KRS 154.61-030: Applications -- Tax incentive agreements -- Fee -- Approval -- Cost

report -- Review.

(1) An eligible company shall, prior to incurring any expenditure for which recovery

will be sought, file an application for tax incentives wit h the office. The application

shall include:

(a) The name and address of the applicant;

(b) Verification that the applicant is a Kentucky-based company;

(c) The preliminary production script or a detailed synopsis of the script;

(d) The locations where the filming or production will occur;

(e) The anticipated date on which filming or production shall begin in Kentucky;

(f) The anticipated date on which the applicant will complete incurring

expenditures in Kentucky;

(g) The total anticipated qualifying expenditures;

(h) The total anticipated qualifying payroll expenditures for resident and

nonresident above-the-line crew by county;

(i) The total anticipated qualifying payroll expenditures for resident and

nonresident below-the-line crew by county;

(j) The address of a Kentucky location at which records of the production will be

kept;

(k) An affirmation that if not for the incentive offered under this subchapter, the

eligible company would not film or produce the production in the

Commonwealth; and

(l) Any other information the office may require.

(2) The office shall notify the eligible company within thirty (30) days after receiving

the application that:

(a) The application is complete; or

(b) Additional information is required.

(3) Upon receipt of the application and any additional information submitted by the

office and cabinet, the council shall consider all submitted information and, if

appropriate, authorize the execution of a tax incentive agreement between the

council and the approved company, if the amount of anticipated tax credit from the

application would not make the total tax credit approved for the calendar year

exceed the annual tax credit cap under KRS 154.61-020(4).

(4) The tax incentive agreement shall include the following provisions:

(a) The duties and responsibilities of the parties;

(b) A detailed description of the motion picture or entertainment production for

which incentives are requested;

(c) The anticipated qualifying expenditures and qualifying payroll expenditures

for resident and nonresident above -the-line and below -the-line crews by

county;

(d) The minimum combined total of qualifying expenditures and qualifying

payroll expenditures necessary for the approved company to qualify for

incentives;

(e) That the approved company shall:

1. Begin filming or production in Kentucky within one hundred eighty

(180) days of approval by the council; and

2. Complete production in Kentucky within two (2) years of their

production start date;

(f) That the motion picture or entertainment produc tion shall not include obscene

materials and shall not negatively impact the economy or the tourism industry

of the Commonwealth;

(g) That the execution of the agreement is not a guarantee of tax incentives and

that actual receipt of the incentives shall b e contingent upon the approved

company meeting the requirements established by the tax incentive

agreement;

(h) That the approved company shall submit to the office and cabinet within one

hundred eighty (180) days of the completion of production in Kentuck y for

the motion picture or entertainment production:

1. A detailed cost report of the qualifying expenditures and qualifying

payroll expenditures;

2. Certified audit; and

3. The latest version of the production script at the time of cost report

submission;

(i) That the approved company shall provide the office and cabinet with

documentation that the approved company or the associated loan -out entity

has withheld income tax as required by KRS 141.310 or the individual income

tax rate imposed by KRS 141.020 on all qualified payroll expenditures for

which an incentive under this subchapter is sought;

(j) That, if the cabinet determines that the approved company has failed to

comply with any of its obligations under the tax incentive agreement:

1. The council m ay deny the incentives available to the approved

company;

2. Both the council and the Department of Revenue may pursue any

remedy provided under the tax incentive agreement;

3. The council may terminate the tax incentive agreement; and

4. Both the council and the Department of Revenue may pursue any other

remedy at law to which it may be entitled;

(k) That the cabinet and the Department of Revenue shall monitor the tax

incentive agreement;

(l) That the approved company shall provide to the cabinet and the Department

of Revenue all information necessary to monitor the tax incentive agreement;

(m) That the council may share information with the Department of Revenue and

the Interim Joint Committee on Appropriations and Revenue or any other

entity the cabinet determines is necessary for the purposes of monitoring and

enforcing the terms of the tax incentive agreement;

(n) That the motion picture or entertainment production shall contain an

acknowledgment that the motion picture or entertainment production was

produced or filmed in the Commonwealth of Kentucky;

(o) That the approved company shall include screen credits in its final production,

indicating the approved company received tax incentives from the

Commonwealth of Kentucky;

(p) Terms of default;

(q) The method and procedures by which the approved company shall request and

receive the incentive provided under KRS 141.383 and 154.61-020;

(r) That the approved company may be required to pay an administrative fee as

authorized under subsection (5) of this section;

(s) The approved company may be required to pay a fee of two thousand dollars

($2,000) for ex penses incurred as a result of preparation of the tax incentive

agreement; and

(t) Any other provisions deemed necessary or appropriate by the parties to the tax

incentive agreement.

(5) The council may require the approved company to pay an administrative fee, the

amount of which shall be established by administrative regulation promulgated in

accordance with KRS Chapter 13A. The administrative fee shall not exceed one -

half of one percent (0.5%) of the estimated amount of tax incentive sought or five

hundred dollars ($500), whichever is greater.

(6) Prior to commencement of activity as provided in a tax incentive agreement, the tax

incentive agreement shall be approved by the council. Following approval by the

council, the tax incentive agreement shall be s ubmitted to the Government Contract

Review Committee established by KRS 45A.705 for review, as provided in KRS

45A.695, 45A.705, and 45A.725.

(7) The council shall notify the Department of Revenue following approval of an

approved company. The notification shall include the name of the approved

company, the name of the motion picture or entertainment production, the estimated

amount of qualifying expenditures, the estimated date on which the approved

company will complete filming or production in Kentucky, and any other

information required by the department.

(8) Within one hundred eighty days (180) days of completion of production in

Kentucky for the motion picture or entertainment production, the approved

company shall submit to the council:

(a) A detailed cost report of:

1. Qualifying expenditures;

2. Qualifying payroll expenditures for resident and nonresident above -the-

line crew by county; and

3. Qualifying payroll expenditures for resident and nonresident below -the-

line crew by county;

(b) The latest version of the production script available at the time of cost report

submission; and

(c) The certified audit.

(9) (a) Cabinet staff shall review all information submitted for accuracy and shall

confirm that all relevant provisions of the tax incentive agree ment have been

met.

(b) Upon confirmation that all requirements of the tax incentive agreement have

been met, cabinet staff shall review the latest version of the production script

available at the time of cost report submission, and if they determine that the

motion picture or entertainment production does not:

1. Contain visual or implied scenes that are obscene; or

2. Negatively impact the economy or the tourism industry of the

Commonwealth;

the council shall forward the detailed cost report to the Depa rtment of

Revenue for calculation of the refundable credit.

(10) The Department of Revenue shall:

(a) Verify that the approved company withheld the proper amount of income tax

on qualifying payroll expenditures; and

(b) Notify the council of the total amount of refundable credit available on

qualifying expenditures and qualifying payroll expenditures.