Current through Register Vol. 49, No. 2, February 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. 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. See Arkansas Code Annotated
§15-4-2001 et seq.
For more information, please contact:
Arkansas Economic Development Commission
Arkansas Film Office
One Capitol Mall
Little Rock, AR 72201
(501) 682-7326
II.
Definitions
(1) "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 actors, directors, producers, and writers;
(2) "Commission" means the Arkansas Economic
Development Commission;
(3) "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;
(4) "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,
N. Trailer, pilot, video teaser, or demo
created primarily to stimulate the sale, marketing, promotion, or exploitation
of future investment;
(5) "Film Office" means the division of the
Arkansas Economic Development Commission charged with the responsibility of
promoting and assisting the digital content and motion picture industry in
Arkansas;
(6) "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;
(7) "Financial institution"
means any bank or savings and loan in the state which carries Federal Deposit
Insurance Corporation insurance;
(8) "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;
(9) "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;
(10)
"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,
(K) Soundtrack production,
"Post-production" does not include expenditures for advertising,
marketing, or distribution;
(11) "Post-Production costs" means all
expenditures incurred in the state in the post- production phase of a
state-certified production;
(12)
"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) An ongoing program created
primarily as news, weather, or financial market reports;
(ii) A production containing any material or
performance that is obscene;
(iii)
A production deemed an infomercial; or
(iv) Sexually explicit productions as defined
in 18 U.S.C. § 2257, as it existed on January 1, 2009;
(13) "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;
(14) "Qualified
production costs" means costs incurred in Arkansas for the development,
preproduction, production, or postproduction of a qualified production,
including but not limited to payments for:
(A)
Per diem expenditures by the cast or crew for meals and lodging when
accompanied by receipts,
(B) Costs
incurred concerning original music compositions produced by an Arkansas
resident to be used as incidental music, scoring, 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
non-recourse 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) "Qualified production costs" does not
include:
(A) The optioning or purchase of
intellectual property that is not used in the production project;
(B) Media buys, promotional events, or gifts
or public relations associated with the promotion or marketing of any qualified
production;
(C) Deferred,
leveraged, or profit participation costs relating to any and all personnel
associated with any and all aspects of the production, including, but not
limited to, producer fees, director fees, talent fees, and writer
fees;
(D) Amounts paid to persons
or businesses as a result of their participation in profits from the
exploitation of the qualified production;
(E) Salaries for highly compensated
individuals; and
(F) Payments for
penalties or fines, payments to nonprofit organizations, and payments to
federal and state entities that do not pay state taxes;
(15) "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;
(16) "Season" means production of at least
ten (10) episodes of a television series;
(17) "State-certified production" means a
qualified production produced by an eligible production company that is:
(A) In compliance with established rules and
regulations of the Digital Content and Motion Picture Industry Development
Act;
(B) Authorized by the
Commission to conduct business in this state; and
(C) Approved by the Commission as qualifying
for a production rebate under this section;
(18) "Television mini-series" means a limited
run program of more than two (2) and less than the thirteen (13) part-season or
half-season block associated with serial or series programming;
(19) "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. Television
programming does not include programs created primarily as:
(i) News reports,
(ii) Weather reports,
(iii) Financial market reports,
(iv) Current events,
(v) Sporting events,
(vi) Award shows,
(vii) Gala events,
(viii) Fundraising events,
(ix) Marketing a product or
service,
(x) Corporate training,
or
(xi) Corporate
advertising,
(20)
"Television series" means at least six (6) hours of television programming
exhibited by a television station or network;
(21) "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
Requirement
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 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 Revenue Division of the Department of Finance and Administration
(DF& A) on the reporting of expenditures and other information necessary to
qualify for the rebate.
C. Upon
approval of the application by the Commission, the production company and the
Commission will sign a financial incentive agreement.
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
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 Commission, the production
company shall be eligible for a rebate on all qualified production costs in
connection with the production of a state-certified film project.
The amount of the rebate shall be fifteen percent (15%) of all
qualified production costs associated with the production of a state-certified
production.
An approved production company may 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.
VI.
Employment
Rebate
In addition to the production rebate and post-production rebates, the
employment rebate also entitles a state-certified production company for
benefits of employing full-time residents of Arkansas for which the company has
submitted a Certified Declaration of Arkansas Residency form with the
Commission.
1. 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.
2. If a
production company hires a payroll service company to handle the payroll of a
production, the payroll payments shall be allowed as eligible expenditures
provided:
(A) Payments made by the production
company to the payroll service company are paid through an Arkansas financial
institution account; and
(B) All
eligible income payments to employees and independent contractors done through
the payroll service are to Arkansas residents.
3. The salary for an employee whose salary is
equal to or greater than five hundred thousand dollars ($500,000), shall be
excluded from eligibility for either rebate.
VII.
Production Costs
Certification
Within ninety (90) days after the last production costs are incurred,
the production company shall certify the total costs to the Commission.
The Final Expenditure Report and all qualified production costs shall
be subject to an audit by an outside certified public accountant licensed in
the state of Arkansas.
The eligible production company shall be responsible for paying all
fees associated with the audit and final certification.
Upon review of the Final Expenditure Report, and supporting
documentation, the Commission will determine the total eligible production
costs that are eligible for rebate and 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.
Within ninety (90) 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 the DF&A the amount of rebate due to the production
company.
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:
A. The production company,
or
B. At the option of the
production company, the full amount or a specified amount noted by the
production company to the:
1. National Film
Preservation Foundation;
2. Motion
Picture Retirement Fund; or
3.
Digital Product and Motion Picture Office Fund.
VIII.
Production Costs
Limitations
Payments for eligible production and post-production expenses shall be
made 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.
IX.
Penalties
A production company that intends to apply for the rebate and does not
register as required by §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 the provision 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.
