Current through Register Vol. 49, No. 9, September, 2024
I.
Introduction
To encourage growth in Arkansas's digital product and motion
picture industry, Act 816 of 2009 was enacted by the
87th General Assembly and amended in 2013 and 2019.
Amended and codified at ACA §
15-4-2001
et seq, the legislation's purpose is to cultivate the industry by offering
financial incentives to foster the development of the digital and traditional
film industry in Arkansas.
For more information, please contact:
Arkansas Economic Development Commission
Arkansas Film Office
1 Commerce Way, Suite 601
Little Rock, AR 72202
(501) 682-7326
II.
Definitions
(1) "Application for rebate" means the
document required by the Film Office to begin the process for obtaining a
rebate under the Digital Product and Motion Picture Industry Development
Act;
(2) "Below-the-line employees"
means:
(A) employees involved with a motion
picture production including but not limited to:
(i) Casting assistants,
(ii) Costume design,
(iii) Gaffers,
(iv) Grips,
(v) Location managers,
(vi) Production assistants,
(vii) Set construction staff, and
(viii) Set design staff.
(B) "Below-the-line employees" does not
include directors and producers;
(3) "Commission" means the Arkansas Economic
Development Commission;
(4) "Film"
means a single media or multi-media production that is fixed on film, digital
medium, videotape, computer disc, laser disc, or similar delivery
medium:
(5) "Film and digital
product" means video images or other visual media entertainment content in
digital format, film, or videotape, provided the program meets all the
underlying criteria of a qualified production including but not limited to the
following:
(A) Motion pictures,
(B) Documentaries,
(C) Long-form programs,
(D) Specials,
(E) Mini-series,
(F) Series,
(G) Music videos,
(H) Television programming,
(I) Interactive television,
(J) Interactive games,
(K) Videogames,
(L) Commercials,
(M) Digital media for distribution or
exhibition to the general public, or
(N) Trailer, pilot, video teaser, or demo
created primarily to stimulate the sale, marketing, promotion, or exploitation
of future investment;
(6) "Film Office" means the division of the
Arkansas Economic Development Commission charged with the responsibility of
promoting and assisting the digital content industry in Arkansas in order to
enhance Arkansas as a land of opportunity for digital and motion picture
filmmaking;
(7) "Film production
company" means a corporation, individual, limited liability company or
partnership that produces one (1) or more films or any part of a
film;
(8) "Financial institution"
means any bank or savings and loan in the state which carries Federal Deposit
Insurance Corporation Insurance;
(9) "Highly compensated individual" means:
(A) An individual who directly or indirectly
receives compensation in excess of five hundred thousand dollars ($500,000) for
personal services with respect to a single production.
(B) An individual receives compensation
indirectly when a production company pays a personal service company or an
employee-leasing company that pays the individual;
(10) "Interactive television" means a
television production in which the viewer's action(s) may:
(A) Affect the program being watched,
or
(B) Affect the outcome of the
production;
(11)
"Post-production" means a final stage in the production of film or digital
content occurring after the action has been filmed or videotaped, including but
not limited to:
(A) Dialogue
replacement,
(B) Sound
editing,
(C) Addition or deletion
of special effects,
(D) Editing
music,
(E) Beginning and end
credits,
(F) Negative
cutting,
(G) Soundtrack
production,
(H) Dubbing,
(I) Subtitling,
(J) Addition or deletion of sound or visual
effects,
"Post-production" does not include expenditures for
advertising, marketing, or distribution;
(12) "Post-production costs" means all
expenditures incurred in the state associated with the post-production phase of
a state-certified production within the state;
(13) "Production" means:
(A) The process of producing a type of
entertainment content and includes film and digital content product.
(B) "Production" shall not include:
(i) News reports;
(ii) Weather reports;
(iii) Current events;
(v) Sporting events;
(vi) Fundraising events;
(vii) Gala events;
(viii) Marketing a product or
service;
(ix) Corporate
training;
(x) Corporate
advertising;
(xi) A production
containing any material or performance that is obscene; or
(xii) Sexually explicit productions as
defined in
18 U.S.C. §
2257, as it existed on January 1,
2009;
(14)
"Production company" means a corporation, partnership, limited liability
company, or other business entity engaged in the business of producing
qualified productions and is registered with the Arkansas Secretary of State to
engage in business in Arkansas;
(15) "Qualified production costs" means costs
associated with the development, preproduction, production, or postproduction
of a qualified production within the state, including but not limited to:
(A) Per diem expenditures by the cast or crew
for meals and lodging when accompanied by receipts,
(B) Costs associated with original music
compositions produced by an Arkansas resident to be used as incidental music,
the score, or the soundtrack in film or video games,
(C) Arkansas residents for labor, wages,
fees, talent or management,
(D)
Arkansas businesses for personal services,
(E) The story and scenario used in the
production,
(F) Set
construction,
(G) Set
operations,
(H) Wardrobe and
accessory services,
(I)
Photography,
(J) Sound,
(K) Lighting,
(L) Editing related services,
(M) Rentals of equipment and
facilities,
(N) Leasing of motor
vehicles,
(O) Chartering of
aircraft through an Arkansas-based businesses for in-state transportation
attributed to the production,
(P)
Commercial airfare purchased through Arkansas-based travel agencies for travel
to and from Arkansas attributed to the production,
(Q) Insurance and bonding costs,
(R) Costs to option or purchase intellectual
property, including without limitation books, scripts, music, or trademarks
relating to the development or purchase of a script, screenplay, or format if:
(i) The intellectual property was produced
primarily in Arkansas or the creator of the intellectual property is a resident
of Arkansas;
(ii) At least
seventy-five percent (75%) of the subsequent film or digital content is
produced in Arkansas; and
(iii)
The production expenses or costs for the optioning or purchase are less than
twenty-five percent (25%) of the production expenses or costs incurred in
Arkansas. The expenses or costs include all expenditures associated with the
optioning or purchase of intellectual property, including option money, agent
fees, and attorney fees relating to the transaction, but do not include
deferrals, deferments, royalties, profit participation, or recourse or
nonrecourse loans which the eligible production company may negotiate in order
to obtain the rights to the intellectual property;
(S) Other costs of the production in
accordance with generally accepted entertainment industry practices,
(T) Fringe contributions being paid for work
performed in Arkansas, including:
(i) Health
benefits,
(ii) Pension
contributions,
(iii) Welfare
contributions,
(iv) Stipends,
and
(v) Living
allowances.
(U) Food
catering services. When a production company hires a food catering service
company that is located outside the state, payments otherwise allowable that
are made by the out-of-state food catering service to food businesses located
in Arkansas shall be allowed as eligible expenditures,
(V) "Qualified production costs" does not
include:
(i) The optioning or purchase of
intellectual property that is not used in the production project;
(ii) Media buys, promotional events, or gifts
or public relations associated with the promotion or marketing of any qualified
production;
(iii) Deferred,
leveraged, or profit participation costs relating to any and all personnel
associated with any and all aspects of the production, including, without
limitation, producer fees, director fees, talent fees, and writer
fees;
(iv) Amounts paid to persons
or businesses as a result of their participation in profits from the
exploitation of the qualified production; and
(v) Payments for penalties or fines, payments
to nonprofit organizations, and payments to federal and state entities that do
not pay state taxes;
(16) "Resident" means natural persons and
includes for the purpose of determining eligibility for the rebate incentive
provided by this subchapter, a person domiciled in Arkansas and who maintains a
permanent residence within the state and spends at least six (6) months of the
taxable year within the state;
(17)
"Season" means production of at least six (6) episodes of a television
series;
(18) "State-certified
production" means a qualified production produced by an eligible production
company that is:
(A) In compliance with the
established rules of the Digital Content and Motion Picture Industry
Development Act;
(B) Authorized by
the Film Office to conduct business in this state; and
(C) Approved by the Executive Director of the
Arkansas Economic Development Commission as qualifying for a discretionary
production rebate under this section;
(19) "Television mini-series" means a limited
run program of more than three (3) hours of programming or half-season block
associated with serial or series programming;
(20) "Television programming" means a long-
or short-form narrative production of a television series, television
mini-series or television special that is intended for commercial
broadcast;
(21) "Television series"
means at least six (6) hours of television programming exhibited by a
television station or network;
(22)
"Television specials" means major dramatized presentations broadcast during
times normally occupied by episodes of one or more weekly television
series.
III.
Registration Requirements
A production company, which plans to operate within Arkansas
shall register with the Film Office of the Arkansas Economic Development
Commission on the prescribed forms before beginning operations in
Arkansas.
IV.
Application Requirements
A. A
production company seeking benefits of this program shall submit an application
to the Commission. The application must include an estimate of the production
expenditures and shall be filed with the Commission and approved by the
Executive Director prior to incurring any production costs or post-production
costs in Arkansas.
B. The
application shall also include the name, phone number and address of a
representative to work with the Commission and the Film Office on the reporting
of expenditures and other information necessary to qualify for the
rebate.
C. Upon approval of the
application by the Executive Director, the production company and the Executive
Director shall sign a financial incentive agreement.
D. The financial incentive agreement shall
define the provisions of the program, which shall include the:
(i) Effective date of the
agreement;
(ii) Term of the
agreement;
(iii) Incentive for
which the production company may qualify;
(iv) Investment threshold requirements
necessary to qualify for eligibility;
(v) Production company's responsibilities for
certifying eligibility requirements; and
(vi) Production company's responsibilities
for failure to meet or maintain eligibility requirements.
V.
Production Rebate
To qualify for this rebate, a production company shall spend at
least two hundred thousand dollars ($200,000) within a six-month period in
connection with the production of one (1) project.
Upon approval of the application by the Executive Director, the
production company may receive a discretionary rebate on all qualified
production costs in connection with the production of a state-certified film
project.
The amount of the rebate shall be up to twenty percent (20%) of
all qualified production costs associated with the production of a
state-certified production.
If the Executive Director approves a project for a rebate of
qualified production costs, the production company shall also receive an
additional rebate of ten percent (10%) for the payroll of below-the-line
employees involved in the production who are full-time residents of
Arkansas.
A production rebate shall not be processed until the production
company has met in full all obligations to each Arkansas institution and vendor
owed for products and services in the state.
VI.
Post-production Rebate
To qualify for this rebate, a production company shall spend at
least fifty thousand dollars ($50,000) within a six-month period in connection
with the production of one (1) project.
Upon approval of the application by the Executive Director, the
production company may receive a discretionary rebate on all qualified
production costs in connection with the post-production of a state-certified
film project.
The amount of the rebate shall be up to twenty percent (20%) of
all qualified production costs associated with the production of a
state-certified production.
An additional rebate of ten percent (10%) shall be granted for
the payroll of below-the-line employees who are full-time residents of
Arkansas.
A post-production rebate shall not be processed until the
production company has met in full all obligations to each Arkansas institution
and vendor owed for products and services in the state.
VII.
Employment Rebate
In addition to the production rebate and post-production
rebates, the Executive Director may approve an employment rebate that entitles
a state-certified production company to benefits for employing full-time
residents of Arkansas for which the company has submitted a Certified
Declaration of Arkansas Residency form with the Film Office.
A. The employment rebate authorizes a rebate
of ten percent (10%) for the aggregate payroll of salaries and wages to
Arkansas residents who are below-the line employees of the state-certified
production.
B. If a production
company hires a payroll service company to handle the payroll of a production,
the payroll payments otherwise allowable shall be allowed as eligible
expenditures if all eligible income payments to employees and independent
contractors done through the payroll service are subject to Arkansas state
income taxes.
C. If approved by the
Executive Director, the employment rebate shall include the first five hundred
thousand dollars ($500,000) of a highly compensated individual's
salary.
VIII.
Weekly Expenditure Reports
A.
(i) Within two (2) weeks after principal
photography begins, the production company shall begin filing weekly
expenditure reports.
(ii) Failure
to file weekly expenditure reports may result in a delay in the disbursement of
the rebate provided in §§
15-4-2005 and
15-4-2006.
B. The weekly expenditure report
shall be filed in accordance with but shall not be limited to the following:
(i) Direct cash payments by the production
company to Arkansas vendors, businesses, or citizens hired as cast or crew that
are accompanied by receipts shall be allowed if the sum of that cash payments
does not exceed forty percent (40%) of the total verifiable
expenditures;
(ii) Per diem
expenditures by cast or crew, or both, for lodging, when accompanied by
receipts, shall be allowed as eligible expenditures; and
(iii) Expenditure reports shall include
without limitation:
(a) Check identification
number;
(b) Date of
payment;
(c) Name of
payee;
(d) Address of
payee;
(e) Amount paid;
and
(f) Other information the
division deems necessary to ensure compliance with this subsection.
IX.
Production Costs Certification
Within one hundred eighty (180) days after the last production
costs are incurred, the production company shall apply to the Commission for a
production rebate certificate and provide a final expenditure report that
includes the amount of the company's production expenses or costs. Expenditure
reports also shall include information as required by the Revenue Division of
the Department of Finance and Administration to ensure compliance with §
15-4-2001 et seq.
The Commission will forward the Final Expenditure Report with
supporting documents with its recommendation for rebate to the Revenue Division
of the Department of Finance and Administration (DF&A).
Upon receipt of the Final Expenditure report and supporting
documents from the Commission, the Revenue Division of DF&A will review the
Commission's recommendation and verify the amount of rebate recommended.
X.
Application for
Rebate
Upon completion of filming or production, or both, in Arkansas,
the production company shall file an application for the rebate allowed under
A.C.A. §
15-4-2001 et seq. The application for rebate shall include a
proof of performance expenditure list that provides the total amount of
expenditures that were made in the state in connection with the filming or
production, or both, of a film and digital product that complies with this
subchapter. The production company shall provide documentation for expenditures
in accordance with rules promulgated by the Commission.
A. The Revenue Division of DF&A shall
upon receipt of an application for rebate, including a proof of performance
expenditure report from the Commission:
(i)
Calculate the total expenditures of the relevant production company for which
there are documented receipts for funds expended in the state;
(ii) Calculate the incentive benefit to which
the applicant is entitled subject to any conditions of the approved financial
incentive agreement; and
(iii)
Within one hundred twenty (120) days of the date the Final Expenditure Report
was submitted to the Commission, the Revenue Division of DF&A will certify
to the Director of DF&A the amount of rebate due to the production
company.
B. Within ten
(10) working days after the receipt of the certification from the Revenue
Division, the Director of DF&A shall issue the rebate to:
(i) The production company, or
(ii) At the option of the production company,
the full amount or a specified amount noted by the production company to the:
a. National Film Preservation
Foundation;
b. Motion Picture
Retirement Fund; or
c. Digital
Product and Motion Picture Office Fund.
C.
(i) The
amount of the rebate is limited to the amount specified in the approved
financial incentive agreement,
(ii)
Rebates to be awarded from the Digital Product and Motion Picture Office Fund
may be payable from any source of funds allocated for their rebates.
XI.
Production
Costs Limitations
Production companies are encouraged to make payments for
production and postproduction expenses from a checking account from an Arkansas
financial institution.
Direct cash payments by a production company to Arkansas
vendors, businesses, or citizens hired as cast or crew, which are accompanied
by receipts, shall not exceed forty percent (40%) of the total verifiable
expenditures.
XII.
Penalties
A production company that intends to apply for the rebate and
does not register as required by §
15-4-2004 may be enjoined from engaging
in production activities in the state by any court of competent jurisdiction
until the production company has registered.
A production company that intends to apply for the rebate
incentives and fails to comply with any provisions of the Digital Product and
Motion Picture Industry Development Act may be denied future participation in
this incentive program and shall be subject to penalty in accordance with
applicable state or federal law.
XIII.
Rulemaking Authority
The Arkansas Economic Development Commission has authority, at
A.C.A. §
15-4-2010, to promulgate rules necessary to implement Act 816 of
2009, as amended and to prevent abuse.
