READ FIRST TIME 02/17/06.   

     AN ACT Relating to the state of Washington's economic, cultural, and educational standing in the motion picture industry; adding a new section to chapter 82.04 RCW; and adding a new chapter to Title 43 RCW.

BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF WASHINGTON:

NEW SECTION.  Sec. 1   The legislature recognizes the motion picture industry in Washington as a valuable commodity contributing greatly to the economic vitality of the state and the cultural integrity of our communities. The legislature further recognizes the production of in-state motion pictures, television programs, and television commercials creates a marked increase in tourism, family wage jobs, and the sale of local goods and services generating revenue for the state. Furthermore, with captive national and international audiences, the world is introduced to the state's pristine scenic venues and reminded that the Pacific Northwest is a great place to live and raise a family. The legislature also recognizes the inherent educational value of promoting arts and culture as well as the benefits of training young motion picture professionals who will build a fruitful industry for years to come.
     The legislature finds in recent years that the state has realized a drastic decline in motion picture production that precludes economic expansion and threatens the state's reputation as a production destination. With the emergence of tax incentives in thirty states nationwide, in-state producers are taking their projects to more competitive economic climates, such as Oregon and Vancouver, British Columbia, where compelling tax incentive packages and subsidies are already in effect.
     The legislature also finds that in recent years increasingly workers in Washington state are without health insurance coverage and retirement income protections, causing hardships on workers and their families and higher costs to the state.
     Therefore, it is the intent of the legislature to recognize both national and international competition in the motion picture production marketplace. The legislature is committed to leveling the competitive playing field and interested in a partnership with the private sector to regain Washington's place as a premier destination to make motion pictures, television, and television commercials. While at the same time the legislature is committed to ensuring that workers in the motion picture and television industry are covered under health insurance and retirement income plans.

NEW SECTION.  Sec. 2   The following definitions apply to this chapter, unless the context clearly requires otherwise.
     (1) "Approved motion picture competitiveness program" means a nonprofit organization under the internal revenue code, section 501(c)(6), with the sole purpose of revitalizing the state's economic, cultural, and educational standing in the national and international market of motion picture production by recommending and awarding financial assistance for costs associated with motion pictures in the state of Washington.
     (2) "Contribution" means cash contributions.
     (3) "Costs" means actual expenses of production and postproduction expended in Washington state for the production of motion pictures, including but not limited to payments made for salaries, wages, and health insurance and retirement benefits, the rental costs of machinery and equipment and the purchase of services, food, property, lodging, and permits for work conducted in Washington state.
     (4) "Department" means the department of community, trade, and economic development.
     (5) "Motion picture" means a recorded audio-visual production intended for distribution to theaters, DVD, video, or the internet, or television, or one or more episodes of a single television series, television pilots or presentations, or a commercial. "Motion picture" does not mean production of a television commercial of an amount less than two hundred fifty thousand dollars in actual total investment or one or more segments of a newscast or sporting event.
     (6) "Funding assistance" means cash expenditures from an approved motion picture competitiveness program.
     (7) "Person" has the same meaning as provided in RCW 82.04.030.

NEW SECTION.  Sec. 3   (1) The department shall 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. Rules adopted by the department shall allow the program, within the established criteria, to provide funding assistance only when it captures economic opportunities for Washington's communities and businesses and shall only be provided under a contractual arrangement with a private entity. In establishing the criteria, the department shall consider:
     (a) The additional income and tax revenue to be retained in the state for general purposes;
     (b) The creation and retention of family wage jobs which provide health insurance and payments into a retirement plan;
     (c) The impact of motion picture projects to maximize in-state labor and the use of in-state film production and film postproduction companies;
     (d) The impact upon the local economies and the state economy as a whole, including multiplier effects;
     (e) The intangible impact on the state and local communities that comes with motion picture projects;
     (f) The regional, national, and international competitiveness of the motion picture filming industry;
     (g) The revitalization of the state as a premier venue for motion picture production and national television commercial campaigns;
     (h) Partnerships with the private sector to bolster film production in the state and serve as an educational and cultural purpose for its citizens;
     (i) The vitality of the state's motion picture industry as a necessary and critical factor in promoting the state as a premier tourist and cultural destination;
     (j) Giving preference to additional seasons of television series that have previously qualified;
     (k) Other factors the department may deem appropriate for the implementation of this chapter.
     (2) The board of directors created under section 4 of this act shall create and administer an account for carrying out the purposes of subsection (3) of this section.
     (3) Money received by an approved motion picture competitiveness program shall be used only for: (a) Health insurance and payments into a retirement plan, and other costs associated with film production; (b) a tax credit marketer to market the tax credits authorized under section 5 of this act; and (c) staff and related expenses to maintain the program's proper administration and operation.
     (4) Maximum funding assistance from an approved motion picture competitiveness program is limited to:
     (a) Twenty percent of a total actual investment in the state of at least five hundred thousand dollars, for a single feature film produced in Washington state;
     (b) Twenty percent of a total actual investment in the state of at least three hundred thousand dollars per television episode produced in Washington state; or
     (c) Twenty percent of a total actual investment in the state of at least two hundred fifty thousand dollars for an infomercial or television commercial associated with a national or regional advertisement campaign produced in Washington state.
     (5) No single motion picture production or episodic television project may be awarded an amount greater than one million dollars from an approved motion picture competitiveness program.
     (6) Funding assistance approval must be determined by the approved motion picture competitiveness program within a maximum of thirty calendar days from when the application is received, if the application is submitted after August 15, 2006.

NEW SECTION.  Sec. 4   (1) A Washington motion picture competitiveness program under this chapter shall be administered by a board of directors appointed by the governor, and the appointments shall be made within sixty days following enactment. The department, after consulting with the board, shall adopt rules for the standards that shall be used to evaluate the applications for funding assistance prior to June 30, 2006.
     (2) The board shall evaluate and award financial assistance to motion picture projects under rules set forth under section 3 of this act.
     (3) The board shall consist of the following members:
     (a) One member representing the Washington motion picture production industry;
     (b) One member representing the Washington motion picture postproduction industry;
     (c) Two members representing labor unions affiliated with Washington motion picture production;
     (d) One member representing the Washington visitors and convention bureaus;
     (e) One member representing the Washington tourism industry;
     (f) One member representing the Washington restaurant, hotel, and airline industry; and
     (g) A chairperson, chosen at large, shall serve at the pleasure of the governor.
     (4) The term of the board members, other than the chair, is four years. A board member appointed by the governor may be removed by the governor for cause under RCW 43.06.070 and 43.06.080.
     (5) Five members of the board constitute a quorum.
     (6) The board shall elect a treasurer and secretary annually, and other officers as the board members determine necessary, and may adopt bylaws or rules for its own government.
     (7) The board shall make any information available at the request of the department to administer this chapter.
     (8) Contributions received by a board shall be deposited into the account described in section 3(2) of this act.

NEW SECTION.  Sec. 5   A new section is added to chapter 82.04 RCW to read as follows:
     (1) Subject to the limitations in this section, a credit is allowed against the tax imposed under this chapter for contributions made by a person to a Washington motion picture competitiveness program.
     (2) The person must make the contribution before claiming a credit authorized under this section. Credits earned under this section may be claimed against taxes due for the calendar year in which the contribution is made. The amount of credit claimed for a reporting period shall not exceed the tax otherwise due under this chapter for that reporting period. No person may claim more than one million dollars of credit in any calendar year, including credit carried over from a previous calendar year. No refunds may be granted for any unused credits.
     (3) The maximum credit that may be earned for each calendar year under this section for a person is limited to the lesser of:
     (a) One million dollars; or
     (b)(i) Through calendar year 2008, an amount equal to one hundred percent of the contributions made by the person to a program during the calendar year; and
     (ii) For calendar years after 2008, an amount equal to ninety percent of the contributions made by the person to a program during the calendar year.
     (4) Except as provided under subsection (5) of this section, a tax credit claimed under this section may not be carried over to another year.
     (5) Any amount of tax credit otherwise allowable under this section not claimed by the person in any calendar year may be carried over and claimed against the person's tax liability for the next succeeding calendar year. Any credit remaining unused in the next succeeding calendar year may be carried forward and claimed against the person's tax liability for the second succeeding calendar year; and any credit not used in that second succeeding calendar year may be carried over and claimed against the person's tax liability for the third succeeding calendar year, but may not be carried over for any calendar year thereafter.
     (6) Credits are available on a first in-time basis. The department shall disallow any credits, or portion thereof, that would cause the total amount of credits claimed under this section during any calendar year to exceed three million five hundred thousand dollars. If this limitation is reached, the department shall notify all Washington motion picture competitiveness programs that the annual statewide limit has been met. In addition, the department shall provide written notice to any person who has claimed tax credits in excess of the three million five hundred thousand dollar limitation in this subsection. The notice shall indicate the amount of tax due and shall provide that the tax be paid within thirty days from the date of such notice. The department shall not assess penalties and interest as provided in chapter 82.32 RCW on the amount due in the initial notice if the amount due is paid by the due date specified in the notice, or any extension thereof.
     (7) To claim a credit under this section, a person must electronically file with the department all returns, forms, and any other information required by the department, in an electronic format as provided or approved by the department. Any return, form, or information required to be filed in an electronic format under this section is not filed until received by the department in an electronic format. As used in this subsection, "returns" has the same meaning as "return" in RCW 82.32.050.
     (8) No application is necessary for the tax credit. The person must keep records necessary for the department to verify eligibility under this section.
     (9) A Washington motion picture competitiveness program shall provide to the department, upon request, such information needed to verify eligibility for credit under this section, including information regarding contributions received by the program.
     (10) The department shall not allow any credit under this section before July 1, 2006.
     (11) For the purposes of this section, "Washington motion picture competitiveness program" or "program" means an organization established pursuant to chapter 43.-- RCW (sections 1 through 4 of this act).
     (12) No credit may be earned for contributions made on or after July 1, 2011.

NEW SECTION.  Sec. 6   (1) The legislature finds that accountability and effectiveness are important aspects of setting tax policy. In order to make policy choices regarding the best use of limited state resources the legislature needs information on how incentives are used.
     (2) Each motion picture production receiving funding assistance under section 3 of this act shall report information to the department by filing a complete annual survey. The survey is due by March 31st of the year following any calendar year in which funding assistance under section 4 of this act is taken. The department may extend the due date for timely filing of annual surveys under this section if failure to file was the result of circumstances beyond the control of the motion picture production receiving the funding assistance.
     (3) The survey shall include the amount of funding assistance received. The survey shall also include the following information for employment positions in Washington by the motion picture production receiving funding assistance, including indirect employment by contractors or other affiliates:
     (a) The number of total employment positions;
     (b) Full-time, part-time, and temporary employment positions as a percent of total employment;
     (c) The number of employment positions according to the following wage bands: Less than thirty thousand dollars; thirty thousand dollars or greater, but less than sixty thousand dollars; and sixty thousand dollars or greater. A wage band containing fewer than three individuals may be combined with another wage band; and
     (d) The number of employment positions that have employer-provided medical, dental, and retirement benefits, by each of the wage bands.
     (4) The department may request additional information necessary to measure the results of the funding assistance program, to be submitted at the same time as the survey.
     (5) If a person fails to submit an annual survey under subsection (2) of this section by the due date of the report or any extension the department shall declare the amount of funding assistance for the previous calendar year to be immediately due and payable. The department shall assess interest, but not penalties, on the amounts due under this section. The interest shall be assessed at the rate provided for delinquent taxes under chapter 82.32 RCW, retroactively to the date the funding assistance was received, and shall accrue until the funding assistance is repaid.
     (6) The department shall use the information from this section to prepare summary descriptive statistics. The department shall report these statistics to the legislature each year by September 1st. The department shall provide the complete annual surveys to the joint legislative audit and review committee.

NEW SECTION.  Sec. 7   The provisions of section 5 of this act are subject to review by the joint legislative audit and review committee. The joint legislative audit and review committee will make a recommendation to the house finance committee and the senate ways and means committee by December 1, 2010, regarding the effectiveness of the motion picture competitiveness program including, but not limited to, the amount of state revenue generated, the amount of family wages jobs with benefits created, adherence to the criteria in section 3 of this act, and any other factors deemed appropriate by the joint legislative audit and review committee.

NEW SECTION.  Sec. 8   Sections 1 through 4, 6, and 7 of this act constitute a new chapter in Title 43 RCW.