Current through Register 1518, March 29, 2024
(1)
Statement of Purpose, Outline
of Topics.
(a)
Statement of Purpose. Under M.G.L. c. 62B, § 2,
the Commissioner is authorized to require persons other than employers to
deduct and withhold taxes from payments other than wages in order to protect
the revenue of the commonwealth.
830
CMR 62B.2.3 establishes and explains the
requirements of motion picture production companies to withhold Massachusetts
personal income tax on payments to independent contractors and loan-outs for
services rendered in Massachusetts. For coordination with live performance
performer withholding See
830
CMR 62B.2.3(6)(c).
(b)
Outline of
Topics.
830
CMR 62B.2.3 is organized as follows:
1. Statement of Purpose; Outline of
Topics
2. Definitions
3. Registration and Reporting Obligations of
a Production Company; Qualification for the Credit
4. Withholding and Reporting Requirements as
Prerequisites for Credit Qualification; Loan-out Filing Requirements
5. Personal Income Credit Against Taxes;
Reporting Requirements
6.
Coordination With Other Withholding Requirements
7. Effective Date
(2)
Definitions. For purpose of
830
CMR 62B.2.3, the following terms shall have
the following meanings, unless the context requires otherwise:
Commissioner, the Commissioner of the
Massachusetts Department of Revenue or the Commissioner's duly authorized
representative.
Credit, the motion picture production
company credit.
Independent Contractor, an individual
treated as an independent contractor for federal and Massachusetts tax purposes
and contracted with and retained by the production company, such as artists,
crew, actors, directors and producers, for the performance of services used
directly in a production. It does not include entities retained by the
production company to provide tangible property or outside contractor service,
such as catering, construction, trailers, equipment and transportation.
Loan-out, a personal service
corporation or other entity contracted with and retained by the production
company to provide individual personnel, such as artists, crew, actors,
directors and producers, for the performance of services used directly in a
production, but not including entities retained by the production company to
provide tangible property or outside contractor service, such as catering,
construction, trailers, equipment and transportation.
Motion Picture Production Company
Credit, the motion picture aggregate payroll or production expense
credit allowed under M.G.L. c. 62, § 6(l) or M.G.L. c. 63, §
38X.
Performer Withholding Waiver, a waiver
from performer withholding requirements authorized under
830
CMR 62B.2.1, Withholding of Taxes on Wages
and Other Payments, issued by the Commissioner's performer withholding
unit.
Production, a motion picture as
defined in M.G.L. c. 62, § 6(l) and M.G.L. c. 63, § 38X.
Production Company, a motion picture
production company as defined in M.G.L. c. 62, § 6(l) and M.G.L. c. 63,
§ 38X.
(3)
Registration and Reporting Obligations of a Production Company;
Qualification for the Credit.
(a)
Registration. A production company that seeks a motion
picture production company credit as to payments made to a loan-out or an
independent contractor must register for motion picture production company
withholding prior to filing an application for the credit.
(b)
Withholding
Amount. A production company must withhold at the personal income
tax rate under M.G.L. c. 62, § 4(b), on any payment to a loan-out or an
independent contractor for that payment to qualify for the motion picture
production company credit. A payment to a loan-out or an independent contractor
can only qualify for the motion picture production company credit if, and to
the extent that, such payment if made directly to the individual(s) providing
services used directly in the production on behalf of the loan-out, would be
Massachusetts source income to such individual.
(c)
Timing of Withholding
Remittance. Any production company seeking a credit as to a
payment made to a loan-out or an independent contractor, must withhold and
remit to the Commissioner the withholding amount required under
830
CMR 62B.2.3(3)(b) prior to
the filing of an application for the credit.
(4)
Withholding and Reporting
Requirements as Prerequisites for Credit Qualification; Loan-out Filing
Requirements.
(a)
Withholding and Reporting Requirements. A payment to a
loan-out or an independent contractor will not qualify for the credit:
1. if, or to the extent that, the withholding
amount required under
830
CMR 62B.2.3(3)(b) is not
remitted to the Commissioner prior to the filing of an application for the
credit; and
2. if the reporting
requirements are not met as required under
830
CMR 62B.2.3(5).
Example. A production company files an
application for the credit and reports as an otherwise qualifying production
expense a $4 million payment to a loan-out for the services of the leading
actor in the production. The production company has met the reporting
requirements as required under
830
CMR 62B.2.3(5). Prior to
filing the application for the credit, the production company had registered
for production company withholding as required under
830
CMR 62B.2.3(3)(a) and
remitted to the Commissioner $159,000 of withholding on payments to the
loan-out for the services of the leading actor in the production. The
withholding required under
830
CMR 62B.2.3 on the $4 million payment to the
loan-out is $212,000 (5.3% x $4 million). The production company will be
allowed to claim $3 million of the payment to the loan-out (5.3% x $3 million =
$159,000) but the remaining $1 million of the payment does not constitute a
qualifying expense for purposes of the credit.
(b)
Loan-out Filing
Requirements. Upon the completion of its tax year(s) during which
the production took place, the loan-out doing business in Massachusetts must
file a Massachusetts tax return and report its income and pay any accompanying
tax liability.
(5)
Personal Income Credit Against Taxes; Reporting
Requirements.
(a)
Allocation of Personal Income Credit Against Taxes.
The amount deducted and withheld as tax under
830
CMR 62B.2.3 during any calendar year upon the
payment from a production company to a loan-out or an independent contractor
shall be allowed as a credit to the individual or individuals whose services
were provided in the production against his or her income tax. If the services
of multiple individuals are provided by the loan-out, the amount deducted and
withheld under
830
CMR 62B.2.3 shall be allocated to each
individual in proportion to the individual's respective Massachusetts source
income received by the loan-out from the production company as payment for the
individual's services used directly in the production.
(b)
Individual Filing
Responsibility; Overpayment Applied to Estimated Tax; Refund. The
individual providing services must file a Massachusetts personal income tax
return attaching the allocation form provided by the production company as
required under
830
CMR 62B.2.3(5), and apply
the credit for the withholding tax allocated to him or her against the
calculated individual income tax liability for that individual. The individual
must sign the allocation form acknowledging that any overpayment of the income
tax liability will, in this order, be:
1.
applied to any required offsets or intercepts;
2. applied to estimated taxes for the next
tax year unless all of the Massachusetts source income related to the allocated
withholding tax has been reported on this, or a prior, Massachusetts personal
income tax return;
3. refunded to
the individual.
(c)
Reporting Requirements; Loan-out Allocation Form. The
production company and the loan-out must furnish to the Commissioner as an
attachment to the production company's credit application, in the manner
prescribed by the Commissioner, an accounting and allocation of the withholding
amounts on the payments to the loan-out and the social security number or
numbers of the individual or individuals allocated the credit against taxes as
allowed under
830
CMR 62B.2.3(5)(a) as well
as any other information required by the Commissioner. An authorized
representative of the production company, an authorized representative of the
loan-out and the individual providing services to the loan-out, must sign and
declare that to the best of their knowledge and belief, the information
contained on the allocation form is true, correct and complete. The production
company must also furnish a copy of this allocation form to the individual
allocated the withholding amount as allowed under
830
CMR 62B.2.3(5)(a).
Example. Same facts as the example in
830
CMR 62B.2.3(4)(a) with the
following additional facts: The withholding upon the payment to the loan-out
occurs during the actor's 2010 tax year. The actor does not receive the
Massachusetts source income reported on the allocation form until the actor's
2011 tax year. The actor does not have any Massachusetts source income, income
tax liability or required offsets or intercepts for his or her 2010 tax year.
The actor files a Massachusetts personal income tax return for his or her 2010
tax year, attaching the allocation form and applies the $159,000 withholding
amount to his or her estimated taxes for the 2011 tax year. The actor files a
Massachusetts personal income tax return for the 2011 tax year, attaching the
allocation form and receives a refund of any overpayment for his or her 2011
tax year, as allowed under
830
CMR 62B.2.3(5)(b).
(6)
Coordination with Other Withholding Requirements.
(a)
Employer Production Company
Withholding. The
830
CMR 62B.2.3 withholding requirements apply to
a payment made by a production company to a loan-out or an individual
independent contractor. Wages and other payments made by a production company
that is an employer to its employee are governed by the employer withholding
requirements as explained in
830
CMR 62B.2.1. Nothing in
830
CMR 62B.2.3 limits the requirement that a
production company must register and withhold Massachusetts income tax on
employee wages subject to tax in Massachusetts.
(b)
Loan-out
Withholding. When a loan-out receives a payment from a production
company on which there has been withholding under the withholding requirements
of 830 CMR 62B.2.3, it does not
have to further withhold under the production company withholding rules set
forth in
830
CMR 62B.2.3, the employer withholding rules
set forth in
830
CMR 62B.2.1 or the pass-through entity
withholding rules set forth in
830
CMR 62B.2.2 as to any paid or allocated
amount to an individual to the extent such payment or allocation relates to the
same services previously withheld upon.
Example. Same facts as the example in
830
CMR 62B.2.3(4)(a),
e.g., the production company makes a $4 million payment to the
loan-out, but only withholds on $3 million. The loan-out and the individual
actor do not have to further withhold on the $3 million payment to the loan-out
for the services of the leading actor in the production. However, any
withholding obligation imposed by M.G.L. c. 62B and the regulations thereunder,
on the loan-out and the individual actor, is effective for the remaining $1
million of the payment to the loan-out, as well as any related interest and
penalties for failure to withhold.
(c)
Performer
Withholding. The performer withholding requirements and waivers
explained in
830
CMR 62B.2.1 do not apply to a production that
qualifies and submits an application for the motion picture production company
credit as defined and allowed under M.G.L. c. 62, § 6(l)(1) or M.G.L. c.
63, § 38X. A production qualifying for the motion picture production
company credit is generally defined as a film, video, digital media project or
a television series. The performer withholding requirements and waivers
explained in
830
CMR 62B.2.1 apply to live performances
including, but not limited to, live entertainment, public appearances and
athletic competitions.
(7)
Effective Date.
(a)
General Effective
Date.
830
CMR 62B.2.3 is effective January 29, 2010.
Motion picture production company registration and withholding is required on
payments to independent contractors and loan-outs made on or after February 18,
2010.
(b)
Transition
Effective Date. Notwithstanding the effective date in
830
CMR 62B.2.3(7)(a), a valid
performer withholding waiver issued to a loan-out before February 18, 2010, for
a production that commenced filming before February 18, 2010, will remain
effective for the production for which the waiver was issued. Performer
withholding waivers will not be issued after February 17, 2010, and any
outstanding valid performer withholding waivers will expire after the
production for which the waiver was issued is completed.