Chapter 64H of the General Laws, as appearing in the 2002 Official Edition, is hereby amended by inserting thereafter the following new chapter:-

Chapter 64H ½ .

SECTION 1.  DEFINITIONS.

The following words and phrases when used in this section shall have the following meanings unless the context clearly indicates otherwise: 

“Department” shall mean The Department of Revenue of the Commonwealth.

“Film” The term includes a feature film, a television series and a television show of 15 minutes or more in length, intended for a national audience.  The term does not include a production featuring news, current events, weather and market reports, or public programming, talk show, game show, sports event, awards show or other gala event, a production that solicits funds, a production that primarily markets a product or service, a production containing obscene material or performances as defined by law, or a production primarily for private, industrial, corporate or institutional purposes.  The Massachusetts Film Bureau will establish specific guidelines together with a certification process that will guide the selection and evaluation of film and television projects that are eligible for the Film Production Tax Credit.

“Film Production Tax Credit” shall mean the credit provided under this Act for the production of the Film.

“Pass-Through Entity” shall mean a partnership taxable in the Commonwealth under M.G.L. c. 62, Section 17 or an S-corporation taxable under M.G.L. c. 62, Section 17a.

“Massachusetts Production Expense” shall mean a production expense for the Film clearly and demonstrably incurred in the Commonwealth.

“Production Expense(s)” shall mean an expense incurred in the production of the Film.  Said term includes wages and salaries paid to individuals employed in the production of the Film; the costs of construction, operations, editing, photography, sound synchronization, lighting, wardrobe and accessories; and the cost of purchase or rental of facilities and equipment.  The term does not include expenses incurred in marketing or advertising the Film.

“Qualified Film Production Expense(s)” shall mean a Massachusetts Production Expense if at least 50% of the total production expenses of the Film are Massachusetts Production Expenses.

“Qualified Tax Liability” shall mean the liability for taxes imposed on any natural person or entity under M.G.L. c. 62 Or M.G.L. c. 63.

“Taxpayer” shall mean an entity engaged in the making of the Film, including but not limited to any partnership or S-corporation.

SECTION 2. CREDIT FOR QUALIFIED FILM PRODUCTION EXPENSES.

(A) General Rule.--A Taxpayer who incurs a Qualified Film Production Expense in a taxable year shall be allocated a Film Production Tax Credit as provided in this Act.

(B) Amount of Film Production Tax Credit.--A Taxpayer shall receive a Film Production Tax Credit for the taxable year in the amount of 20% of the Qualified Film Production Expenses incurred in such year; provided, however, that the maximum amount of Film Production Tax Credits allocable to all Taxpayers in all years with respect to the Film shall not exceed the cumulative amount of $2 million.

SECTION 3. CARRYOVER, CARRYBACK, REFUND AND ASSIGNMENT OF CREDIT.

(A) General Rule.--If a Taxpayer cannot use the entire amount of the Film Production Tax Credit for the taxable year in which the Film Production Tax Credit first becomes available under Section 2 of this Act, then the excess may be carried over to succeeding taxable years and used as a credit against the Qualified Tax Liability of the Taxpayer for those taxable years.  Each time that the Film Production Tax Credit is carried over to a succeeding taxable year, it shall be reduced by the amount that was used as a credit during the immediately preceding taxable year.  The Film Production Tax Credit provided by this Act may be carried over and applied to succeeding taxable years for no more than five taxable years following the first taxable year for which the taxpayer was entitled to claim the credit.

(B) No Carryback.--A Taxpayer is not entitled to carry back or obtain a refund of an unused Film Production Tax Credit.

(C) Sale or Assignment.--A Taxpayer may sell or assign, in whole or in part, a Film Production Tax Credit granted to the Taxpayer under this Article to any person or persons with tax liabilities under M.G.L. c. 62 or c. 63.

(D) Purchasers and Assignees.--A purchaser or assignee of a portion of a Film Production Tax Credit under subsection (C) shall immediately claim the credit in the taxable year in which the purchase or assignment is made.  [The amount of the Film Production Tax Credit that a purchaser or assignee may use against any qualified tax liability may not exceed 50% of such qualified tax liability for the taxable year.]  The purchaser or assignee may carryover any unused credit in the same manner as the Taxpayer under Section 2.  The purchaser or assignee may not carry back, obtain a refund of or assign the Film Production Tax Credit.  The purchaser or assignee shall notify the Department of the seller or assignor of the Film Production Tax Credit in compliance with procedures, if any, specified by the Department.

SECTION 4. DETERMINATION OF QUALIFIED FILM PRODUCTION

Expenses.--In determining which Production Expenses are considered Qualified Film Production Expenses for purposes of computing the credit provided by this Act, the Department shall consider:

(1) The location where the services are performed.

(2) The residence or business location of the person or persons performing the service.

(3) The location where Qualified Film Production Expenses are consumed.

(4) Other factors established in regulations by the Department which are necessary for determination.

SECTION 5. TIME LIMITATIONS.

(A) Taxpayer is not entitled to a Film Production Tax Credit for Qualified Film Production Expenses incurred in taxable years ending after December 31, 2006.

SECTION 6.  PASS-THROUGH ENTITY.

(A) General Rule.-- If a Pass-Through Entity has any unused tax credit, it may assign such credit pursuant to Section 3, above, or it may allocate all or a portion of the credit to shareholders, members or partners in proportion to the share of its distributive income to which the shareholder, member or partner is entitled.

(B) Limitation.-- Any credit allocated as provided under Subsection (A) is in addition to any Film Production Tax Credit to which a shareholder, member or partner of a Pass-Through entity is otherwise entitled under this Article.  However, a Pass-Through Entity and a shareholder, member or partner of a Pass-Through Entity may not claim a credit under this Article for the same Qualified Film Production Expense.

(C) Application.-- A shareholder, member or partner of a pass-through entity to whom a credit is transferred under Subsection (A) shall immediately claim the credit in the taxable year in which the transfer is made.  A credit transferred to a natural person may be applied only against the income tax liabilities assessed under M.G.L. c. 62.  The shareholder, member or partner may not carry back, obtain a refund of or assign the credit.

SECTION 7. REGULATIONS.

The Department may promulgate regulations necessary for the implementation and administration of this Act.

SECTION 8. This Act shall take effect upon its passage.