Washington State

House of Representatives

Office of Program Research

BILL

ANALYSIS

Community Development & Housing Committee

HB 1554

This analysis was prepared by non-partisan legislative staff for the use of legislative members in their deliberations. This analysis is not a part of the legislation nor does it constitute a statement of legislative intent.

Brief Description: Concerning Washington's motion picture competitiveness.

Sponsors: Representatives Kenney, Orcutt, Pettigrew, Parker, Ormsby, Walsh, Maxwell, Billig and Smith.

Brief Summary of Bill

  • Changes the expiration date for earning business and occupation tax credits for the Washington Motion Picture Competitiveness Program from July 1, 2011, to July 1, 2017.

  • Increases the annual credit limit of $3,500,000 to $7 million in 2011, and $10 million for 2014 though 2017, with incremental increases in between.

  • Increases the allowable uses and percentage of funding that may be credited for specific purposes.

  • Modifies definitions and expands the board by one member.

Hearing Date: 2/3/11

Staff: Jennifer Thornton (786-7147).

Background:

In 2006, through 2SSB 6558, the Washington Legislature created the Motion Picture Competitiveness Program with the intent of maintaining Washington’s position as a competitive location for filming motion pictures, television, and television commercials. The Motion Picture Competitiveness Program allows taxpayers that contribute to an incentive fund to receive a credit against their business and occupation tax for the full amount contributed. Qualifying production companies that film in Washington can apply for payment from the incentive fund.

The Department of Community, Trade, and Economic Development (now Department of Commerce) was directed to adopt criteria for an approved motion picture competitiveness program with the sole purpose of revitalizing the state's economic, cultural, and educational standing in the national and international market of motion picture production. The Department of Commerce (Department) was also directed to adopt rules, within established criteria, for awarding incentive payments to production companies. Additionally, the Department was required to create and annually collect surveys from the production companies receiving the incentives, and to provide statistical reports to the Legislature based on the information in the surveys.

The 2006 Legislation called for the creation of a nonprofit corporation to administer the incentive payments to production companies. Washington Filmworks, the non-profit corporation, processes the production companies’ applications for incentive payments pursuant to Department of Commerce rules.

The tax credit is set to expire July 1, 2011. 2SSB 6558 directed the Joint Legislative Audit and Review Committee (JLARC) to review the effectiveness of the program and make a recommendation to the Legislature by December 1, 2010, regarding the effectiveness of the motion picture competitiveness program. The JLARC review found the following:

(1) Washington’s share of film industry employment has remained relatively consistent even as more states are competing for film work. Currently, 44 states provide film incentives.

(2) Due to weaknesses in reporting requirements, data reported by the production companies regarding the tax revenue and job impacts of the incentive were unreliable. Using other sources, the JLARC determined the following impacts:

The JLARC review made the following two recommendations:

(1) Because Washington has maintained its position as a competitive location for filming, the Legislature should continue this preference and reexamine the preference at a later date to determine its ongoing effectiveness in encouraging filming in Washington.

(2) If the Legislature desires information on the revenue and economic impacts of the tax credit, it should require more stringent reporting and clarify what entity is responsible for maintaining the information.

Summary of Bill:

The "approved Motion Picture Competitiveness Program's" sole purpose to revitalize the state's economic, cultural, and educational standing in the national and international market of motion picture production is expanded to also include assisting and providing services for attracting the film industry.

The definition of "motion picture" is changed to encompass recorded audio-visual production intended for distribution to the public for exhibition in public and/or private settings by means of any and all delivery systems and/or delivery platforms now or hereafter known.

The provision allowing the Motion Picture Competitiveness Program funding to be used for a tax credit marketer to market the tax credits is removed.

The maximum funding of up to 30 percent of total actual investment of at least $300,000 per television episode produced in Washington is increased to 35 percent when six or more episodes of a series are produced in Washington.

For motion pictures and episodic services, up to 15 percent of the total actual investment for costs associated with non-state labor may be used as long as 85 percent of the production's labor force is Washington residents. The board may establish additional criteria to maximize the use of in-state labor.

The program may annually allocate up to 10 percent of the qualifying program contributions to provide funding support for filmmakers who are Washington residents, new forms of production, and emerging technologies of:

(1) Up to 30 percent of the actual investment for a motion picture with an actual investment lower than the $500,000 investment required for a motion picture; or

(2) Up to 30 percent of the actual investment of an interactive motion picture intended for multiplatform exhibition and distribution.

One member representing Washington interactive media or the emerging motion picture industry is added to the board.

The annual calendar year credit limit of $3,500,000 is increased to:

The last date during which business and occupation tax credits may be earned for contributions is moved from July 1, 2011 to July 1, 2017.

Appropriation: None.

Fiscal Note: Available.

Effective Date: The bill takes effect 90 days after adjournment of the session in which the bill is passed.