(a) The aggregate
cap applies to taxable years beginning after December 31, 2018. If the total
amount of credits applied for in any particular year exceeds the aggregate cap,
the excess shall be treated as applied for in the subsequent year and shall be
claimed in such year; provided that no credit shall be claimed after December
31, 2025.
(b) For purposes of
applying the aggregate cap, tentatively allocating the credit under subsection
(c), and certifying the credit under subsection (d), the Hawaii film office
shall consider the year's claims for credits to be the total amount of credits
applied for based on production costs incurred during the preceding calendar
year. Credits applied for in production reports that cover tax years beginning
before January 1, 2019 shall not be counted against the aggregate cap for any
year.
(c) The Hawaii film office
shall tentatively allocate credits based on the production costs reported in
the estimated budget provided by taxpayers as part of the preproduction
registration submitted to the Hawaii film office. Tentative allocation of
credits is subject to the following rules:
(1) Credits shall be tentatively allocated in
the order of the date and, if necessary, the time that the preproduction
registration required under section
18-235-17-03(a) and section
235-17(f),
HRS, is received by the Hawaii film office;
(2) The principal photography start date
shall be within ninety days of the date of the letter sent by the Hawaii film
office approving the preproduction registration and tentatively allocating the
credit. Each production shall provide written notice of the actual principal
photography start date to the Hawaii film office within thirty days of starting
principal photography. If the principal photography start date is after the
ninety-day period described in this paragraph, the tentative allocation of
credit shall be void; provided that a new preproduction registration may be
submitted to the Hawaii film office in order to receive a new tentative
allocation of credit;
(3) Credits
that cannot be tentatively allocated pursuant to paragraph (5) or (6) or
because the aggregate cap is exceeded in any year, shall be allocated in the
subsequent year in the manner described in paragraph (1);
(4) Credits of $500,000 or less described in
subsection (e) shall have priority in tentative allocation before initial claim
year claims and after any credits that were allocated under paragraph
(3);
(5) If the amount of credit
applied for by a qualified production is $2,500,000 or more, these credits
shall be tentatively allocated over a two-year period; provided that no more
than one-half of the credits applied for shall be allocated to the initial
claim year, except as allowed under subsection (t); provided further that this
paragraph shall not apply if the initial claim year is the last year that the
credit is available under section
235-17,
HRS;
(6) For split-year
productions, credits shall be tentatively allocated to the initial claim year
and the subsequent year upon the approval of the preproduction registration for
the initial claim year; provided that the requirements of this subsection are
met for the initial claim year as if the production was not a split-year
production; provided further that this paragraph shall not apply to qualified
productions that are subject to paragraph (5); and
(7) If the amount of credit applied for in a
production report exceeds the amount of credit that was tentatively allocated
under this subsection, the difference shall be tentatively allocated in the
subsequent year in the manner described in paragraph (1).
Tentative allocation required under this subsection shall not
be interpreted to guarantee the amount of credit that is certified or may be
claimed.
(d) The
Hawaii film office shall certify credits in the same order that the credits
were tentatively allocated under subsection (c). The amount of credits
certified shall be based on the qualified production costs reported in the
verification review of the qualified production. Except as allowed under
subsection (t), the amount of credit certified under this subsection shall not
exceed the amount of tentative allocation under subsection (c). Credits shall
only be certified for taxpayers that have:
(1)
Received a letter from the Hawaii film office approving the preproduction
registration;
(2) Received a
tentative allocation of credit under subsection (c); and
(3) Submitted a timely production report.
Example 1: LAT Productions is a calendar year
taxpayer who submits a timely production report to the Hawaii film office but
has not submitted a preproduction registration and has therefore not received a
letter from the Hawaii film office tentatively allocating the credit. Although
LAT Productions submitted a timely production report, the Hawaii film may not
allocate any credits to LAT Productions because it did not receive a
preproduction registration approval letter which would have contained the
tentative credit allocation. LAT Productions has waived its right to claim the
credit under section 18-235-17-03(a).
Example 2: CAL Productions is a calendar year
taxpayer and submits its production report to the Hawaii film office on May 1,
2020. FIS Productions is a fiscal year taxpayer whose fiscal year begins on
April 1 and ends on March 31. FIS Productions also submits its production
report on May 1, 2020. The production report was due on March 30, 2020, ninety
days after the end of the calendar year, for both taxpayers. Because a timely
production report was not submitted by either taxpayer, both CAL Productions
and FIS Productions have waived their right to the credit for the qualified
production costs reported on the 2020 production report.
If the amount of credit applied for in a production report is
twenty or more percent less than the amount of credit tentatively allocated
under subsection (c) for that year, the Hawaii film office shall certify no
more than one-half of the credit applied for in that year; provided that for
credits subject to paragraph (c)(5), the Hawaii film office shall certify no
more than one-fourth of the credit applied for in that year. The credits that
were not certified pursuant to this provision shall be tentatively allocated in
the subsequent year in the manner described in paragraph (c)(1). The Hawaii
film office may waive the applicability of this provision if it finds that the
estimated budget was made in good faith and that the reduction in the actual
production costs was due to circumstances beyond the taxpayer's control.
For the calendar year ending December 31, 2019, the Hawaii
film office shall certify credits under this subsection based on the production
report as if each taxpayer received a tentative allocation of credit. Credits
shall be certified in the order that the preproduction registration was
received by the Hawaii film office.
(e) Qualified productions that have a credit
claim of $500,000 or less shall have priority over initial claim year claims in
tentative allocation under subsection (c) and certification under subsection
(d); provided that such credits shall not have priority over credits allocated
under paragraph (c)(3).
(f) The
amount of credits certified for a taxpayer under subsection (d) shall not
exceed the amount of credits tentatively allocated to that taxpayer under
subsection (c); provided that if the aggregate cap is not reached for the
calendar year, the remaining credits for the year may be certified for
taxpayers who were not tentatively allocated the full amount of credits for the
initial claim year pursuant to paragraph (c)(5) or (c)(7). Credits shall be
certified under this subsection in the manner described in paragraph (c)(1).
For the calendar year ending December 31, 2019, the Hawaii
film office and the department shall have discretion to determine the most
efficient and appropriate method of allocation under this
subsection.
