| Date: | 02/12/2025 |
|---|---|
| Organization: | Massachusetts Department of Revenue |
| Regulatory Authority: | Massachusetts General Laws |
| Official Version: | Published by the Massachusetts Register |
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
(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
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.
Surtax, the personal income tax imposed by M.G.L. c. 62, § 4(d).
(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), and, where applicable, M.G.L. c. 62, § 4(d), 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.
(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 1. A production company files an application for the credit and reports as an otherwise qualifying production expense a $4,000,000 payment it made during the 2022 tax year 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). The withholding required under 830 CMR 62B.2.3 on the $4,000,000 payment to the loan-out for the services of the leading actor is $200,000 (5% x $4,000,000). However, the production company withheld and remitted to the Commissioner only $150,000, which is 75% of the required withholding. The production company will only be allowed to claim the credit on the portion of the payment on which it withheld and remitted to the Commissioner prior to filing its application for the credit. The $150,000 withheld by the production company is the required withholding on a payment of $3,000,000. Because this is so, the production company can only claim $3,000,000 as qualifying expenses and the credit would be equal to 25% of this amount, or $750,000. The remaining $1,000,000 of the payment to the loan-out does not constitute a qualifying expense for purposes of the credit.
Example 2. Same facts as example 1, but the production company made the payment during the 2023 tax year. For the 2023 tax year, the surtax applies to income exceeding $1,000,000. As a result, the withholding required under 830 CMR 62B.2.3 on the $4,000,000 payment is $320,000 (5% x $4,000,000 plus 4% x $3,000,000). Assume that the production company withheld $150,000, which is the required withholding on a payment of $2,111,111. As a result, the production company can only claim $2,111,111 as a qualifying expense and the credit would be equal to 25% of this amount, or $527,778. The remaining $1,888,889 of the payment to the loan-out 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.
(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 Massachusetts personal income tax imposed on each individual’s respective Massachusetts source income received 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 Example 1 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 2022 tax year. However, the actor does not receive the Massachusetts source income reported on the allocation form until the actor’s 2023 tax year. The actor does not have any Massachusetts source income, income tax liability or required offsets or intercepts for his or her 2022 tax year. The actor files a Massachusetts personal income tax return for his or her 2022 tax year, attaching the allocation form and applies the $150,000 withholding amount to his or her estimated taxes for the 2023 tax year. The actor files a Massachusetts personal income tax return for the 2023 tax year, attaching the allocation form and receives a refund of any overpayment for his or her 2023 tax year, as allowed under 830 CMR 62B.2.3(5)(b).
(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.
WORKING DRAFT FOR PRACTITIONER COMMENT - 2/12/25
