Home » 2015 Issues » June 10, 2015 » EDV-46-14-00001-ERP Empire State Musical and Theatrical Production Tax Credit Program
EDV-46-14-00001-ERP Empire State Musical and Theatrical Production Tax Credit Program
6/10/15 N.Y. St. Reg. EDV-46-14-00001-ERP
NEW YORK STATE REGISTER
VOLUME XXXVII, ISSUE 23
June 10, 2015
RULE MAKING ACTIVITIES
DEPARTMENT OF ECONOMIC DEVELOPMENT
NOTICE OF EMERGENCY ADOPTION AND REVISED RULE MAKING
NO HEARING(S) SCHEDULED
I.D No. EDV-46-14-00001-ERP
Filing No. 410
Filing Date. May. 21, 2015
Effective Date. May. 21, 2015
Empire State Musical 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 production companies preparing to undertake touring productions to make expenditures associated with producing these tours in Upstate New York theatrical facilities, and to secure the economic benefits associated with these production expenditures for Upstate New York communities.
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. 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 Musical and Theatrical Production Tax Credit Program.
Purpose:
Establish application procedures for the Empire State Musical and Theatrical Production Tax Credit Program.
Substance of emergency/revised 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,” “certificate of conditional eligibility,” “qualified production expenditure,” “qualified touring production,” “show,” and “technical period.”
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 the technical period for a qualified musical and theatrical 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 a final application shall not be approved unless the Department determines that the final 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 identity of applicants for Credits, and the amount of each Credit allocated to each taxpayer.
This notice is intended
to serve as both a notice of emergency adoption and a notice of revised rule making. The notice of proposed rule making was published in the State Register on November 19, 2014, I.D. No. EDV-46-14-00001-EP. The emergency rule will expire August 18, 2015.
Emergency rule compared with proposed rule:
Substantive revisions were made in section 240.2(m).
Text of rule and any required statements and analyses may be obtained from:
Thomas Regan, New York State Department of Economic Development, 625 Broadway, 8th Floor, Albany, NY 12207, (518) 292-5123, email: Thomas.Regan@esd.ny.gov
Data, views or arguments may be submitted to:
Same as above.
Public comment will be received until:
30 days after publication of this notice.
Revised Regulatory Impact Statement
Changes made to the last published rule do not necessitate revision to the previously published Regulatory Impact Statement. The changes made represent clarification of issues that do not impact the regulatory impact statement.
Revised Regulatory Flexibility Analysis
Changes made to the last published rule do not necessitate revision to the previously published Regulatory Flexibility Analysis. The changes made represent clarification of issues that do not impact the statement.
Revised Rural Area Flexibility Analysis
Changes made to the last published rule do not necessitate revision to the previously published Rural Area Flexibility Analysis. The changes made represent clarification of issues that do not impact the statement.
Revised Job Impact Statement
Changes made to the last published rule do not necessitate revision to the previously published Job Impact Statement. The changes made represent clarification of issues that do not impact the statement.
Assessment of Public Comment
The New York State Department of Economic Development received two sets of comments on its draft music and theatrical tax credit regulations.
The following is a summary of the questions/comments made on these regulations and the Department’s response. Where the regulations have been amended, the Department so indicates.
Comments:
1. Replace the term “show” with the term “performance” throughout the text.
The term “show” has been defined in the regulations to mean “a live performance of a dramatic musical or theatrical presentation.”
2. Please clarify whether “completion of a qualified touring production” means completion of the entire tour or completion of eight shows in three localities? Please confirm that localities are any locality within North America.
The Department notes that completion of a qualified touring production means the completion of at least eight shows in three or more localities and that such localities do not necessarily have to be within New York State. Clarification to the regulation itself was not necessary.
3. Please clarify when discounting for unused assets is contemplated? Is this aimed at depreciation? Concern that a set may not be destroyed for a decade which should be considered when calculating an allowance expense for the purposes of the credit. Also, the regulations should contain a formula for standard depreciation in this section.
As indicated in the response, there could be assets that last long after a tour has been completed and others that have much shorter useful lives. The Department has no experience with “retained assets” in this industry and is not well positioned to establish a strict depreciation formula in regulations with such little information as a basis. With time and experience, a more formal depreciation schedule may evolve that makes sense to promulgate via regulations but not at this time.
An applicant will be asked to identify any such assets as part of the preliminary application and the conditional certificate of eligibility will reflect any decisions the Department makes about discounting such assets.
4. We understand that expenditures associated with a post-tech performance will be eligible for the credit if such performance takes place in a qualified production facility. Is that correct?
Yes.
5. Please expand upon the extent of the exclusions in the regulation, specifically the exclusions for ”compensation for services performed at a location other than a qualified production facility” and “expenditures for the technical period of a musical and theatrical production incurred at a location other than a qualified production facility”? These exclusions can render the credit worthless because set building and rehearsals are typically done outside of a qualified production facility. Advertising, marketing and publicity expenses should be eligible for the credit as well.
The regulations have been modified, and any costs for services incurred that are directly and predominantly for the technical period, or the performance of a show in a qualified production facility, will be considered qualified production costs. Advertising, marketing and publicity expenses remain non-qualified expenses based upon the Department’s determination that including such costs as qualified production costs would not further the purpose of the program to induce qualified production companies to incur production costs in New York regions outside of New York City.
6. Amend the definition of authorized applicant to state it is a music and theatrical production company scheduled to begin its technical rehearsal, not begin its production as a matter of clarification.
The regulations have been updated to reflect this suggested change.
7. Broaden the language of section 240.2(l)(ii) to include other compensation-based and related payments, including payroll taxes and workers compensation.
The regulations have been amended to include payroll taxes.
8. Clarify in section 240(m)(ii) what the phrase “for which receipts attributable to ticket sales constitute 75% or more of the gross receipts of the facility means. Commentator requests that any private fundraising or charitable contributions subsidizing these venues, as well as income derived from government grants, be excluded from amounts against which the 75% threshold is applied. Commentator also requests that the definition of facility be limited to the auditorium itself, as opposed to a larger facility of which the auditorium is a part thereof.
Changes have not been made to the regulation to reflect this comment because it is not consistent with the intent of the program.
9. Under section 240.2(p) “cast and crew” should be expanded to include members of the creative, production and administrative team, including but not limited to authors, music supervisors, technical directors and company managers.
Transportation costs will be covered for any cast and crew working at a qualified facility as part of the technical period.
10. Please clarify the timing of the final application process. Should a final application be filed after tech and after the first three venues of 8 performances each or at some other point?
The final application should be submitted upon completion of a qualified touring production.
11. Under the application process a pre-certification amount of the credit or an estimated credit based on the initial application should be provided the applicant (like in other tax credit programs).
The regulations have been amended to allow for a conditional certificate of eligibility.
