Form Tir 07-15: An Act Providing Incentives To The Motion Picture Industry (Page 5 of 7) in pdf

Any holder of the credits, including a motion picture production company, transferee, buyer or

assignee, that wants to make a sale, transfer or assignment of the credits (the “transferor”) shall

obtain a certificate to transfer, sell or assign the credits before making a transfer to another taxpayer.

[13]

The transferor must submit to the Commissioner a statement in the form prescribed by the

Commissioner that details the amount of tax credit being sold, transferred or assigned and any other

information required by the Commissioner. Potential transferors that have an outstanding tax

obligation with the state in connection with any motion picture for any prior taxable year are not

eligible to transfer, sell or assign the credits. Transferees that have an outstanding tax liability are

subject to offsets prior to application of the credit against their current tax

liability.[14]

Transferees,

buyers or assignees may use and carry forward the credits to any of the five taxable years

subsequent to the first taxable year the credits were allowed to the initial transferor. Transferring,

selling or assigning a credit does not extend the five-year carryforward period.

(2) Refund

Effective January 1, 2007, the payroll and production expense credits are, at the election of the

taxpayer, refundable to the extent provided for in M.G.L. c. 62, § 6(l) and c. 63, § 32E. At the written

request of the taxpayer, the Commissioner will apply the credit against the taxpayer’s liability as

reported on its tax return, first reduced by any other available credits, and then refund 90 per cent of

the balance of the credits to the taxpayer. Consequently, a taxpayer that elects to receive a refund

must file a tax return for the tax period at issue in order to receive a refund of the

credit.[15]

If the

taxpayer does not elect to claim a refund, any credit amount that exceeds the taxpayer’s tax due for a

taxable year may be carried forward by the taxpayer to any of its five subsequent taxable years. A

taxpayer that elects to claim a refund of credit is not permitted to seek a partial refund and a partial

transfer or carryover of the

credit.[16]

(3) Effective Date Issues

As noted above, the new Act is effective for film credit applications that are received on or after

January 1, 2007. Consequently, expenses incurred in connection with a motion picture shot in

calendar year 2006 may qualify for a payroll or production expense credit under the new Act, so long

as no credit application was submitted for the motion picture prior to 2007. Expenses incurred in

connection with a motion picture shot in 2007 prior to the enactment of the new Act may also qualify

for a credit under the new Act. Further, in cases in which a credit application was submitted in 2007

for a motion picture that was shot in either 2006 or 2007, the taxpayer may amend such application to

take into consideration the more favorable terms of the new Act (including the lower total production

expense requirement of $50,000, the increased payroll credit of 25%, and the fact that there is no

longer any limitation on the amount of the credit). The following are examples of how the effective

date provisions of the new Act may potentially apply to a credit application.

Example 1: Company A filmed a production in 2006, but did not qualify for the film credit in 2006

because it had only $155,000 in qualified expenses. Under the new Act Company A may now file an

application for the film credit.

Example 2: Company B filmed a production in 2006 and filed a film credit application in April, 2007.

Company B may amend its previous film credit application to receive an additional film credit under

the new Act because it filed its application on or after January 1, 2007, the effective date for the new

Act. However, if Company B previously transferred the credit, it may not elect to claim a refund of

additional film credit to be received in connection with the production.

Example 3: Same facts as in example 2, except that Company B has not transferred the initial film

credit that it received from its April, 2007 application. Company B files an amended application and

receives additional film credit in 2007. Company B qualifies to elect a refund of the film credit on its

2007 tax return for 90 % of any film credit it receives for this production that is not used to reduce its

2007 Massachusetts tax. Note that Company B is not allowed to seek a partial refund and also to

partially transfer or carryover the film credit.

/s/ Henry Dormitzer

Form Tir 07-15: An Act Providing Incentives To The Motion Picture Industry Page 5

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