Connecticut Digital Media & Motion Picture Tax Credit - Details
In 2006, the Connecticut General Assembly established tax credits for the production of digital media and motion pictures in Connecticut. The statute was amended in 2007 by Public Act 07-236 and again in 2009 by House Bill 6802. For income years starting January 1, 2010, the 2009 bill increases the minimum expenditure to $100,000 and makes the credit amount dependent on the production's total expenses or costs. Production companies incurring production expenses or costs between $100,000 and $500,000 are eligible for a 10% credit, between $500,000 and $1 million are eligible for a 15% credit, and over $1 million continue to be eligible for a 30% credit.
Eligible Production Companies
Any “eligible production company” may apply. An eligible production company is a corporation, partnership, limited liability company or other business entity that produces a qualified production” in Connecticut and is registered with the Secretary of the State to do business in Connecticut.
A “qualified production” means the process of producing any type of entertainment content. Entertainment content is defined to include motion pictures, documentaries, television series, music videos, commercials, mini-series, video games and other productions listed in the statute, which are created primarily for distribution or exhibition to the general public. A qualified production does not include any ongoing program created primarily as news, weather or financial market reports, infomercials, or any production containing any material or performance considered obscene under state law.
Eligible Production Expenses Used in Calculating the Tax Credits
Production expenses or costs used in calculating the tax credits include expenditures clearly and demonstrably incurred in Connecticut in the preproduction, production or postproduction costs of a qualified production, including expenditures in the form of either compensation or purchases including production work, production equipment, production software, postproduction work, postproduction equipment, set design, set construction, props, lighting, wardrobe and other costs or services directly incurred in the state in connection with a qualified production.
In-State Expenditures. In addition to minimum expenditure requirements, starting July 1, 2011, a production company is required to conduct at least 50% of its principal photography days in the state to be eligible.
Out-of-State Expenditures. Starting January 1, 2010, no out-of-state expenses will be eligible.
Star Salaries. Starting January 1, 2010, compensation for all star talent featured in a film or digital media production is limited to $ 20 million in the aggregate and requires that the compensation be subject to Connecticut personal income tax.
Audit Costs. Costs related to the required independent audit of project costs and expenses are excluded. Process for Obtaining Tax Credits
To obtain tax credits, eligible production companies must engage in a two-step process. First, an eligible production company applies for an eligibility certificate. This application must be made no later than ninety (90) days after the first qualified production expense or cost is incurred in Connecticut on a qualified production. The eligibility certificate certifies that the production company is eligible to earn the tax credits.
The second step of the process begins when the eligible production company applies for a tax credit certificate no later than ninety (90) days after the last production expense is incurred in the state. At this time, the eligible production company must submit a cost certification of its eligible production expenses. After this is verified, a tax credit certificate is issued. An eligible production company is not entitled to claim tax credits before the production tax credit certificate is issued.
Cost Certification. An eligible production company must provide independent certification (audit) of the amount of its production expenses and costs when it applies for a tax credit voucher. The eligible production company is required to use an audit professional, chosen from a list DECD compiles, to provide the independent certification.
Administrative Fee. An administrative fee will be charged to cover the department's costs in analyzing submitted applications.
Interim Tax Credits. Starting January 1, 2010, no interim tax credits will be issued.
The Tax Benefit
The tax credits may be applied against the corporation business tax as provided in Chapters 207 and 208 of the Connecticut General Statutes.
Claiming the Tax Credits
The tax credits must be claimed against the corporation business tax or insurance premium tax for the income year in which final certification for the qualified production is made. Any tax credit not used in the income year in which final certification is made may be carried forward for, or in, the three immediately succeeding income years. The tax credits are nonrefundable.
Assigning the Tax Credits
An eligible production company may sell, assign or otherwise transfer the tax credits to another taxpayer. Written notification of such transfer must be submitted jointly by the transferor and transferee no later than thirty (30) days after such transfer.
The preceeding information is subject to legislative change. The State of Connecticut shall not be liable for any errors in this information or responsible for any acts taken in reliance thereon.
Applications and Instructions
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Content Last Modified on 7/31/2012 12:59:34 PM