EDV-07-15-00001-E Empire State Music and Theatrical Production Tax Credit Program

2/18/15 N.Y. St. Reg. EDV-07-15-00001-E

NEW YORK STATE REGISTER

VOLUME XXXVII, ISSUE 7

February 18, 2015

RULE MAKING ACTIVITIES

DEPARTMENT OF ECONOMIC DEVELOPMENT

EMERGENCY RULE MAKING

 

I.D No. EDV-07-15-00001-E

Filing No. 87

Filing Date. Jan. 28, 2015

Effective Date. Jan. 28, 2015

Empire State Music and Theatrical Production Tax Credit Program

PURSUANT TO THE PROVISIONS OF THE State Administrative Procedure Act, NOTICE is hereby given of the following action:

Action taken:

Addition of Part 240 to Title 5 NYCRR.

Statutory authority:

L. 2014, ch. 59

Finding of necessity for emergency rule:

Preservation of general welfare.

Specific reasons underlying the finding of necessity:

Chapter 59 of the Laws of 2014 created the Empire State Musical and Theatrical Production Tax Credit Program. The Program provides for the allocation of tax credits to qualified musical and theatrical production companies that complete qualifying touring productions. These benefits are designed to encourage musical and theatrical productions to perform shows in Upstate New York theatrical facilities.

Chapter 59 of the Laws of 2014 authorized the New York State Department of Economic Development to adopt regulations establishing procedures for the allocation of credits under the Program on an emergency basis by October 31, 2014. Without regulatory action by the Department of Economic Development, procedures will not be in place to accept applications from musical and theatrical production companies desiring to participate in the Program.

Adoption of this rule will allow the Department of Economic Development to begin accepting applications from musical and theatrical production companies, and will assist in stimulating spending on musical and theatrical productions in areas of the State that would otherwise not benefit from such expenditures.

Subject:

Empire State Music and Theatrical Production Tax Credit Program.

Purpose:

Establish application procedures for the Empire State Musical and Theatrical Production Tax Credit Program.

Substance of emergency rule:

The Empire State Musical and Theatrical Production Tax Credit Program (the “Program”) provides Empire State Musical and Theatrical Production Tax Credits (“Credits”) to qualified musical and theatrical production companies that complete qualifying touring productions of eight or more shows in three or more localities.

1) The rule defines numerous important terms, including, but not limited to, “authorized applicant,” “qualified production expenditure,” and “qualified touring production.”

2) The rule indicates that only authorized applicants, qualified musical and theatrical production companies scheduled to begin production of qualified musical and theatrical productions after submitting an initial application to the New York State Department of Economic Development (the “Department”), may apply to participate in the Program.

3) The rule describes the application process for a musical and theatrical production company pursuing a Credit, including that an authorized applicant must submit an initial application prior to commencing a qualified touring production and submit a final application subsequent to completion of a qualified touring production.

4) The rule states that Credits shall be issued in the amount of twenty-five (25) percent and the sum of the qualified production expenditures and the transportation expenditures incurred by an applicant.

5) The rule provides that an application shall not be approved unless the Department determines that the application is complete, the applicant completed a qualified touring production, and the applicant did not knowingly submit false or misleading information to the Department.

6) The rule requires an applicant to retain records of any qualified musical and theatrical production costs used to calculate their potential or actual benefit(s) under the Program for a minimum of three years from the date the applicant claims a Credit.

7) The rule provides for an appeal process by which an applicant may appeal the disapproval of its final application by the Department, or the amount of a Credit granted by the Department, before an independent hearing officer.

8) The rule describes information sharing to take place between the Department and the New York State Department of Taxation and Finance relating to Credits applied for, allowed, or claimed under the Program, as well as information regarding taxpayers seeking Credits.

9) The rule describes the annual Program report to be submitted by the Department to the governor, the temporary president of the senate, and the speaker of the assembly. The annual report is to include information on the Credit-eligible man hours and total wages for such credit-eligible man hours for each project, the identify of applicants for Credits, and the amount of each Credit allocated to each taxpayer.

This notice is intended

to serve only as an emergency adoption, to be valid for 90 days or less. This rule expires April 27, 2015.

Text of rule and any required statements and analyses may be obtained from:

Thomas P Regan, NYS Department of Economic Development, 625 Broadway, Albany, NY 12245, [phone], email: [e-mail]

Regulatory Impact Statement

STATUTORY AUTHORITY:

Chapter 59 of the Laws of 2014 requires the Commissioner of the Department of Economic Development (the “Department”) to promulgate regulations establishing the application process for the Empire State Musical and Theatrical Production Tax Credit Program (the “Program”). These procedures include the process for applying for tax credits under the Program, standards for the assessment of applications, and other provisions deemed necessary and appropriate. This regulatory impact statement is submitted in conjunction with the submission of a permanent regulation.

LEGISLATIVE OBJECTIVES:

The proposed rule gives effect to the intention of the legislature in adopting the Empire State Musical and Theatrical Production Tax Credit Program to encourage the production of musical and theatrical shows in venues outside of New York City. The proposed rule furthers this objective by establishing the application process for Empire State Musical and Theatrical Production Tax Credits (“Credits”), and clarifying certain requirements as to which touring productions are qualified to receive Credits under the Program.

NEEDS AND BENEFITS:

The rulemaking is necessary in order to implement the statute contained in Section 24-A of Article 1 of the Tax Law, creating the Empire State Musical and Theatrical Production Tax Credit Program. The statute authorizing the Program directs the Commissioner of the Department of Economic Development to establish procedures for the implementation and execution of the program.

Upstate New York, in particular, is home to some of the premier regional venues in which to produce musical and theatrical productions. In order to induce musical and theatrical production companies to undertake production activities in these non-New York City venues, referred to in the statute as qualified production facilities, the Program will allow musical and theatrical production companies to apply for a Credit against their qualifying production expenditures. To become eligible for a Credit, musical and theatrical production companies must undertake the pre-tour production activities comprising the technical period for the qualified touring production in a qualified production facility. Provided that musical and theatrical production companies meet this qualification requirement, they will be eligible for a Credit equal to twenty-five (25) percent of their qualified production expenditures associated with the show. In addition to pre-tour production costs, qualified production expenditures also include expenditures associated with performing a show before a paying audience in a qualified production facility if the show in question has not been previously performed in any venue other than a qualified production facility.

This incentive will allow musical and theatrical venues located outside of New York City to more fully actualize their potential for attracting musical and theatrical productions, as well as provide these venues with competitive balance against competing venues located in northeastern states that offer tax incentives to musical and theatrical productions which conduct technical rehearsals and other pre-tour production activities in their venues.

The Program is premised upon using touring musical and theatrical productions, and the expenditures associated with these productions, as tools for economic development. Program incentives will be used to increase the number of musical and theatrical productions that launch tours from venues outside of New York City. This goal will not be achieved without first establishing procedures for the acceptance and evaluation of applications for Program Credits.

The proposed rule establishes the necessary application procedures for the Department to receive applications by musical and theatrical production companies for Program Credits. These rules allow for the prompt and efficient commencement of the Empire State Musical and Theatrical Production Tax Credit Program, clarify which touring productions will be eligible for Program Credits, and promote the general welfare of New Yorkers.

COSTS:

I. Costs to private regulated parties (the business applicants): None. The proposed rule will not impose any additional costs to eligible business applicants.

II. Costs to the regulating agency for the implementation and continued administration of the rule: None.

III. Costs to the State government: None.

IV. Costs to local governments: None. The proposed rule will not impose any costs on local governments.

LOCAL GOVERNMENT MANDATES:

None. There are no local government mandates associated with the Program.

PAPERWORK:

The rule establishes qualification rules and application procedures for the Program. The rule entails certain paperwork burdens including materials to be submitted as part of applications for Program Credits, additional documents the Commissioner may request from applicants as part of his evaluation of applications, and certain records that must be maintained by program participants for auditing purposes.

DUPLICATION:

The proposed rule will create a new section of the existing regulations of the Commissioner of the Department of Economic Development, Part 240 of 5 NYCRR. Accordingly, there is no risk of duplication in the adoption of the proposed rule.

ALTERNATIVES:

No alternatives were considered with regard to creating a new rule in response to the statutory requirement. The rule interprets the Empire State Musical and Theatrical Production Tax Credit Program requirements as to the application process for tax credits under the Program. This action is necessary in order to clarify how qualifying musical and theatrical production companies may obtain tax benefits under the Program, and is required by the legislation establishing the Program.

FEDERAL STANDARDS:

There are no federal standards applicable to the Program; it is purely a state program that offers tax benefits to musical and theatrical production companies with qualifying expenses. Therefore, the proposed rule does not exceed any federal standard.

COMPLIANCE SCHEDULE:

The affected agency (Department of Economic Development) and any musical and theatrical production company applicants will be able to achieve compliance with the regulation as soon as it is implemented.

Regulatory Flexibility Analysis

Participation in the Empire State Musical and Theatrical Production Tax Credit Program is entirely at the discretion of qualifying musical and theatrical production companies. Neither statute nor the proposed rule impose any obligation on any local government or business entity to participate in the program. The proposed rule does not impose any adverse economic impact or compliance requirements on small businesses or local governments. In fact, the proposed rule may have a positive economic impact on small businesses. Small businesses may enjoy increased business if the Empire State Musical and Theatrical Production Tax Credit Program induces applicant musical and theatrical production companies to procure products or services from small businesses in Upstate New York regions that the musical and theatrical production companies would not have included as destinations in their touring productions without the tax credit benefits.

Because it is evident from the nature of the proposed rule that it will have either no impact or a positive impact on small businesses and local government, no further affirmative steps were needed to ascertain that fact and none were taken. Accordingly, a regulatory flexibility analysis for small business and local government is not required and one has not been prepared.

Rural Area Flexibility Analysis

The Empire State Musical and Theatrical Production Tax Credit Program provides tax benefits to participating musical and theatrical production companies, and does not distinguish between venues located in rural and urban areas of Upstate New York. Furthermore, the rule does not impose reporting, recordkeeping or other compliance requirements on public or private entities in rural areas, except for any rural musical and theatrical production companies which voluntarily choose to participate in the Program. Therefore, the rule will not have a substantial adverse economic impact on rural areas. Accordingly, a rural flexibility analysis is not required and one has not been prepared.

Job Impact Statement

The proposed rule establishes application procedures for musical and theatrical production companies to apply for benefits under the Empire State Musical and Theatrical Production Tax Credit Program, as well as standards for the assessment of applications by the Commissioner of the Department of Economic Development. The Empire State Musical and Theatrical Production Tax Credit Program provides tax incentives to musical and theatrical production companies that incur qualifying expenditures in association with qualified touring productions. The program aims to attract musical and theatrical productions to Upstate New York musical and theatrical venues so as to stimulate economic activity and create jobs. The rule will not have a substantial adverse impact on jobs and employment opportunities; rather, the program is intended to create jobs. Because it is evident from the nature of the rulemaking that it will have either no impact or a positive impact on job and employment opportunities, no further affirmative steps were needed to ascertain that fact and none were taken. Accordingly, a job impact statement is not required and one has not been prepared.