Haw. Code R. § 18-235-17-04

Current through September, 2024

Section 18-235-17-04 - Claim for credit; aggregate cap; tentative allocation and certification of credit

(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.

Haw. Code R. § 18-235-17-04

[Eff 11/17/2019] (Auth: HRS § 231-3(9)) (Imp: HRS § 235-17)