HB1126: HB1126 Georgia Musical Investment Act; enact

26 LC 59 0220 House Bill 1126 By: Representatives Neal of the 79th and Carpenter of the 4th A BILL TO BE ENTITLED AN ACT To amend Article 2 of Chapter 7 of Title 48 of the Official Cod e of Georgia Annotated,1 relating to imposition, rate, computation, exemptions, and credits regarding income tax, so2 as to create an income tax credit for certain expenditures by a production company related3 to certain state certified productions; to provide for rules and regulations and an application4 process related to such income tax credit; to provide for certain conditions, procedures, and5 limitations; to provide for definitions; to provide a short title; to provide for related matters;6 to provide for an effective date and automatic repeal; to repeal conflicting laws; and for other7 purposes.8 BE IT ENACTED BY THE GENERAL ASSEMBLY OF GEORGIA:9 SECTION 1.10 Article 2 of Chapter 7 of Title 48 of the Official Code of Geor gia Annotated, relating to11 imposition, rate, computation, exemptions, and credits regarding income tax, is amended by12 revising Code Section 48-7-40.33, which is reserved, as follows:13 "48-7-40.33.14 (a) This Code section shall be known and may be cited as the 'Georgia Musical Investment15 Act.'16 H. B. 1126 - 1 - 26 LC 59 0220 (b) As used in this Code section, the term:17 (1) 'Musical or theatrical performance' means a live performance of a concert, musical18 tour, ballet, dance, opera, live variety entertainment, or a series of any such performances19 occurring over the course of a 12 month period or longer that o riginates, is developed,20 and has its initial public performance before a live audience w ithin this state or that21 prepares and rehearses a minimum of seven days within this stat e and has its United22 States debut within this state. Such term excludes a single musical performance that is23 not intended for touring, a music or cultural festival that is not intended for touring, an24 industry seminar, a trade show, or a market.25 (2) 'Production company' means a company primarily engaged in qualified production26 activities. Such term shall not mean or include any form of business owned, affiliated,27 or controlled, in whole or in part, by any company or person which is in default on any28 tax obligation of the state, or a loan made by the state or a loan guaranteed by the state.29 (3) 'Qualified production activities' means activities related to the preparation, planning,30 recording, or staging of a state certified production.31 (4) 'Qualified production expenditures' means expenditures inc urred in this state on32 direct account of qualified production activities for which a t ax credit has not been33 claimed pursuant to Code Section 48-7-40.26 and shall include, but are not limited to:34 (A) Set construction and operation; wardrobe, make-up, accesso ries, and related35 services; costs associated with photography and sound synchronization, expenditures36 excluding license fees incurred with Georgia companies for soun d recordings and37 musical compositions, lighting, and related services and materials; editing and related38 services; rental of facilities and equipment; leasing of vehicl es; costs of food and39 lodging; total aggregate payroll; talent and producer fees; technical fees; crew fees; per40 diem costs paid to employees; airfare, if purchased through a Georgia travel agency or41 travel company; insurance costs and bonding, if purchased through a Georgia insurance42 H. B. 1126 - 2 - 26 LC 59 0220 agency; and other direct costs of producing the project in acco rdance with generally43 accepted entertainment industry practices; and44 (B) Payments to a loan-out company by a production company.45 (5) 'Recorded musical performance' means a recording of a music composition affixed46 in a tangible medium, which includes but is not limited to the score and musical47 accompaniment of a motion picture, film, television, game, or interactive entertainment48 production.49 (6) 'Resident' shall have the same meaning as set forth in Code Section 48-7-1.50 (7) 'State certified production' means a musical or theatrical performance or recorded51 musical performance that is approved by the Department of Economic Development in52 accordance with rules and regulations promulgated pursuant to this Code section.53 (8) 'Total aggregate payroll' means the total sum expended by a production company on54 salaries paid to employees working within this state in a state certified production or55 productions. For purposes of this paragraph:56 (A) With respect to a single employee, the portion of any sala ry which exceeds57 $500,000.00 for a single production shall not be included when calculating total58 aggregate payroll; and59 (B) All payments to a single employee and any legal entity in which the employee has60 any direct or indirect ownership interest shall be considered as having been paid to the61 employee and shall be aggregated regardless of the means of payment or distribution.62 (c) A production company that invests in a state certified production shall be allowed an63 income tax credit against the tax imposed under this article eq ual to 15 percent of such64 production company's qualified production expenditures and an additional tax credit equal65 to 5 percent for such production company's qualified production expenditures incurred in66 a county designated as tier 1 or tier 2 by the commissioner of community affairs pursuant67 to Code Section 48-7-40.68 H. B. 1126 - 3 - 26 LC 59 0220 (d) The tax credits allowed under this Code section for all production companies shall be69 subject to the following aggregate annual caps:70 (1) For taxable years beginning on or after January 1, 2027, and before January 1, 2028,71 the aggregate amount of tax credits allowed under this Code section shall not exceed $2.572 million;73 (2) For taxable years beginning on or after January 1, 2028, and before January 1, 2029,74 the aggregate amount of tax credits allowed under this Code section shall not exceed $575 million;76 (3) For taxable years beginning on or after January 1, 2029, and before January 1, 2032,77 the aggregate amount of tax credits allowed under this Code section shall not exceed $7.578 million per year; and79 (4) The tax credits allowed under this Code section shall not be available for taxable80 years beginning on or after January 1, 2032.81 (e)(1) The maximum allowable tax credit under this Code sectio n claimed by a single82 production company and its affiliates shall not exceed, in any single taxable year, 2083 percent of the aggregate amount of tax credits available for su ch taxable year under84 subsection (d) of this Code section, including the amount of any aggregate annual caps85 rolled over from prior years.86 (2) Production companies seeking to claim a tax credit under t his Code section shall87 submit an application to the department for preapproval of such t a x c r e d i t . T h e88 department shall preapprove the tax credits based on the order in which properly89 completed applications were submitted. In the event that two or more applications were90 submitted on the same day and the amount of funds available wil l not be sufficient to91 fully fund the tax credits requested, the department shall pror ate the available funds92 between or among the applicants.93 (f) The credit granted under this Code section shall be subject to the following conditions94 and limitations:95 H. B. 1126 - 4 - 26 LC 59 0220 (1) For each year in which the production company claims or tr ansfers the credit, the96 production company shall attach a schedule to the production company's Georgia income97 tax return which will set forth the following information, as a minimum:98 (A) A description of the qualified production expenditures sho wing categorized99 spending, along with the certification from the Department of Economic Development;100 (B) A detailed listing of employees' names, social security nu mbers, and Georgia101 wages;102 (C) The amount of tax credit claimed for the taxable year;103 (D) Any tax credit previously taken by the production company against Georgia104 income tax liabilities or the production company's quarterly or monthly payments under105 Code Section 48-7-103;106 (E) The amount of tax credit carried over from prior years;107 (F) The amount of tax credit utilized by the production company in the current taxable108 year; and109 (G) The amount of tax credit to be carried over to subsequent tax years;110 (2) Where the amount of tax credits under this Code section ex ceeds the production111 company's income tax liability in a taxable year, any unused credit amount:112 (A) May be carried forward for three years from the close of the taxable year in which113 the investment occurred; or114 (B) May be taken as a credit against such production company's quarterly or monthly115 payment under Code Section 48-7-103. Each employee whose employer receives credit116 against such production company's quarterly or monthly payment under Code Section117 48-7-103 shall receive credit against his or her income tax liability under Code Section118 48-7-20 for the corresponding taxable year for the full amount which would be credited119 against such liability prior to the application of the credit p rovided for in this120 subparagraph. Credits against quarterly or monthly payments un der Code Section121 H. B. 1126 - 5 - 26 LC 59 0220 48-7-103 and credits against liability under Code Section 48-7-20 established by this122 subparagraph shall not constitute income to the production company.123 No such credit shall be allowed the production company against prior years' tax liability;124 and125 (3) Any tax credits earned by a production company under this Code section and126 previously claimed but not used by such production company against its income tax or127 its monthly payment under Code Section 48-7-103 may be transferred or sold in whole128 or in part by such production company to another Georgia taxpay er, subject to the129 following conditions:130 (A) Such production company may make only a single transfer or sale of tax credits131 earned in a taxable year; however, the transfer or sale may inv olve one or more132 transferees;133 (B) Such production company shall submit to the Department of Economic134 Development and to the Department of Revenue a written notification of any transfer135 or sale of tax credits within 30 days after the transfer or sale of such tax credits. The136 notification shall include such production company's tax credit balance prior to transfer,137 the credit certificate number, the remaining balance after transfer, all tax identification138 numbers for each transferee, the date of transfer, the amount transferred, and any other139 information required by the Department of Economic Development or the Department140 of Revenue;141 (C) Failure to comply with this paragraph shall result in the disallowance of the tax142 credit until the production company is in full compliance;143 (D) The transfer or sale of this tax credit does not extend th e time in which such tax144 credit can be used. The carry-forward period for a tax credit that is transferred or sold145 shall begin on the date on which the tax credit was originally earned;146 (E) A transferee shall have only such rights to claim and use the tax credit that were147 available to such production company at the time of the transfer, except for the use of148 H. B. 1126 - 6 - 26 LC 59 0220 the credit in subparagraph (B) of paragraph (2) of this subsect ion. To the extent that149 such production company did not have rights to claim or use the tax credit at the time150 of the transfer, the Department of Revenue shall either disallow the tax credit claimed151 by the transferee or recapture the tax credit from the transfer e e . T h e t r a n s f e r e e ' s152 recourse is against such production company; and153 (F) Any production company claiming, transferring, or selling the tax credit shall be154 required to reimburse the Department of Revenue for any department initiated audits155 relating to the tax credit. This subparagraph shall not apply to routine tax audits of a156 taxpayer that may include the review of the credit provided in this Code section.157 (g) The Department of Economic Development shall determine through the promulgation158 of rules and regulations which projects qualify for the tax cre dits authorized under this159 Code section. Certification shall be submitted to the state revenue commissioner.160 (h) The state revenue commissioner shall promulgate such rules and regulations as are161 necessary to implement and administer this Code section. Reserved."162 SECTION 2.163 This Act shall become effective on January 1, 2027, and shall stand repealed on January 1,164 2032.165 SECTION 3.166 All laws and parts of laws in conflict with this Act are repealed.167 H. B. 1126 - 7 -