SB0613CTS

SENATE CORPORATIONS AND TRANSPORTATION COMMITTEE SUBSTITUTE FOR

SENATE BILL 613

50th legislature - STATE OF NEW MEXICO - first session, 2011

AN ACT

RELATING TO THE PUBLIC PEACE, HEALTH, SAFETY AND WELFARE; DISTRIBUTING REFUNDABLE FILM PRODUCTION TAX CREDITS OVER MULTIPLE YEARS; SPECIFYING, FOR A LIMITED PERIOD, THE MAXIMUM ANNUAL PAYOUT OF ACCRUED FILM PRODUCTION TAX CREDITS; IMPOSING A REFUNDABLE APPLICATION FEE FOR FILM PRODUCTION COMPANIES DESIRING A FILM PRODUCTION TAX CREDIT.

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

SECTION 1. Section 7-1-68 NMSA 1978 (being Laws 1965, Chapter 248, Section 69, as amended) is amended to read:

"7-1-68. INTEREST ON OVERPAYMENTS.--

A. As provided in this section, interest shall be allowed and paid on the amount of tax overpaid by a person that is subsequently refunded or credited to that person.

B. Interest on overpayments of tax shall accrue and be paid at the rate established for individuals pursuant to Section 6621 of the Internal Revenue Code, computed on a daily basis; provided that if a different rate is specified by a compact or other interstate agreement to which New Mexico is a party, that rate shall apply to amounts due under the compact or other agreement.

C. Unless otherwise provided by this section, interest on an overpayment not arising from an assessment by the department shall be paid from the date of the claim for refund until a date preceding by not more than thirty days the date of the credit or refund to any person; interest on an overpayment arising from an assessment by the department shall be paid from the date of overpayment until a date preceding by not more than thirty days the date of the credit or refund to any person.

D. No interest shall be allowed or paid with respect to an amount credited or refunded if:

(1) the amount of interest due is less than one dollar ($1.00);

(2) the credit or refund is made within:

(a) fifty-five days of the date of the claim for refund of income tax, pursuant to either the Income Tax Act or the Corporate Income and Franchise Tax Act for the tax year immediately preceding the tax year in which the claim is made;

(b) seventy-five days of the date of the claim for refund of gasoline tax to users of gasoline off the highways; or

(c) one hundred twenty days of the date of the claim for refund of tax imposed pursuant to the Resources Excise Tax Act, the Severance Tax Act, the Oil and Gas Severance Tax Act, the Oil and Gas Conservation Tax Act, the Oil and Gas Emergency School Tax Act, the Oil and Gas Ad Valorem Production Tax Act, the Natural Gas Processors Tax Act or the Oil and Gas Production Equipment Ad Valorem Tax Act;

(3) the credit or refund is made within one hundred twenty days of the date of the claim for refund of income tax, pursuant to the Income Tax Act or the Corporate Income and Franchise Tax Act, for any tax year more than one year prior to the year in which the claim is made;

(4) Sections 6611(f) and 6611(g) of the Internal Revenue Code, as those sections may be amended or renumbered, prohibit payment of interest for federal income tax purposes;

(5) the credit or refund is made within sixty days of the date of the claim for refund of any tax other than income tax;

(6) the credit results from overpayments found in an audit of multiple reporting periods and applied to underpayments found in that audit or refunded as a net overpayment to the taxpayer pursuant to Section 7-1-29 NMSA 1978;

(7) the department applies the credit or refund to an intercept program, to the taxpayer's estimated payment prior to the due date for the estimated payment or to offset prior liabilities of the taxpayer pursuant to Subsection E of Section 7-1-29 NMSA 1978; [or]

(8) the credit or refund results from overpayments the department finds pursuant to Subsection F of Section 7-1-29 NMSA 1978 that exceed the refund claimed by the taxpayer on the return; or

(9) the refund results from a film production tax credit pursuant to Section 7-2F-1 NMSA 1978.

E. Nothing in this section shall be construed to require the payment of interest upon interest."

SECTION 2. 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, subject to the limitations and requirements of this section, 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:

(a) are directly attributable to the production in New Mexico of a film or commercial audiovisual product;

(b) are subject to taxation by the state of New Mexico; and

(2) postproduction expenditures made in New Mexico that:

(a) are directly attributable to the production of a commercial film or audiovisual product;

(b) are for services performed in New Mexico;

(d) exclude postproduction expenditures for which another taxpayer claims the film production tax credit.

B. Except as provided in Subsections C and J of this section, the percentage to be applied in calculating the amount of the film production tax credit is twenty-five percent.

C. 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, the percentage to be applied in calculating the film production tax credit is twenty percent.

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:

(1) a film production company shall submit to the New Mexico film division of the economic development department information required by the division to demonstrate conformity with the requirements of this section and shall agree in writing:

[(1)] (a) to pay all obligations the film production company has incurred in New Mexico;

[(2)] (b) 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)] (c) that outstanding obligations are not waived should a creditor fail to file by the specified date; and

[(4)] (d) 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; and

(2) prior to making any expenditures that may qualify for the film production tax credit, a film production company shall reserve a tax credit by submitting a filing fee and application to the taxation and revenue department pursuant to the following provisions:

(a) the filing fee shall be based on the anticipated film production tax credit that the film production company will request for the development of a commercial audiovisual product. The amount of the anticipated tax credit shall be specified in the application;

(b) a tax credit shall be reserved for the film production company in the amount of the tax credit specified in the application. Upon compliance with the requirements of this section, the film production company shall have priority in the amount of the reserved tax credit over all other applications for a reserved tax credit subsequently filed pursuant to this paragraph;

(c) for a commercial audiovisual product for which the anticipated film production tax credit is two million dollars ($2,000,000) or less, there is no filing fee;

(d) for a commercial audiovisual product for which the anticipated film production tax credit is greater than two million dollars ($2,000,000) and less than or equal to five million dollars ($5,000,000), the filing fee is ten thousand dollars ($10,000);

(e) for a commercial audiovisual product for which the anticipated film production tax credit is greater than five million dollars ($5,000,000), the filing fee is fifty thousand dollars ($50,000); and

(f) a filing fee submitted pursuant to this paragraph is fully refundable if: 1) the development of the commercial audiovisual product in New Mexico begins within twelve months after the filing fee is submitted; or 2) the development of the commercial audiovisual product in New Mexico is cancelled or delayed by an event of force majeure, including, but not limited to, war, riot, civil disturbance, natural disaster, or the death or incapacity of the director, producer or a leading performing artist.

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 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; provided that:

(1) the application for the tax credit shall be submitted within one year of the date of the last direct production expenditure in New Mexico or the last postproduction expenditure in New Mexico; and

(2) the amount of the approved film production tax credit shall not exceed one hundred twenty percent of the anticipated film production tax credit specified in the application submitted pursuant to Paragraph (2) of Subsection F of this section.

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 pursuant to the following provisions:

(1) refunds in amounts of less than two million dollars ($2,000,000) shall be distributed in the twelve months following the date on which the initial refund claim was received;

(2) refunds in amounts of two million dollars ($2,000,000) or more but less than five million dollars ($5,000,000) shall be divided into two equal allocations, with the first allocation being distributed in the twelve months following the date on which the initial refund claim was received and the second allocation being distributed twelve months following the date of the first distribution; and

(3) refunds in amounts of five million dollars ($5,000,000) or more shall be divided into three equal allocations, with the first allocation being distributed in the twelve months following the date on which the initial refund claim was received, the second allocation being distributed twelve months following the date of the first distribution and the third allocation being distributed twenty-four months following the date of the first distribution.

J. As applied to direct production expenditures for the services of performing artists, the film production tax credit authorized by this section shall not exceed five million dollars ($5,000,000) for services rendered by all performing artists in a production for which the film production tax credit is claimed.

K. In fiscal years 2012 and 2013, the maximum aggregate amount of film production tax credits that may be claimed against personal income tax liability or corporate income tax liability in a fiscal year shall not exceed forty-five million dollars ($45,000,000). The following provisions govern how the limitation of this subsection shall be administered:

(1) if the total claims submitted exceed the limitation of this subsection, the claims shall be processed in the following priority:

(a) refunds not made in the previous fiscal year because of the limitations of Subsection I of this section shall have the highest priority;

(b) claims not processed in the previous fiscal year because of the limitation of this subsection shall have the next highest priority; and

(c) the priority for the remainder of the claims shall be in the order that the applications and filing fees were submitted pursuant to Paragraph (2) of Subsection F of this section; and

(2) the limitation of this subsection does not apply to film production tax credits for direct production expenditures or postproduction expenditures for a production created to run multiple production seasons on television with an estimated order of at least seven episodes per season and qualified expenditures of at least five hundred thousand dollars ($500,000) per episode."

SECTION 3. APPLICABILITY.--

A. The limitation of Subsection K of Section 7-2F-1 NMSA 1978 does not apply to film production tax credits for which an agreement has been entered into prior to July 1, 2011 pursuant to Subsection F of Section 7-2F-1 NMSA 1978, as that subsection existed prior to the amendment made by this act.

B. A project for a commercial audiovisual product for which an agreement has been entered into prior to July 1, 2011 pursuant to Subsection F of Section 7-2F-1 NMSA 1978, as that subsection existed prior to the amendment made by this act, is not required to submit an application and a filing fee pursuant to Paragraph (2) of that subsection.

SECTION 4. EFFECTIVE DATE.--The effective date of the provisions of this act is July 1, 2011.

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