2022 Arizona Revised Statutes
Title 41 - State Government
§ 41-1517 - Arizona motion picture production program; duties; preapproval; postapproval; fee; rulemaking; audit; report; definitions

41-1517. Arizona motion picture production program; duties; preapproval; postapproval; fee; rulemaking; audit; report; definitions

(Rpld. 1/1/44)

A. The authority shall:

1. Implement an Arizona motion picture production program in this state to promote the workforce development and expansion of the commercial motion picture industry in this state.

2. Certify motion picture production companies that produce one or more motion pictures in this state for the purpose of the tax credits allowed under section 43-1082 or 43-1165.

B. To qualify for the program, a motion picture production company shall:

1. Do either of the following:

(a) Use a qualified production facility in this state to produce the motion picture production.

(b) If the motion picture production is filmed primarily at a practical location, produce and film the motion picture production primarily in this state and perform all preproduction, postproduction and editing at an industry standard facility in this state, if such a facility for those functions is available.

2. Maintain the motion picture production company's production labor positions in this state.

3. Include in the credits for each motion picture production an acknowledgment that the production was filmed in Arizona.

4. Submit a completed application pursuant to subsection C of this section. An application is complete on receipt of all requested information.

5. Provide supporting statements and records requested by the authority to demonstrate that the motion picture production company satisfies the criteria provided in this subsection.

C. The application for certification under this section shall be on a form prescribed by the authority and shall include the following:

1. The name, address, telephone number and website address of the motion picture production company.

2. The name and address of an individual who will maintain records of expenditures in this state.

3. The projected first preproduction date and last production date in this state.

4. The production office address and office telephone number in this state.

5. The estimated total budget of the production.

6. The estimated total production cost expenditures in this state.

7. The estimated total percentage of the production that will take place in this state.

8. The estimated number and duration of full-time production labor employment positions in this state.

9. The estimated number of employees who are residents of this state in the cast and crew.

10. The estimated median wage of production labor employment positions in this state.

11. A script or synopsis, the name of the proposed director and a preliminary list of the cast and producer.

12. An affidavit that attests that the motion picture production company will meet all of the requirements to qualify for the tax credits, including that the motion picture production company will use a qualified production facility in this state to produce the motion picture production or otherwise satisfy the requirements prescribed in subsection B, paragraph 1 of this section.

D. The authority shall establish processes to:

1. Review a completed initial application submitted pursuant to this section within a time period prescribed by the authority by rule to determine whether the motion picture production company satisfies all of the criteria provided in subsection B of this section.

2. Certify and preapprove a motion picture production company for the motion picture production tax credits under section 43-1082 or 43-1165. Preapproval priority shall be based on the date that the motion picture production company files a complete initial application for certification with the authority.

E. The preapproved amount applies against the applicable dollar limit prescribed by subsection I of this section for the calendar year in which the application was submitted regardless of whether the preapproval period extends into the following year or years.

F. The authority shall deny an application if the authority determines that:

1. The motion picture production company does not meet all of the established criteria provided in subsection B of this section.

2. The production would constitute an obscene motion picture film or obscene pictorial publication under title 12, chapter 7, article 1.1.

3. The production violates the obscenity laws under title 13, chapter 35.

4. The production would constitute sexual exploitation of a minor or commercial sexual exploitation of a minor under title 13, chapter 35.1.

G. On a determination by the authority that a motion picture production company qualifies for the motion picture production tax credits under section 43-1082 or 43-1165, the authority shall issue the motion picture production company a preapproval letter and transmit a copy of the preapproval letter to the department of revenue. A preapproval letter is effective for a time period prescribed by the authority by rule that shall be stated in the preapproval letter. A motion picture production company may apply to the authority to extend the preapproval period if the motion picture production company can demonstrate that an act of force majeure occurred and that the preapproval letter will expire before the production is complete.

H. On completion of the motion picture production, a motion picture production company that is preapproved for the motion picture production tax credits under section 43-1082 or 43-1165 shall apply to the authority, on a form prescribed by the authority, for approval of motion picture production tax credits and provide an audited statement completed by a certified public accountant in this state that certifies the total amount of eligible production costs associated with the production. The authority shall provide postapproval to a motion picture production company that the motion picture production company has met the eligibility requirements of this section and notify the department of revenue that the motion picture production company may claim the tax credits under section 43-1082 or 43-1165.

I. The authority may not preapprove tax credits exceeding the following amounts in a calendar year, of which up to $25, 000, 000 in each calendar year may be used for motion picture productions that qualify for the program pursuant to subsection B, paragraph 1, subdivision (b) of this section:

1. In calendar year 2023, $75, 000, 000.

2. In calendar year 2024, $100, 000, 000.

3. In calendar year 2025, and each calendar year thereafter, $125, 000, 000.

J. Any information gathered from motion picture production companies for the purposes of this section is considered confidential taxpayer information and shall be disclosed only as provided in section 42-2003, subsection B, paragraph 12.

K. The authority shall adopt fees and deposit requirements and rules and shall publish and prescribe forms and procedures as necessary to administer this section and provide administrative support services.

L. The authority shall submit a report on or before December 31 each year to the governor, the president of the senate and the speaker of the house of representatives and shall provide a copy of this report to the secretary of state. The authority shall also make the report available to the general public on request. The report shall include:

1. Information relating to the program's activities, receipts and expenditures.

2. Information comparing the annual amount of monies credited to certified motion picture production companies to the estimated amount of monies spent on in-state production costs by motion picture production companies.

3. Quarterly data on the growth and development of motion picture industry employment and wages in this state.

4. A third-party review of the relative economic benefits to this state based on an analysis of the following:

(a) A comparison of the estimated state tax revenues generated by motion picture production activity to the calculated value of the tax credit. State tax revenue estimates shall include the sum of all income taxes, transaction privilege taxes and other taxes imposed by this state.

(b) The direct, indirect and induced inputs that rely on commonly used input-output economic modeling for generating economic multipliers and that measure the direct and indirect impact of the motion picture production industry and identifiable induced economic activity in this state, including benefits related to construction activity and the associated state transaction privilege tax.

(c) The difference between the state tax revenues estimated pursuant to subdivision (a) of this paragraph and the amount of monies credited pursuant to sections 43-1082 and 43-1165, aggregated each year and reported on a cumulative basis in each succeeding year.

M. Beginning on the fifth year after the authority issues the first preapproval letter and at least every fifth year thereafter, the authority shall perform an audit of the program. On or before June 30 of the respective year, the authority shall issue a public report of the audit and submit the report of the audit to the president of the senate and the speaker of the house of representatives and shall provide a copy to the secretary of state. The auditor general shall review each audit performed pursuant to this subsection and report the auditor general's findings to the president of the senate and the speaker of the house of representatives and shall provide a copy to the secretary of state. The audit performed on the tenth year after the first audit by the authority shall include a recommendation for whether the program is economically viable and effective.

N. Each audit report required by subsection M of this section must include:

1. The cumulative total number of production labor employment positions and labor costs related to those positions that qualified for the tax credits allowed under section 43-1082, subsection A, paragraph 2 or section 43-1165, subsection A, paragraph 2 for each year the credit is taken.

2. A comparison of the median wage of production labor employment positions in each county and the median wage in the county in which a production labor employment position is located.

3. The cumulative total of worker-days calculated by multiplying the total number of production labor employment positions by the number of days worked for each position during the employment.

O. For the purposes of this section:

1. " Motion picture production" means a single medium or multimedia program, including a feature film, episodic series or commercial advertisement message, that:

(a) Is created by production activities conducted in this state.

(b) Can be viewed or reproduced.

(c) Is intended for commercial distribution or licensing in the delivery medium used.

2. " Motion picture production company" means any person that is primarily engaged in the business of producing motion pictures and that has a physical business office in this state.

3. " Practical location" means a location at which a motion picture production is filmed that is not and that does not use an industry standard sound stage or production facility to produce and film the motion picture production.

4. " Production costs" :

(a) Means costs for the following that are incurred and taxable in this state:

(i) All compensation paid to talent, writers, directors and management.

(ii) All compensation paid for production labor.

(iii) Set construction and operation costs paid pursuant to construction contracts with contractors that are licensed under title 32, chapter 10.

(iv) Wardrobe, props, accessories and related services.

(v) Photography, sound synchronization, lighting and related costs.

(vi) Editing and related services.

(vii) Rental of qualified production facilities.

(viii) Rental of equipment.

(ix) Catered food, drink and condiment purchased from a qualified production facility.

(x) Other direct in-state costs of producing the motion picture production pursuant to rules adopted by the authority.

(b) Does not include payments for penalties and fines or fees or deposits established by the authority or the department of revenue to administer the program.

5. " Production labor" means all laborers working on a production that are not talent, writers, directors, producers or management.

6. " Program" means the Arizona motion picture production program implemented pursuant to this section.

7. " Qualified production facility" means a structure that is built for film industry purposes, is located in this state, is at least ten thousand square feet and meets generally accepted industry standards, including standards for soundproofing, lighting, air conditioning and motion picture production quality technology for producing, filming or otherwise creating a motion picture production.