830 CMR: DEPARTMENT OF REVENUE
830 CMR 62B.00: WITHHOLDING AND ESTIMATED TAXES
830 CMR 62B.00 is amended by adding the following section:
830 CMR 62B.2.3: Motion Picture Production Company Withholding

(1) Statement of Purpose, Outline of Topics.

(a) Statement of Purpose. Under M.G.L. c. 62B, § 2, the Commissioner is authorized to require persons other than employers to deduct and withhold taxes from payments other than wages in order to protect the revenue of the commonwealth. 830 CMR 62B.2.3 establishes and explains the requirements of motion picture production companies to withhold Massachusetts personal income tax on payments to independent contractors and loan-outs for services rendered in Massachusetts. For coordination with live performance performer withholding see 830 CMR 62B.2.3(6)(c).

(b) Outline of Topics. 830 CMR 62B.2.3 is organized as follows:

1. Statement of Purpose; Outline of Topics
2. Definitions
3. Registration and Reporting Obligations of a Production Company; Qualification for the Credit
4. Withholding and Reporting Requirements as Prerequisites for Credit Qualification; Loan-Out Filing Requirements
5. Personal Income Credit Against Taxes; Reporting Requirements
6. Coordination With Other Withholding Requirements
7. Effective Date

(2) Definitions. For purpose of 830 CMR 62B.2.3, the following terms shall have the following meanings, unless the context requires otherwise:

Commissioner, the Commissioner of the Massachusetts Department of Revenue or the Commissioner's duly authorized representative.

Credit, the motion picture production company credit.

Independent Contractor, an individual treated as an independent contractor for federal and Massachusetts tax purposes and contracted with and retained by the production company, such as artists, crew, actors, directors and producers, for the performance of services used directly in a production. It does not include entities retained by the production company to provide tangible property or outside contractor service, such as catering, construction, trailers, equipment and transportation.

Loan-Out, a personal service corporation or other entity contracted with and retained by the production company to provide individual personnel, such as artists, crew, actors, directors and producers, for the performance of services used directly in a production, but not including entities retained by the production company to provide tangible property or outside contractor service, such as catering, construction, trailers, equipment and transportation.

Motion Picture Production Company Credit, the motion picture aggregate payroll or production expense credit allowed under M.G.L. c. 62, § 6(l) or M.G.L. c. 63, § 38X.

Performer Withholding Waiver, a waiver from performer withholding requirements authorized under 830 CMR 62B.2.1, Withholding of Taxes on Wages and Other Payments, issued by the Commissioner's performer withholding unit.

Production, a motion picture as defined in M.G.L. c. 62, § 6(l) and M.G.L. c. 63, § 38X.

Production Company, a motion picture production company as defined in M.G.L. c. 62, § 6(l) and M.G.L. c. 63, § 38X.

(3) Registration and Reporting Obligations of a Production Company; Qualification for the Credit.

(a) Registration. A production company that seeks a motion picture production company credit as to payments made to a loan-out or an independent contractor must register for motion picture production company withholding prior to filing an application for the credit.

(b) Withholding Amount. A production company must withhold at the personal income tax rate under M.G.L. c. 62, § 4(b), on any payment to a loan-out or an independent contractor for that payment to qualify for the motion picture production company credit. A payment to a loan-out or an independent contractor can only qualify for the motion picture production company credit if, and to the extent that, such payment if made directly to the individual(s) providing services used directly in the production on behalf of the loan-out, would be Massachusetts source income to such individual.

(c) Timing of Withholding Remittance. Any production company seeking a credit as to a payment made to a loan-out or an independent contractor, must withhold and remit to the Commissioner the withholding amount required under 830 CMR 62B.2.3(3)(b) prior to the filing of an application for the credit.

(4) Withholding and Reporting Requirements as Prerequisites for Credit Qualification; Loan-Out Filing Requirements.

(a) Withholding and Reporting Requirements. A payment to a loan-out or an independent contractor will not qualify for the credit:

1. if, or to the extent that, the withholding amount required under 830 CMR 62B.2.3(3)(b) is not remitted to the Commissioner prior to the filing of an application for the credit; and

2. if the reporting requirements are not met as required under 830 CMR 62B.2.3(5).

Example. A production company files an application for the credit and reports as an otherwise qualifying production expense a $4 million payment to a loan-out for the services of the leading actor in the production. The production company has met the reporting requirements as required under 830 CMR 62B.2.3(5). Prior to filing the application for the credit, the production company had registered for production company withholding as required under 830 CMR 62B.2.3(3)(a) and remitted to the Commissioner $159,000 of withholding on payments to the loan-out for the services of the leading actor in the production. The withholding required under 830 CMR 62B.2.3 on the $4 million payment to the loan-out is $212,000 (5.3% x $4 million). The production company will be allowed to claim $3 million of the payment to the loan-out (5.3% x $3 million = $159,000) but the remaining $1 million of the payment does not constitute a qualifying expense for purposes of the credit.

(b) Loan-Out Filing Requirements. Upon the completion of its tax year(s) during which the production took place, the loan-out doing business in Massachusetts must file a Massachusetts tax return and report its income and pay any accompanying tax liability.

(5) Personal Income Credit Against Taxes; Reporting Requirements.

(a) Allocation of Personal Income Credit Against Taxes. The amount deducted and withheld as tax under 830 CMR 62B.2.3 during any calendar year upon the payment from a production company to a loan-out or an independent contractor shall be allowed as a credit to the individual or individuals whose services were provided in the production against his or her income tax. If the services of multiple individuals are provided by the loan-out, the amount deducted and withheld under 830 CMR 62B.2.3 shall be allocated to each individual in proportion to the individual's respective Massachusetts source income received by the loan-out from the production company as payment for the individual's services used directly in the production.

(b) Individual Filing Responsibility; Overpayment Applied to Estimated Tax; Refund. The individual providing services must file a Massachusetts personal income tax return attaching the allocation form provided by the production company as required under 830 CMR 62B.2.3(5), and apply the credit for the withholding tax allocated to him or her against the calculated individual income tax liability for that individual. The individual must sign the allocation form acknowledging that any overpayment of the income tax liability will, in this order, be:

1. applied to any required offsets or intercepts;

2. applied to estimated taxes for the next tax year unless all of the Massachusetts source income related to the allocated withholding tax has been reported on this, or a prior, Massachusetts personal income tax return;

3. refunded to the individual.

(c) Reporting Requirements; Loan-Out Allocation Form. The production company and the loan-out must furnish to the Commissioner as an attachment to the production company's credit application, in the manner prescribed by the Commissioner, an accounting and allocation of the withholding amounts on the payments to the loan-out and the social security number or numbers of the individual or individuals allocated the credit against taxes as allowed under 830 CMR 62B.2.3(5)(a) as well as any other information required by the Commissioner. An authorized representative of the production company, an authorized representative of the loan-out and the individual providing services to the loan-out, must sign and declare that to the best of their knowledge and belief, the information contained on the allocation form is true, correct and complete. The production company must also furnish a copy of this allocation form to the individual allocated the withholding amount as allowed under 830 CMR 62B.2.3(5)(a).

Example. Same facts as the example in 830 CMR 62B.2.3(4)(a) with the following additional facts: The withholding upon the payment to the loan-out occurs during the actor's 2010 tax year. The actor does not receive the Massachusetts source income reported on the allocation form until the actor's 2011 tax year. The actor does not have any Massachusetts source income, income tax liability or required offsets or intercepts for his or her 2010 tax year. The actor files a Massachusetts personal income tax return for his or her 2010 tax year, attaching the allocation form and applies the $159,000 withholding amount to his or her estimated taxes for the 2011 tax year. The actor files a Massachusetts personal income tax return for the 2011 tax year, attaching the allocation form and receives a refund of any overpayment for his or her 2011 tax year, as allowed under 830 CMR 62B.2.3(5)(b).

(6) Coordination With Other Withholding Requirements.

(a) Employer Production Company Withholding. The 830 CMR 62B.2.3 withholding requirements apply to a payment made by a production company to a loan-out or an individual independent contractor. Wages and other payments made by a production company that is an employer to its employee are governed by the employer withholding requirements as explained in 830 CMR 62B.2.1. Nothing in this regulation limits the requirement that a production company must register and withhold Massachusetts income tax on employee wages subject to tax in Massachusetts.

(b) Loan-Out Withholding. When a loan-out receives a payment from a production company on which there has been withholding under the withholding requirements of 830 CMR 62B.2.3, it does not have to further withhold under the production company withholding rules set forth in 830 CMR 62B.2.3, the employer withholding rules set forth in 830 CMR 62B.2.1 or the pass-through entity withholding rules set forth in 830 CMR 62B.2.2 as to any paid or allocated amount to an individual to the extent such payment or allocation relates to the same services previously withheld upon.

Example. Same facts as the example in 830 CMR 62B.2.3(4)(a), e.g., the production company makes a $4 million payment to the loan-out, but only withholds on $3 million. The loan-out and the individual actor do not have to further withhold on the $3 million payment to the loan-out for the services of the leading actor in the production. However, any withholding obligation imposed by M.G.L. c. 62B and the regulations thereunder, on the loan-out and the individual actor, is effective for the remaining $1 million of the payment to the loan-out, as well as any related interest and penalties for failure to withhold.

(c) Performer Withholding. The performer withholding requirements and waivers explained in 830 CMR 62B.2.1 do not apply to a production that qualifies and submits an application for the motion picture production company credit as defined and allowed under M.G.L. c. 62, §6(l)(1) or M.G.L. c. 63, § 38X. A production qualifying for the motion picture production company credit is generally defined as a film, video, digital media project or a television series. The performer withholding requirements and waivers explained in 830 CMR 62B.2.1 apply to live performances including, but not limited to, live entertainment, public appearances and athletic competitions.

(7) Effective Date.

(a) General Effective Date. This regulation is effective upon promulgation. Motion picture production company registration and withholding is required on payments to independent contractors and loan-outs made on or after February 18, 2010.

(b) Transition Effective Date. Notwithstanding the effective date in 830 CMR 62B.2.3(7)(a), a valid performer withholding waiver issued to a loan-out before February 18, 2010, for a production that commenced filming before February 18, 2010, will remain effective for the production for which the waiver was issued. Performer withholding waivers will not be issued after February 17, 2010, and any outstanding valid performer withholding waivers will expire after the production for which the waiver was issued is completed.

REGULATORY AUTHORITY
830 CMR 62B.2.3: M.G.L. c. 14, § 6(1); M.G.L. c. 62C, § 3; M.G.L. c. 62B.

REGULATORY HISTORY
Emergency Regulation: 1/29/10
Date of Promulgation: 4/2/10