(Rpld. 1/1/44)
A. For taxable years beginning from and after December 31, 2022, a tax credit is allowed against production costs paid by a motion picture production company in this state that are subject to taxation by this state and that are directly attributable to a motion picture production. The amount of the credit shall be determined as follows:
1. An amount equal to a percentage of the total amount of the qualified production costs as approved by the Arizona commerce authority pursuant to section 41-1517 as follows:
(a) For a motion picture production company that spends up to $10,000,000, fifteen percent.
(b) For a motion picture production company that spends more than $10,000,000 but less than $35,000,000, seventeen and one-half percent.
(c) For a motion picture production company that spends more than $35,000,000, twenty percent.
2. An additional two and one-half percent of the motion picture production company's production labor costs related to positions held by residents of this state as approved by the Arizona commerce authority pursuant to section 41-1517.
3. If the motion picture production company either:
(a) Uses a qualified production facility in this state to produce the motion picture production, an additional two and one-half percent of the total amount of qualified production costs as approved by the Arizona commerce authority pursuant to section 41-1517.
(b) Films primarily at a practical location, produces and films the motion picture production primarily in this state and performs all preproduction, postproduction and editing at a qualified production facility in this state, an additional two and one-half percent of the total qualified production costs as approved by the Arizona commerce authority pursuant to section 41-1517.
4. An additional two and one-half percent of the total amount of qualified production costs as approved by the Arizona commerce authority pursuant to section 41-1517 if the motion picture production is produced and filmed in association with a long-term tenant of a qualified production facility.
B. Tax credits under this section may not exceed the amount provided in the postapproval issued by the Arizona commerce authority pursuant to section 41-1517, subsection H. The taxpayer must include a copy of the postapproval with the taxpayer's income tax return for the taxable year in which the Arizona commerce authority issued the postapproval.
C. The department may not allow a tax credit under this section to a taxpayer who has a delinquent tax balance owed to the department under this title.
D. To qualify for a tax credit under this section, the motion picture production company must:
1. Do either of the following:
(a) Use a qualified production facility in this state to produce the motion picture production.
(b) If the motion picture production is filmed primarily at a practical location, produce and film the motion picture production primarily in this state and perform all preproduction, postproduction and editing at an industry standard facility, if such a facility for those functions is available.
2. Maintain the motion picture production company's production labor positions in this state.
3. Include in the credits for each motion picture production an acknowledgment that the production was filmed in Arizona.
4. Receive preapproval and postapproval from the Arizona commerce authority pursuant to section 41-1517.
5. Claim the tax credit by using the form prescribed by the department and include the form with the motion picture production company's income tax return for the taxable year in which the Arizona commerce authority issued the postapproval.
E. Co-owners of a motion picture production company, including partners in a partnership, members of a limited liability company and shareholders of an S corporation, as defined in section 1361 of the internal revenue code, may each claim the pro rata share of the tax credit allowed under this section based on ownership interests. The total of the tax credits allowed all such owners may not exceed the amount that would have been allowed a sole owner.
F. If the allowable tax credit for a taxable year exceeds the income taxes otherwise due on the claimant's income, or if there are no state income taxes due on the claimant's income, the amount of the claim not used as an offset against income taxes shall be paid to the taxpayer in the same manner as a refund under section 42-1118. Refunds made pursuant to this subsection are subject to setoff under section 42-1122. If the department determines that a refund is incorrect or invalid, the excess refund may be treated as a tax deficiency pursuant to section 42-1108.
G. The department shall maintain annual data on the total amount of monies credited pursuant to this section and shall provide the data to the Arizona commerce authority on request.
H. The department shall adopt fees and rules and publish and prescribe forms and procedures as necessary to administer this section and provide administrative support services.
I. The tax credit allowed by this section is in lieu of any allowance for state tax purposes of a deduction of those expenses allowed by the internal revenue code.
J. For the purposes of this section:
1. "Long-term tenant" means a person that enters into a lease of at least five years for the use of a qualified production facility.
2. "Motion picture production" has the same meaning prescribed in section 41-1517.
3. "Motion picture production company" has the same meaning prescribed in section 41-1517.
4. "Practical location" has the same meaning prescribed in section 41-1517.
5. "Production costs" has the same meaning prescribed in section 41-1517.
6. "Production labor" has the same meaning prescribed in section 41-1517.
7. "Qualified production facility" has the same meaning prescribed in section 41-1517.