Form Tir 07-15: An Act Providing Incentives To The Motion Picture Industry (Page 3 of 7) in pdf

2007, the credit is equal to 25 per cent of the total qualifying aggregate payroll of the motion picture.

Only actual payments to employees may be used to determine the qualifying aggregate payroll, and

only when the payment constitutes Massachusetts source income to the recipient. See 830 CMR

62.5A.1(3). Qualifying aggregate payroll may also include fringe benefits to employees to the extent

such benefits constitute Massachusetts source income. For example, the qualified transportation

fringe benefit of employer-provided parking may be included in the qualifying aggregate payroll to the

extent it is included in Massachusetts source income to the recipient. See TIR 05-16. The qualifying

aggregate payroll shall not include any payments made to an employee when the total payments

made to, or to be made to, such employee in connection with the motion picture are equal to or

greater than $1,000,000 (“High Salary Employee”). M.G.L. c. 62, § 6(l)(2) and c. 63, § 38T(b). A High

Salary Employee’s entire salary, and not merely the amount of such salary that is equal to or greater

than $1,000,000, is excluded from the determination of the payroll credit.

A taxpayer must be registered for withholding of Massachusetts personal income tax and must

withhold from its payroll expenses in order for the payments to qualify as an aggregate payroll

expense.[8]

The Commissioner requires withholding whether or not the amounts paid are to

“employees” or constitute “wages” as defined in M.G.L. c. 62B, §

1.[9]

To qualify as part of the

aggregate payroll expense, the salary paid must be Massachusetts source income to the recipient and

further must not be a payment representing the recipient’s participation in profits from the motion

picture.

(3) Production Expense Credit

If a taxpayer is eligible for the payroll credit with respect to a particular motion picture, then it may also

be eligible to claim a credit equal to 25 per cent of its Massachusetts production expenses, not

including the qualifying aggregate payroll expenses included in the calculation of the taxpayer’s

payroll credit. To qualify for the 25 per cent production credit, the taxpayer’s production expenses in

Massachusetts must exceed 50 per cent of its total production expenses incurred in connection with

the motion picture or, alternatively, at least 50 per cent of the taxpayer’s total principal photography

days spent filming the motion picture must take place in Massachusetts. M.G.L. c. 62, § 6(l)(3) and c.

63, § 38T(c). “Principal photography days” within the meaning of the Film Statute is “the phase of

production during which the motion picture is actually filmed” and shall not include preproduction or

postproduction. Id.

A “Massachusetts production expense ” within the meaning of the Film Statute is a production

expense for a motion picture that is clearly and demonstrably incurred in the commonwealth. M.G.L.

c. 62, § 6(l)(1) and c. 63, § 38T(a). If tangible personal property is rented or purchased for direct use

in a qualified production in Massachusetts and it is not returned, disposed of or sold by the production

company as of the completion of its use in the film production, only a portion of the rental or

depreciation expense will be allowed.

In addition, if equipment is rented or purchased outside

[10]

Massachusetts and is clearly and demonstrably used in Massachusetts directly in the production of a

motion picture, then a portion of the equipment’s rental or depreciation expense is eligible for the

credit. See also DD 07-1. For example, if equipment or other tangible personal property is rented at a

cost of $1,500 and 60% of the property’s use by the lessee was clearly and demonstrably incurred in

Massachusetts directly in the production of a motion picture, the qualifying portion of the rental cost for

purposes of the production expense credit would equal $900. A “production expense ” within the

meaning of the Film Statute means preproduction, production and postproduction expenditures

directly incurred in the production of a motion picture.

Id.[11]

The entire salary paid to a High Salary Employee that is equal to or greater than $1,000,000 may be

used in calculating the production expense credit including the portion of such salary that is less than

$1,000,000 (provided that the entire salary is excluded from the payroll credit, for which it does not

qualify). However, as discussed above, a taxpayer must be registered for withholding of

Massachusetts personal income tax and must actually withhold on the payments to a High Salary

Employee in order for these payments to constitute a qualifying production expense. See Fact Sheet

entitled “Information on Withholding for Film Subcontractors” located on the DOR website at

C. The Sales Tax Exemption

Form Tir 07-15: An Act Providing Incentives To The Motion Picture Industry Page 3

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