agree in

writing:

(1) to pay all obligations the film

production company has incurred in New Mexico;

(2) to publish, at completion of principal

photography, a notice at least once a week for three

consecutive weeks in local newspapers in regions where filming

has taken place to notify the public of the need to file

creditor claims against the film production company by a

specified date;

(3) that outstanding obligations are not

waived should a creditor fail to file by the specified date;

and

(4) to delay filing of a claim for the film

production tax credit until the New Mexico film division

delivers written notification to the taxation and revenue

department that the film production company has fulfilled all

requirements for the credit.

G. The New Mexico film division shall determine

the eligibility of the company and shall report this

information to the taxation and revenue department in a manner

and at times the economic development department and the

taxation and revenue department shall agree upon.

H. To receive a film production tax credit, a film

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production company shall apply to the taxation and revenue

department on forms and in the manner the department may

prescribe. The application shall include a certification of

the amount of direct production expenditures or postproduction

expenditures made in New Mexico with respect to the film

production for which the film production company is seeking

the film production tax credit. If the requirements of this

section have been complied with, the taxation and revenue

department shall approve the film production tax credit and

issue a document granting the tax credit.

I. The film production company may apply all or a

portion of the film production tax credit granted against

personal income tax liability or corporate income tax

liability. If the amount of the film production tax credit

claimed exceeds the film production company's tax liability

for the taxable year in which the credit is being claimed, the

excess shall be refunded."

Section 2. Section 7-2F-2 NMSA 1978 (being Laws 2003,

Chapter 127, Section 2, as amended) is amended to read:

"7-2F-2. DEFINITIONS.--As used in Chapter 7, Article 2F

NMSA 1978:

A. "commercial audiovisual product" means a film

or a videogame intended for commercial exploitation;

B. "direct production expenditure" means a

transaction that is subject to taxation in New Mexico,

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including:

(1) payment of wages, fringe benefits or

fees for talent, management or labor to a person who is a New

Mexico resident for purposes of the Income Tax Act;

(2) payment to a personal services

corporation for the services of a performing artist if:

(a) the personal services corporation

pays gross receipts tax in New Mexico on those payments; and

(b) the performing artist receiving

payments from the personal services corporation pays New

Mexico income tax; and

(3) any of the following provided by a

vendor:

(a) the story and scenario to be used

for a film;

(b) set construction and operations,

wardrobe, accessories and related services;

(c) photography, sound synchronization,

lighting and related services;

(d) editing and related services;

(e) rental of facilities and equipment;

(f) leasing of vehicles;

(g) food or lodging;

(h) airfare if purchased through a New

Mexico-based travel agency or travel company;

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(i) insurance coverage and bonding if

purchased through a New Mexico-based insurance agent; and

(j) other direct costs of producing a

film in accordance with generally accepted entertainment

industry practice;

C. "federal new markets tax credit program" means

the tax credit program codified as Section 45D of the United

States Internal Revenue Code of 1986, as amended;

D. "film" means a single media or multimedia

program, excluding advertising messages other than national or

regional advertising messages intended for exhibition, that:

(1) is fixed on film, digital medium,

videotape, computer disc, laser disc or other similar delivery

medium;

(2) can be viewed or reproduced;

(3) is not intended to and does not violate

a provision of Chapter 30, Article 37 NMSA 1978; and

(4) is intended for reasonable commercial

exploitation for the delivery medium used;

E. "film production company" means a person that

produces one or more films; and

F. "postproduction expenditure" means an

expenditure that occurs after the completion of principal and

ongoing photography, including an expenditure for editing,

Foley recording, automatic dialogue replacement, sound

editing, special effects, including computer-generated imagery

or other effects, scoring and music editing, beginning and end

credits, negative cutting, soundtrack production, dubbing,

subtitling or addition of sound or visual effects; but not

including an expenditure for advertising, marketing,

distribution or expense payments."

Section 3. REPEAL.--Section 7-2G-1 NMSA 1978 (being

Laws 2005, Chapter 337, Section 1) is repealed.

Section 4. APPLICABILITY.--The provisions of this act

apply to taxable years beginning on or after January 1, 2006.

Section 5. EFFECTIVE DATE.--The effective date of the

provisions of Section 3 of this act is July 1, 2006.

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