INCENTIVES & TAX CREDITS
IMPORTANT NOTICE (posted September 16, 2019)
The Department of Taxation will hold a public hearing on Monday, October 14, 2019, at the Princess Ruth Keelikolani Building, Room 310, 830 Punchbowl St., Honolulu, HI 96813, to allow the public to comment on the proposed adoption of the following administrative rules:
- Proposed rules relating to the motion picture, digital media, and film production income tax credit
- Sample Allocation Based on Proposed Administrative Rules
- Draft Agreed Upon Procedures for Hawaii CPA Review
IMPORTANT NOTICE TO ALL TAX CREDIT APPLICANTS AND CLAIMANTS:
The Hawaii Department of Taxation has issued a new Tax Information Release.
Please review TIR 2019-01 carefully before registering for the tax credit.
Governor David Ige signed into law Act 143 which took effect January 1, 2019. ACT 143 extends the sunset date for the tax credit program to January 1, 2026 and institutes a $35 million overall spending ceiling per year. TIR 2019-01 provides detailed guidelines for administration of ACT 143.
UPDATE: As of July 9, 2019, Senate Bill 33, became law without Governor Ige’s signature. That measure increases the $35M spending ceiling to $50M per year. This is a rolling credit which means that once we reach the aggregate $50M, filers can claim from the subsequent year.
20-25% MOTION PICTURE, DIGITAL MEDIA, & FILM PRODUCTION INCOME TAX CREDIT
This is a refundable tax credit based on a production company’s qualified Hawaii expenditures while producing a qualified film, television, commercial, or digital media project. The credit equals 20% of qualified production costs incurred on Oahu, and 25% on the neighbor islands (Big Island, Kauai, Lanai, Maui, Molokai).
- Register with the Hawaii Film Office/Department of Business, Economic Development & Tourism at least five business days PRIOR to the first Hawaii shoot date;
- Meet the minimum in-state spending requirement of at least $200,000;
- Make reasonable efforts to hire local talent and crew; and,
- Provide evidence of financial or in-kind contributions or educational or workforce development efforts toward the furtherance of the local film, television and digital media industries that is valued at 0.1% of the productions Hawaii Spend or $1000, whichever is greater.
- Provide evidence when making any claim for products or services acquired or rendered outside of Hawaii that reasonable efforts were unsuccessful to secure and use comparable products or services within the state.
- All productions that file for the tax credit must secure a third-party review from qualified CPA firm using agreed-upon procedures prescribed by DBEDT.
- Provide evidence when making any claim for products or services acquired or rendered outside of Hawaii that reasonable efforts were unsuccessful to secure and use comparable productions or services within the state.
The refundable production tax credit also includes the following:
- A $50 million annual spending ceiling, but ACT 143 also provides that once the $50 million aggregate figure is reached that productions may claim from the subsequent year.
- Per production credit cap of $15 million;
- Qualifies certain productions with Internet-only distribution;
- Allows State and County location and facilities fees as a qualified expenditure;
- Costs incurred for the use of state and county facilities and locations, although not subject to GET, will qualify for the incentive.
- Government imposed fines, penalties, or interest incurred within Hawaii by the production do not qualify.
- ALL banking fees, USPS postage expenditures do not qualify.
- Insurance premiums from out-of-state insurance companies, fees to obtain a third party review from out-of-state CPA firms (unless registered to do business in the State of Hawaii) do not qualify.
Overview & Instructions:
- UPDATED Overview & Instructions
- NEW – Tax Information Release (TIR) 2019–01
- NEW – Table of Contents – (TIR) 2019-01
- Tax Information (TIR) No. 2018-04
- Table of contents for (TIR) 2018-04
- NEW – Tax Advisory 2019 (please use this updated tax advisory for all non-resident employee contractor, vendor, loan out company, or other agent providing goods or performing services in Hawaii.
- NEW Act 143 (effective January 1, 2019) Hawaii Revised Statutes §235-17
- Act 88/89 (effective through December 31, 2018) Hawaii Revised Statutes §235-17 (Effective for productions occurring in 2018).
- PRODUCTION REGISTRATION FORM (PRF) 20-25% TAX CREDIT (fillable .pdf) – Due at least one week prior to first Hawaii shoot date.
- SPLIT YEAR – PRODUCTION REGISTRATION FORM (PRF) 20-25% TAX CREDIT (fillable .pdf) – Due at least one week prior to first Hawaii shoot date.
- HAWAII PRODUCTION REPORT (HPR) – FILLABLE (fillable .pdf) – Due no later than 90 days following the end of each taxable year in which qualified production costs were expended.
Required Attachments for the Hawaii Production Report:
- Detailed final Hawaii Expenditure Report.
- Vendor list with total costs associated with each vendor or individual with current general excise tax (GET) license numbers for ALL vendors.
- Verification of Education/Workforce Development Contribution.
- Third-party verification review of your HPR and claim for this tax credit by a qualified tax professional or CPA using agreed upon procedures prescribed by DBEDT. ACT 143 stipulates that ALL tax credit claimants must secure this independent third-party review regardless of production size.
- Crew list with names and contact info.
- End Credit Verification ( Screen Grab ) if available.
Budget/Expenditure Report Templates:
These templates provide an example of the level of detail required on the Hawaii expenditure reports you need to submit with your Hawaii Production Report. All cost items, other than petty cash, must be associated with a specific vendor or individual’s name and include a General Excise Tax (GET) License number. Total costs paid to each vendor or individual must be included in required Vendor List form. Please use the Vendor List Template below. A separate Vendor List must be provided for all out-of-state vendors that provided imported goods or services (for which Use Tax must be paid). You may use your own budget/expenditure report formats as long as the detail provided is equivalent to the detail found in these templates.
Please note the multiple worksheets on different tabs in each document.
ROYALTIES TAX EXEMPTION
Royalties derived from performing arts products are excluded from a Hawaii taxpayer’s income and not subject to state income tax.
Overview & Instructions:
For further information, contact: