1Amending the act of March 4, 1971 (P.L.6, No.2), entitled "An
2act relating to tax reform and State taxation by codifying
3and enumerating certain subjects of taxation and imposing
4taxes thereon; providing procedures for the payment,
5collection, administration and enforcement thereof; providing
6for tax credits in certain cases; conferring powers and
7imposing duties upon the Department of Revenue, certain
8employers, fiduciaries, individuals, persons, corporations
9and other entities; prescribing crimes, offenses and
10penalties," in film production tax credit, further providing
11for definitions, for credit for qualified film production
12expenses and for limitations.

13The General Assembly of the Commonwealth of Pennsylvania
14hereby enacts as follows:

15Section 1. Sections 1702-D and 1703-D of the act of March 4,
161971 (P.L.6, No.2), known as the Tax Reform Code of 1971,
17amended or added July 25, 2007 (P.L.373, No.55) and July 2, 2012
18(P.L.751, No.85), are amended to read:

19Section 1702-D. Definitions.

20The following words and phrases when used in this article
21shall have the meanings given to them in this section unless the

1context clearly indicates otherwise:

2"Department." The Department of Community and Economic
3Development of the Commonwealth.

4"Digital interactive media." As follows:

5(1) Interactive software that meets all of the
6following:

7(i) Is produced at a digital interactive media
8facility.

9(ii) Is produced for distribution on or accessed via
10electronic media, including software accessed via or
11downloaded from the Internet or a mobile network and
12software distributed on optical media or embedded in or
13downloadable to an electronic device, including a mobile
14phone, game system, computer, tablet and personal digital
15assistant or other handheld electronic device.

16(iii) Allows a user to interact with the interactive
17software via an electronic device, including a computer,
18a game system, a mobile phone, a personal digital
19assistant or other handheld electronic device.

20(iv) Includes an appreciable quantity of text,
21sound, fixed images, animated images or 3-D geometry.

22(2) The term includes digital interactive media
23equipment.

24(3) The term does not include media that is obscene.

25"Digital interactive media equipment." Equipment that is
26required for the development or functioning of a digital
27interactive media product or service. The term includes:

28(1) Integrated video and audio equipment, networking
29routers, switches, network cabling and any other computer-
30related hardware necessary to create or operate a digital

1interactive media product or platform.

2(2) Software, notwithstanding the method of delivery,
3transfer or access.

4(3) Computer code.

5(4) Image files, music files, audio files, video files,
6scripts and plays.

7(5) Concept mock-ups.

8(6) Software tools.

9(7) Testing procedures.

10(8) A component part of an item listed under paragraph
11(2), (3), (4), (5), (6) or (7) necessary and integral to
12create, develop or produce a digital interactive media
13product or service.

14"Digital interactive media facility." A facility where
15digital interactive media or digital interactive media equipment
16is developed and which:

17(1) is located in this Commonwealth;

18(2) employs at least ten full-time employees who reside
19in this Commonwealth; and

20(3) has a capital investment of at least $500,000.

21"Film." A feature film, a television film, a television talk
22or game show series, a television commercial or a television
23pilot or each episode of a television series which is intended
24as programming for a national audience. The term does not
25include a production featuring news, current events, weather and
26market reports, public programming, sports events, awards shows
27or other gala events, a production that solicits funds, a
28production containing obscene material or performances as
29defined in 18 Pa.C.S. § 5903(b) (relating to obscene and other
30sexual materials and performances) or a production primarily for

1private, political, industrial, corporate or institutional
2purposes.

3"Minimum stage filming requirements." Include:

4(1) Taxpayers with a Pennsylvania production expense of
5less than $30,000,000 per production must:

6(i) build at least one set at a qualified production
7facility;

8(ii) shoot for a minimum of ten days at a qualified
9production facility; and

10(iii) spend or incur a minimum of $1,500,000 in
11direct expenditures relating to the use or rental of
12tangible property or for performance of services provided
13by a qualified production facility.

14(2) Taxpayers with a Pennsylvania production expense of
15at least $30,000,000 per production must:

16(i) build at least two sets at a qualified
17production facility;

18(ii) shoot for a minimum of 15 days at a qualified
19production facility; and

20(iii) spend or incur a minimum of $5,000,000 in
21direct expenditures relating to the use or rental of
22tangible property at or for performance of services
23provided by a qualified production facility.

24"Pass-through entity." A partnership as defined in section
25301(n.0) or a Pennsylvania S corporation as defined in section
26301(n.1).

27"Pennsylvania postproduction expense." A qualified
28postproduction expense incurred at a qualified postproduction
29facility.

30"Pennsylvania production expense." Production expense

1incurred in this Commonwealth. The term includes:

2(1) Compensation paid to an individual on which the tax
3imposed by Article III will be paid or accrued.

4(2) Payment to a personal service corporation
5representing individual talent if the tax imposed by Article
6IV will be paid or accrued on the net income of the
7corporation for the taxable year.

8(3) Payment to a pass-through entity representing
9individual talent if the tax imposed by Article III will be
10paid or accrued by all of the partners, members or
11shareholders of the pass-through entity for the taxable year
12for which the tax imposed under Article III has been withheld 
13and remitted under the requirements of Article III by the 
14production company.

15(4) The cost of transportation incurred while
16transporting to or from a train station, bus depot or
17airport, located in this Commonwealth.

18(5) The cost of insurance coverage purchased through an
19insurance agent based in this Commonwealth.

20(6) The purchase of music or story rights if any of the
21following subparagraphs apply:

22(i) The purchase is from a resident of this
23Commonwealth.

24(ii) The purchase is from an entity subject to
25taxation in this Commonwealth, and the transaction is
26subject to taxation under Article III, IV or VI.

27(7) The cost of rental of facilities and equipment
28rented from or through a resident of this Commonwealth or an
29entity subject to taxation in this Commonwealth.

30(8) A qualified postproduction expense.

1(9) The development and manufacture of digital
2interactive media equipment.

3"Production expense." As follows:

4(1) The term includes all of the following:

5(i) Compensation paid to an individual employed in
6the production of the film.

7(ii) Payment to a personal service corporation
8representing individual talent.

9(iii) Payment to a pass-through entity representing
10individual talent.

11(iv) The costs of construction, operations, editing,
12photography, sound synchronization, lighting, wardrobe
13and accessories.

14(v) The cost of leasing vehicles.

15(vi) The cost of transportation to or from a train
16station, bus depot or airport.

17(vii) The cost of insurance coverage.

18(viii) The costs of food and lodging.

19(ix) The purchase of music or story rights.

20(x) The cost of rental of facilities and equipment.

21(xi) Development and production costs relating to
22digital interactive media.

23(2) The term does not include any of the following:

24(i) Deferred, leveraged or profit participation paid
25or to be paid to individuals employed in the production
26of the film or paid to entities representing an
27individual for services provided in the production of the
28film.

29(ii) Development cost.

30(iii) Expense incurred in marketing or advertising a

1film.

2(iv) Cost related to the sale or assignment of a
3film production tax credit under section 1705-D(e).

4"Qualified film production expense." All Pennsylvania
5production expenses if Pennsylvania production expenses comprise
6at least 60% of the film's total production expenses. The term
7shall not include more than $15,000,000 in the aggregate of
8compensation paid to individuals or payment made to entities
9representing an individual for services provided in the
10production of the film.

11"Qualified postproduction expense." A Pennsylvania
12postproduction expense of original content for a qualified film
13produced at a qualified postproduction facility if at least 60%
14of all postproduction work related to the film is conducted at a
15qualified postproduction facility.

16(1) The term includes traditional, emerging and new work
17flow techniques used in postproduction for any of the
18following:

19(i) Picture, sound and music editorial, rerecording
20and mixing.

21(ii) Visual effects.

22(iii) Graphic design.

23(iv) Original scoring.

24(v) Animation.

25(vi) Musical composition.

26(vii) Mastering.

27(viii) Dubbing.

28(2) The term does not include:

29(i) Editing previously produced content for a
30qualified film.

1(ii) News or current affairs.

2(iii) Talk shows.

3(iv) Instructional videos.

4(v) Media which is obscene.

5"Qualified postproduction facility." A permanent facility
6where Pennsylvania postproduction activities are conducted and
7to which all of the following apply:

8(1) The facility is located in this Commonwealth.

9(2) The facility is approved by the department.

10(3) The facility employs at least ten full-time
11employees who reside in this Commonwealth.

12(4) There is at least $500,000 of capital investment in
13the facility.

14"Qualified production facility." A film production facility
15located within this Commonwealth that contains at least one
16sound stage with a column-free, unobstructed floor space and
17meets either of the following criteria:

18(1) Has had a minimum of $10,000,000 invested in the
19film production facility in land or a structure purchased or
20ground-up, purpose-built new construction or renovation of
21existing improvement.

22(2) Meets at least three of the following criteria:

23(i) A sound stage having an industry standard noise
24criteria rating of 25 or better.

25(ii) A permanent grid with a minimum point load
26capacity of no less than 1,000 pounds at a minimum of 25
27points.

28(iii) Built-in power supply available at a minimum
29of 4,000 amps per sound stage without the need for
30supplemental generators.

1(iv) A height from sound stage floor to permanent
2grid of a minimum of 20 feet.

3(v) A sound stage with a sliding or roll-up access
4door with a minimum height of 14 feet.

5(vi) A built-in HVAC capacity during shoot days with
6a minimum of 50 tons of cooling capacity available per
7sound stage.

8(vii) Perimeter security that includes a 24-hour,
9seven-days-a-week security presence and use of access
10control identification badges.

11(viii) On-site lighting and grip department with an
12available inventory stored at the film production
13facility with a minimum cost of investment of $500,000.

14(ix) A sound stage with contiguous production
15offices with a minimum of 5,000 square feet per sound
16stage.

17"Qualified tax liability." The liability for taxes imposed 
18under Article III, IV, VI, VII or IX. The term shall not include 
19any tax withheld by an employer from an employee under Article 
20III.

21"Start date." [The] Either:

22(1) the first day of principal photography in this
23Commonwealth; or

24(2) an earlier date approved in writing by the Director 
25of the Pennsylvania Film Office.

26"Tax credit." The film production tax credit provided under
27this article.

28"Taxpayer." A film production company subject to tax under
29Article III, IV or VI. The term does not include contractors or
30subcontractors of a film production company.

1Section 1703-D. Credit for qualified film production expenses.

2(a) Application.--A taxpayer may apply to the department for
3a tax credit under this section. If a film qualifies for a 
4qualified film production expense, any postproduction work done 
5in this Commonwealth shall qualify for a 30% credit. The
6application shall be on the form required by the department.

7(b) Review and approval.--The department shall establish 
8application periods not to exceed 90 days each. All applications 
9received during the application period shall be reviewed and 
10evaluated by the department based on the following criteria:

11(1) The anticipated number of production days in a
12qualified production facility.

13(2) The anticipated number of Pennsylvania employees.

14(3) The number of preproduction days through
15postproduction days in Pennsylvania.

16(4) The anticipated number of days spent in Pennsylvania
17hotels.

18(5) The Pennsylvania production expenses in comparison
19to the production budget.

20(6) The use of studio resources.

21(7) If the application is for a qualified postproduction
22expense, the following criteria shall be reviewed and
23evaluated:

24(i) The facility where the postproduction occurred.

25(ii) The type of postproduction activity conducted.

26(iii) The percentage of the total postproduction
27activity conducted for a film in this Commonwealth.

28(8) Other criteria that the Director of the Pennsylvania
29Film Office deems appropriate to ensure maximum employment
30and benefit within this Commonwealth.

1Upon determining the taxpayer has incurred or will incur 
2qualified film production expenses or qualified postproduction 
3expenses, the department may approve the taxpayer for a tax 
4credit. Applications not approved may be reviewed and considered 
5in subsequent application periods. The department may approve a 
6taxpayer for a tax credit based on its evaluation of the 
7criteria under this subsection.

8(c) Contract.--If the department approves the taxpayer's
9application under subsection (b), the department and the
10taxpayer shall enter into a contract containing the following:

11(1) An itemized list of qualified production or 
12postproduction expenses incurred or to be incurred for the
13film.

14(2) An itemized list of Pennsylvania production or 
15postproduction expenses incurred or to be incurred for the
16film or digital interactive media.

17(3) With respect to a contract entered into prior to
18completion of production, a commitment by the taxpayer to
19incur the qualified film or digital interactive media
20production or qualified postproduction expenses as itemized.

21(4) The start date.

22(5) Any other information the department deems
23appropriate.

24(d) Certificate.--Upon execution of the contract required by
25subsection (c), the department shall award the taxpayer a film
26production tax credit and issue the taxpayer a film production
27tax credit certificate.

28Section 2. Section 1707-D of the act, amended July 2, 2012
29(P.L.751, No.85), is amended to read:

30Section 1707-D. Limitations.

1(a) [Cap.--In no case shall the aggregate amount of tax
2credits awarded in any fiscal year under this article exceed
3$60,000,000. The department may, in its discretion,] Amount.--
4The department may award in one fiscal year up to:

5(1) Thirty percent of the dollar amount of film
6production tax credits available to be awarded in the next
7succeeding fiscal year.

8(2) Twenty percent of the dollar amount of film
9production tax credits available to be awarded in the second
10successive fiscal year.

11(3) Ten percent of the dollar amount of film production
12tax credits available to be awarded in the third successive
13fiscal year.

14(a.1) Advance award of credits.--The advance award of film
15tax credits under subsection (a) shall:

16(1) count against the total dollar amount of credits
17that the department may award in that next succeeding fiscal
18year; and

19(2) reduce the dollar amount of credits that the
20department may award in that next succeeding fiscal year.

21The individual limitations on the awarding of film production
22tax credits apply to an advance award of film production tax
23credits under subsection (a) and to a combination of film
24production tax credits awarded against the current fiscal year
25cap and against the next succeeding fiscal year's cap.

26(b) Individual limitations.--The following shall apply:

27(1) Except as set forth in paragraph (1.1), the 
28aggregate amount of film production tax credits awarded by
29the department under section 1703-D(d) to a taxpayer for a
30film may not exceed 25% of the qualified film production

1expenses to be incurred.

2(1.1) In addition to the tax credit under paragraph (1),
3a taxpayer is eligible for a credit in the amount of 5% of
4the qualified film production expenses or qualified 
5postproduction expenses incurred by the taxpayer if the
6taxpayer:

7(i) films a feature film, television film or
8television series, which is intended as programming for a
9national audience; and

10(ii) Either:

11(A) films in a qualified production facility
12which meets the minimum stage filming requirements; 
13or

14(B) conducts at least $500,000 of postproduction 
15activities at a qualified postproduction facility.

16(2) A taxpayer that has received a grant under 12
17Pa.C.S. § 4106 (relating to approval) shall not be eligible
18for a film production tax credit under this act for the same
19film.

20(c) Qualified production facility.--To be considered a
21qualified production facility or qualified postproduction 
22facility under subsection (b)(1.1), the owner of a facility
23shall provide evidence to the department to verify the
24development or facility specifications and capital [improvement]
25investment costs incurred for the facility so that the threshold
26amounts set in the definition of "qualified production facility"
27or "qualified postproduction facility" under section 1702-D are
28satisfied, and upon verification, the facility shall be
29registered by the department officially as a qualified
30production facility or qualified postproduction facility.

1(d) Waiver.--The department may make a determination that
2the financial benefit to this Commonwealth resulting from the
3direct investment in or payments made to Pennsylvania facilities
4outweighs the benefit of maintaining the 60% requirement
5contained in the definition of "qualified film production
6expense." If such determination is made, the department may
7waive the requirement that 60% of a film's total production
8expenses be comprised of Pennsylvania production expenses for a
9feature film, television film or television series that is
10intended as programming for a national audience and is filmed in
11a qualified production facility if the taxpayer who has
12Pennsylvania production expenses of at least $30,000,000 per
13production meets the minimum stage filming requirements.

14Section 3. The amendment of sections 1702-D, 1703-D and
151707-D(a) of the act shall apply to taxable years beginning
16after December 31, 2012.

17Section 4. This act shall take effect immediately.