052704HawaiiArchive

HAWAII
from Axium Payroll Co.'s "Incentives Guide" - Download yours at http://tinyurl.com/z6kxj
Hawaii offers a new refundable tax credit based on a production company's Hawaii
expenditures while producing a qualified film, television, commercial, or digital
media project. The credit equals 15% of qualified production costs incurred on Oahu,
and 20% on the neighbor islands (Big Island, Kauai, Lanai, Maui, and Molokai). In
addition, the 100% investment tax credit, Act 215 (formerly known as Act 221) is
still available, plus a rebate of the 7.25% hotel room tax.

If using the new tax credit, the Production Registration Form should be filed online
at least one week prior to the start of production.. A signed copy, plus the budget,
must be sent via U.S. mail as well. If approved, the Hawaii Film Office will issue a
credit pre-qualification acknowledgement. The production must make an effort to
hire local crew, and must also make a financial or in-kind contribution toward
educational or workforce development efforts. (The commission website provides a
list of acceptable workforce development contributions). An acceptable end credit
for the state of Hawaii must be included in the film. At least $200,000 in qualified
expenses must be expended in Hawaii, with an $8 million cap for each qualified
production. Only costs incurred in Hawaii and subject to Hawaiiís general excise tax
or income tax will be considered to be ìqualified production costs.î

No later than 90 days after the end of each taxable year in which qualified production
costs were expended, the producer must submit a signed a ìHawaiian Production
Reportî online, as well as an executed copy via mail, plus a mailed copy of the
expense report and crew list. Once the Hawaii income tax return is filed, along with
some additional required documents, the Dept. of Taxation will review the
submissions; the excess of tax credits over any tax liability be refunded by check
within 6 to 8 weeks of the tax filing.

As an alternative -- the 100% investment tax credit, known as Act 215, was designed
by the Hawaii State Legislature as a means to encourage investment in high
technology business, which under ìPerforming Arts Productsî includes motion
pictures and commercial television. Royalties and residual fees are excluded from
gross income.

To utilize Act 215, it is necessary to identify local investors. These investors share in
the financing costs and receive the investment tax credit, up to a maximum of $2
million per project per year. The credit is applied against their state taxes and spread
out over five years, with a maximum credit of 35% or $700,000 in year one, dropping
to 10% in years four and five. The rules are complicated, and a local attorney should
be consulted regarding the necessary structuring; the Film Office can supply the
names of qualified attorneys.

Note that both the 100% investment tax credit and the 15% or
20% refundable production tax credit are claimed on the
taxpayerís state income tax return. Consequently, it is
necessary to form a local company, register a mainland
company to do business in Hawaii, or partner with a local
company so that the credit may be used.

The production incentives are summarized and discussed at:
http://www.hawaiifilmoffice.com/incentives_credits.htm.
Additional information on the incentives is at http://www.state.hi.us/tax/tax.html.
The Film Office sponsors a blog which provides information about any proposed
changes in the incentives. The URL is http://www.hawaiifilmoffice.blogspot.com/.
Hawaii boasts a burgeoning film infrastructure, including equipment rental and a film
studio with soundstages. Because of Hawaiiís experienced labor pool, productions
can hire a significant number of skilled local workers.
ï Hawaii Film Office (808) 586-2570
Donne Dawson, Commissioner
o Hawaii Film Office Website -- www.hawaiifilmoffice.com/
o Hawaii Online Production Guide -- www.hawaiifilm.com/
Filming Incentives:
FILM COMMISSIONS:

Marilyn Killeri
Film Commissioner
Big Island Film Office
25 Aupuni Street, Room 219
Hilo, Hawaii, 96720 USA
Phone: 808-326-2663 Kona | Fax: 808-935-1205 |
Email: film@bigisland.com
http://www.filmbigisland.com/

Donne Dawson
Manager
Hawaii Film Office
250 S. Hotel Street, Suite 510-B
Honolulu, Hawaii, 96804 USA
Phone: 808-586-2570 | Fax: 808-586-2572 |
Email ddawson@dbedt.hawaii.gov

www.hawaiifilmoffice.com
Staff: Sharon Clark, Film Industry Development Specialist
Sandra Ichihara, Film Industry Development Specialist
Tammy Hasegawa, Film Studio Manager
Charlene B. Kwak, Secretary
Jackson Bauer, Temporary Assistant

Walea L. Constantinau
Film Commissioner
Honolulu Film Office/Island of Oahu
City & County of Honolulu, 530 S. King Street, Room 306
Honolulu, Hawaii, 96813 USA
Phone: 808-527-6108 | Fax: 808-527-6102 |
Email: info@filmhonolulu.com
www.filmhonolulu.com

Tiffani Lizama
Film Commissioner
Kauai Film Commission
4444 Rice Street, Suite 200
Lihue, Hawaii, 96766 USA
Phone: 808-241-6390 | Fax: 808-241-6399 |
Email: info@filmkauai.com

Benita Brazier
Film Commissioner
Maui County Film Office
200 S. High Street, 6th Floor
Wailuku, Maui, Hawaii, 96793 USA
Phone: 808-270-7415 | Fax: 808-270-7995 |
Email: info@filmmauai.com
www.filmmaui.com
Staff: Dafnee Montecer, Tasha Tavares

There are two different sets of tax incentives that may be applied to television and film production in Hawaii.

One is an investment tax credit (Act 221, Session Laws of Hawaii 2001), geared toward high technology that is applicable to a television and film production company wanting to establish a presence in Hawaii. The other, the Motion Picture and Film Production Income Tax Credit, is a refundable tax credit for television and film production taking place in Hawaii.Ý
The State of Hawaii Department of Taxation website provides more information on these tax credits:Ýhttp://www.state.hi.us/tax/tax.html.
Text of the law: http://www.capitol.hawaii.gov/session2001/bills/HB175_cd1_.htm
The Department of Taxation website also gives specific information on Act 221, and what is necessary to qualify for the investment tax credit:Ýhttp://www.state.hi.us/tax/hi_tech.html

1) HAWAII TAX INCENTIVES FOR HIGH TECHNOLOGY BUSINESS INVESTMENT

ACT 221, Session Laws of Hawaii 2001

Act 221 was adopted by the Hawaii State Legislature in 2001 as a means to encourage investment in high technology business.Ý There are two sections of Act 221 that apply to the film and television industry:

Section 235-110.9, Hawaii Revised Statutes (HRS), provides a 100% investment income tax credit (over a five-year period) to investors in performing arts products.Ý

Section 235-7.3, HRS, states that royalties derived from performing arts products are excluded from income and not subject to state income tax.

Section 235-110.9, HRS, High technology business investment tax credit.

What is the tax credit?
ï This is a business investment tax credit designed to stimulate greater investment in Hawaii's high technology industry.
ï The credit is non-refundable.
ï The credit is available to the Hawaii taxpayer for each investment in a "qualified high technology business" (QHTB).
ï The credit is deductible from the Hawaii taxpayer's net income liability.
ï The maximum amount of an investment qualifying for the tax credit is $2 million annually, per investor, per QHTB.

How much is the tax credit?
ï The tax credit is applied in percentages, spread out over five years, totaling 100% at the end of the five-year period.
? Ý35%ÝÝÝ The year in which the investment was made.
? Ý25%ÝÝÝ First year after which the investment was made.
? Ý20%ÝÝÝ Second year after which the investment was made.
? Ý10%ÝÝÝ Third year after which the investment was made.
? Ý10%ÝÝÝ Fourth year after which the investment was made.
? Ý100%ÝÝTotal of five years.Ý
ï The credit applies to investments made in taxable years beginning after December 31, 2000 and before January 1, 2006.

Definitions:

ìQualified high technology businessî (QHTB) is defined as:
ï A business employing or owning capital or property or maintaining an office in Hawaii, provided that:
ï More that 50% of the total business activities are qualified research and that the business conducts more than 75% of its qualified research in Hawaii, or,
ï More than 75% of its gross income is derived from qualified research and that this income is received from products sold from, manufactured in, or produced in Hawaii, and services performed in Hawaii.

For a business to be considered a QHTB, a ìComfort Rulingî must be obtained from the Hawaii State Department of Taxation.Ý (http://www.state.hi.us/tax/hi_tech.html)

ìQualified Researchî is defined as:
ï Development and design of computer softwareÝ
ï Biotechnology
ï Performing arts products
ï Sensor and optic technologies
ï Ocean sciences
ï Astronomy
ï Non-fossil fuel energy-related technology

ìPerforming arts productsî is defined as:
ï Audio files, video files, audio-video files, computer animation, and other entertainment products perceived by or through the operation of a computer; and
ï Commercial television and film products for sale or license, and reuse or residual fee payments from these products.

Section 235-7.3, HRS,Ý Royalties derived from patents, copyright, or trade secrets excluded from gross income.Ý Amounts received by an individual or qualified high technology business as royalties, copyright, and trade secrets, are excluded from gross income, adjusted gross income and taxable income.

With respect to performing arts products, this exclusion extends to:

ï The authors of performing arts products, or parts thereof, with or without regard to the application of the work for hire doctrine under United States copyright law.
ï The assignors, licensors, and licensees of any copyright rights in performing arts products, or any parts thereof.

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2) HAWAII PRODUCTION TAX CREDITS
Amount of the credits:
ï 4% of total production expenditures while filming in Hawaii. This includes purchases and payroll.
ï 7.25% of transient accommodations tax (hotel room tax) while filming in Hawaii.

A motion picture and television project will receive:

100% of the credits if the company adheres to all of the following:
ï There is a Hawaiian name or word in the title of the project.
ï The project utilizes Hawaiian scenery, culture or products on screen.
ï A feature film spends a minimum of $2 million or a television pilot/episode/series spends a minimum of $750,000.
ï Distribution covers a minimum of 66% of the national U.S. coverage, based on EDI or Nielsen.Ý Allowable substitutions include evidence of domestic/foreign distribution agreements for feature films, or a letter of intent from network for pickup consideration.

75% of the credits if the company adheres to all of the following:
ï A feature film project spends a minimum of $3 million or a television pilot/episode/series spends a minimum of $1 million.
ï 50% of the below-the-line positions are provided by Hawaii residents.
ï Distribution covers a minimum of 66% of the national U.S. coverage, based on EDI or Nielsen.Ý Allowable substitutions include evidence of domestic/foreign distribution agreements for feature films, or a letter of intent from network for pickup consideration.

Claiming the credits:
ï Must be claimed on a State income tax return filed within one year following the close of the taxable year that the production filmed in Hawaii.

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To obtain the refundable production tax credits, the Hawaii Film Office will send a letter to the Department of Taxation certifying that the production took place. The production must then file an Income Tax Return, and Form N-316 Motion Picture and Film Production Income Tax Credit with the Department of Taxation.Ý The forms can be found at:Ýhttp://www.state.hi.us/tax/2000/n30.pdf andÝhttp://www.state.hi.us/tax/2001/n316.pdf.

Please contact Donne Dawson, the state film commissioner, for more information on these tax credits.

Telephone: (808) 586-2567
Fax: (808) 586-2572
Email: ddawson@dbedt.hawaii.gov

From Hwd Reporter Special Report: ........."Hawaii currently offers a tax-incentive program designed specifically to attract productions.
The incentive program essentially breaks down into two categories -- the Refundable Production Tax Credit and the Investment Tax Credit under Act 221, with the RPTC more applicable to one-off productions and designed specifically to reward productions that use Hawaii locations to shoot material actually set in the state.
"As it stands now, that rebate is good for 4% of everything you spend in Hawaii -- from purchases to payroll and hotel room taxes," Dawson says.
Producers have up to a year after shooting to collect the rebate. However, in order to qualify for the full credit, productions have to shoot Hawaii as Hawaii. Productions that shoot in Hawaii but are set elsewhere can only receive 75% of the rebate.
This year, there was a strong attempt to pass new legislation that would have eliminated the restrictions placed on productions that shoot Hawaii for other locales and would have increased the rebate from 4% to as high as 15%.
"Unfortunately, the measure failed," Dawson says. "But now more than ever, I think our government leaders recognize that in order for us to grow in this industry, we are going to have to be a lot more competitive."
Dawson is working with the tax department to find relief in other ways. "They have given our office a certain amount of latitude regarding the question of qualifying for 100% of the credit," she says. "If Hawaii is being showcased in a certain way and the state is receiving onscreen credit as a location, there has been some flexibility allowed."
While production incentives and financial breaks are sure to sway some productions to the islands, Hawaii's main selling point remains its unique geographical features."...............READ MORE (INCLUDING AN ISLAND-BY-ISLAND "PRODUCTION GUIDE")

Island Hopping In Hawaii
As Close As Far Away Gets
by Virginia Comer

Production Update Magazine: 01/05 issue
Hawaiiís film credits date back to the early 1930s, when director Lois Weber brought a film crew to shoot White Heat. Today the islands continue to attract major film and TV productions. Major studio productions include: Steven Spielbergís 1993 hit, Jurassic Park; Wolfgang Petersenís, Outbreak, with Academy Award winners Cuba Gooding, Jr., Kevin Spacey and Dustin Hoffman; Dragonfly in 2001, starring Kevin Costner. ABCís popular TV pilot Lost was shot there, as well as Foxís, North Shore.

In recent years there has been a significant increase of locally produced TV programs and commercials. Thanks to improved economic incentives and the initiation of film programs in Hawaiian colleges, there are more benefits for producers looking to shoot in Hawaii. A pool of qualified personnel, from talent agents to post-production houses, along with a range of hotel accommodations, from budget to luxury, add to the inducement for filming on the Islands. The obvious lure is Hawaiiís scenery with its diversity of locations including mountain ridges, canyons, tropical jungles, rain forests, arid dunes, towering volcanoes and unending white sand beaches, which complete the offering as an ideal location for filming............Read more