HF4668

Purpose

This bill changes Minnesota’s film production credit to make it easier to attract movie and TV productions to the state, encourage spending in Minnesota, and increase local employment in the industry. It updates how the credit is calculated, who is eligible, how projects are approved, and how the program is reviewed and reported.

Key terms and definitions

• Allocation certificate letter: a certificate from the commissioner confirming a project’s eligibility and showing the anticipated credit amount and credited year.
• Credit certificate: a certificate issued after cost verification confirming the final credit amount.
• Eligible production costs: qualified expenses in Minnesota directly tied to producing a film or TV project.
• Below-the-line crew: technical roles such as camera operators, sound techs, grips, electricians, and other specialized crew.
• Director: the director of Explore Minnesota (the state tourism/film office).
• Key creative role: roles like project director/producer/showrunner/editor/actor/writer/DP/production designer/cinematographer, or an equivalent project role.
• Minnesota script or screenplay production: a script created by a Minnesota resident that is produced into a film.
• Project: a film or TV production (including programming) that promotes Minnesota and that spends a minimum amount on eligible production costs and aims to employ Minnesota residents.
• Promotion of Minnesota: visible Minnesota branding in the project, such as a logo shown in end credits approved by the director.
• Eligible project threshold: the project must meet expenditure minimums and, as practicable, employ Minnesota residents; television commercials have special rules.

What qualifies as a project and eligible costs

• Projects must involve eligible production costs spent in Minnesota and, to the extent practicable, employ Minnesota residents.
• Thresholds:
  • For standard films/TV projects: at least $1,000,000 (or $400,000 in some cases) in eligible production costs within any 12-month period after costs are paid in Minnesota. The project should also aim to employ Minnesota residents.
  • Television commercials are exempt from the expenditure requirement described above.
  • A project also includes a television commercial or a Minnesota script/screenplay production with at least $150,000 in eligible costs in any 12-month period, again with a goal of employing Minnesota residents.
• Promotion of Minnesota: projects must include a visible display of a Minnesota-promoting logo in end credits for the life of the project.

How the credit works

• Base credit: eligible production costs can receive a credit up to a certain portion (the bill uses a range; the base credit is described as up to a significant percentage of eligible costs, with a tiered structure that can go higher for certain conditions).
• Additional 5%: a further 5% credit may be added to reach up to a total of 45% if the project meets at least one of the following:
  • Employs a Minnesota resident in a key creative role.
  • Is a film produced outside of the seven-county metro area.
  • Hires a majority of Minnesota residents in below-the-line crew positions.
• Credit cap and timing:
  • Each year, the director can allocate up to a capped pool (the statute specifies an annual limit of $24,950,000 for credits).
  • If not all credits are allocated in a year, the remaining amount can be allocated over the next four taxable years.
  • No new credits may be awarded for taxable years beginning after December 31, 2030, and any unallocated amounts cancel after that date.
  • Credits are allocated on a first-come, first-served basis.
• Cost verification and final credit:
  • After a project finishes, the taxpayer must submit a cost verification report from a Minnesota-licensed independent CPA using GAAP standards.
  • The director reviews the report and other required documents and then issues a final credit certificate for the actual eligible costs.
  • The final credit cannot exceed the amount stated on the allocation certificate; if the final amount is lower, the difference returns to the pool of credits available for allocation.
  • To claim the credit on state tax returns, the taxpayer must attach a copy of the credit certificate.

Administration and allocation details

• Applications and allocations: taxpayers apply for the credit using forms prescribed by the director (in consultation with the commissioner of revenue). The director issues allocation certificates indicating eligibility, the anticipated credit amount (up to the set percentages), and the tax year when the credit is allocated.
• Annual cap and carryover: no more than the annual cap can be allocated each year; any unused portion carries forward for up to four years; credits cannot be allocated after 2030.
• Allocation order: credits are awarded on a first-come, first-served basis.

Reporting and transparency

• By January 15, 2025, the commissioner of revenue, in consultation with the director, must provide a detailed report to legislative chairs and ranking minority members overseeing economic development and taxes.
• The report must include:
  • Number of credit certifications issued, applications submitted, allocation certificates issued, and final credit certificates issued.
  • Types of eligible projects.
  • The overall economic impact, including year-over-year changes in Minnesota jobs in the 512110 NAICS sector (Motion Picture and Video Production) and related tax data from 2019–2023.
  • The number of taxpayers assigned credits by tax type.
  • Taxes paid by businesses in the 512110 sector for periods after 2018 through 2023, and any other information necessary for administering the credit.

Significance and potential impacts

• This bill broadens and tightens the state’s film credit program with a higher potential credit (up to 45% under certain conditions) and a clear mechanism to allocate, verify, and monitor credits.
• It emphasizes Minnesota employment in key creative roles and crew, and encourages productions outside the metro area.
• It creates formal cost verification requirements and annual public reporting to track economic impact and program usage.
• It places a time limit on the program (no new credits after 2030) and ties credit availability to a capped annual pool.

Relevant Terms allocation certificate letter; credit certificate; eligible production costs; below-the-line crew; key creative role; Minnesota script or screenplay; project; promotion of Minnesota; Explore Minnesota; GAAP; independent certified public accountant; cost verification report; first-come, first-served; television commercial; seven-county metro area; NAICS code 512110; credits for Minnesota residents; outside Minnesota metro area; annual credit cap; carryover; tax credits; director (Explore Minnesota).