Assembly Commerce and Economic Development Committee Statement to Assembly, No. 6070, Dated December 6, 2021

Summary

Statement of the Assembly Commerce and Economic Development Committee of the State of New Jersey, dated December 6, 2021, reporting Assembly Bill 6070 favorably. The bill changes the film and digital media content production tax credit program, raising the digital media credit to 35 percent of qualified expenses purchased through vendors in certain Southern New Jersey counties and 30 percent elsewhere in the State, and lifting the cumulative annual cap on digital media credits from $10 million to $30 million. It lets a New Jersey film-lease partner include up to $15 million of otherwise excluded compensation payments in qualified film production expenses, allows the New Jersey Economic Development Authority to approve excess credits against future fiscal years, and redefines a film-lease partner to include one leasing a portion of a production facility of at least 50,000 square feet.

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ASSEMBLY COMMERCE AND ECONOMIC DEVELOPMENT COMMITTEE

STATEMENT TO

ASSEMBLY,
No. 6070

STATE
OF NEW JERSEY

DATED: DECEMBER
6, 2021

The Assembly Commerce and Economic Development
Committee reports favorably Assembly Bill No. 6070.

This bill makes various changes to the film and
digital media content production tax credit program, including increasing the
amount of the digital media content production tax credit, allowing certain
compensation to be included within the computation of qualified film production
expenses, and revising the definition of “New Jersey film-lease partner.”

Under the film and digital media content production
tax credit program, the State awards tax credits to eligible taxpayers equal
to: (1) 30 percent of the qualified film production expenses incurred for use
within certain parts of Northern New Jersey, or 35 percent of the qualified
film production expenses incurred for use within all other parts of the State;
and (2) 25 percent of the qualified digital media content production expenses
purchased through vendors located in certain counties in Southern New Jersey,
or 20 percent of all other qualified digital media content production expenses
purchased within the State.

Under the bill, the amount of the digital media content
production portion of the tax credit program would be increased. Specifically,
the bill increases the digital media content production tax credit to 35
percent of the qualified digital media content production expenses purchased
through vendors located in certain counties in Southern New Jersey, or 30
percent of all other qualified digital media content production expenses
purchased within the State. In addition, the bill increases the cumulative
annual limitation on digital media content production tax credits from $10
million to $30 million.

The bill also modifies the definition of “qualified
film production expenses” to include amounts paid by New Jersey film-lease
partners for certain employees. Except for certain allowances for New Jersey
studio partners, current law generally prohibits qualified film production
expenses from including any payments in excess of $500,000 for: (1) a highly
compensated individual for costs for a story, script, or scenario used in the
production of a film; and (2) the wages or salaries or other compensation for
writers, directors, including music directors, producers, and performers, other
than background actors with no scripted lines. However, this bill would
instead allow a New Jersey film-lease partner to include up to $15 million of
these payments, in excess of current allowances, in the computation of
qualified film production expenses.

The bill also provides that when the New Jersey
Economic Development Authority receives applications for more tax credits than
are available in any given fiscal year, then the authority may approve
applications for excess tax credits during the year in which such applications
were submitted, provided that the amount of excess credits would be subtracted
from the amounts otherwise available in the next succeeding fiscal years.
However, a taxpayer may not claim the excess tax credits or tax credit transfer
certificates until the first day of the fiscal year from which the credits were
made available.

Additionally, the bill revises the definition of “New
Jersey film-lease partner.” Under current law, the term includes taxpayers who
commit to lease or acquire a New Jersey production facility, with an aggregate
square footage of at least 50,000 square feet, for a period of five or more
years, and who commit to spending an annual average of $50 million in qualified
film production expenses over a designated period of five to 10 years. The
bill revises this definition to allow for a New Jersey film-lease partner to
lease or acquire a portion of a New Jersey production facility, provided that
the leased or acquired portion has an aggregate square footage of at least
50,000 square feet and otherwise meets the requirements of existing law.

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