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 and amended in 2013. 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
900 West Capitol
Little Rock, AR 72201
(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,
(K) Soundtrack production,
"Post-production" does not include expenditures for advertising,
marketing, or distribution;
(12) "Postproduction costs" means all
expenditures 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) 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;
(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 ten (10) 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
established rules and regulations 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 Film Office as qualifying
for a production rebate under this section;
(19) "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;
(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.
Television programming does not includeprograms 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;
(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
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
postproduction 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
Commission, the production company and the Commission shall 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
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 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 twenty percent (20%) of all qualified
production costs associated with the production of a state-certified
production.
An approved 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.
Postproduction 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 twenty percent (20%) of all qualified
production costs associated with the postproduction 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 postproduction 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
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 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. 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 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
§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 Film Office.
A. The Revenue Division of the Department of
Finance and Administration shall upon receipt of an application for rebate,
including a proof of performance expenditure report from the Film Office:
(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;
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
the 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)
There is no per production cap on the rebate and the amount of the rebate shall
be limited only by the amount of moneys in the Digital Product and Motion
Picture Office Fund.
(ii) The
rebate shall be awarded on a first-come, first-served basis.
(iii) 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 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.
