Purpose

This bill amends Minnesota law to modify the film production tax credit. It sets how credits are earned, who qualifies, and how the program is administered, with goals to promote Minnesota through film and television production, create or support Minnesota jobs, and provide state-level reporting on the program’s impact.

Key terms and definitions (for clarity)

• Allocation certificate letter: a certificate issued by the director approving a credit amount for a project.
• Application: the form taxpayers submit to request a credit.
• Below-the-line crew position: technical film crew roles (e.g., camera operators, sound technicians, grips, electricians) and other specialized crafts.
• Credit certificate: certificate issued after cost verification showing the final credit amount.
• Director (Explore Minnesota): the official who administers the credit program (in consultation with the Department of Revenue).
• Eligible production costs: Minnesota-incurred costs directly tied to producing a film project in Minnesota.
• Film / project: a film (including TV programming) that promotes Minnesota and for which the taxpayer spends eligible production costs in Minnesota; projects may include a Minnesota script or screenplay produced into a film.
• Key creative role: roles such as project director, producer, showrunner, editor, actor, writer, director of photography, production designer, cinematographer, or equivalent.
• Minnesota script or screenplay production: a script or screenplay created by a Minnesota resident that is produced into a film.
• Promotion of Minnesota / promotion: the visible display of a logo approved by the director promoting Minnesota in the project’s end credits.
• Televisions commercials: exempt from certain project requirements under the bill.
• Credit certificate vs. allocation certificate: certification documents used at different stages of the credit process.
• Independent CPA cost verification report: an audit report by a Minnesota-licensed CPA verifying eligible costs.
• Exploring Minnesota: the state agency named in the bill (Explore Minnesota) working with the director.

Main Provisions

• Credit scope and rates

  • Eligible production costs incurred in Minnesota, tied to a project that promotes Minnesota, can receive a state film credit.
  • The base credit rate ranges from 25% to 40% of eligible production costs, paid over a 12-month period. An additional 5% credit (for a total of up to 45%) is available if the project meets certain criteria.
  • The additional 5% can be earned if the project meets at least one of the following:
  • Employs a Minnesota resident in a key creative role, or
  • Films outside of the seven-county Minneapolis–Saint Paul metro area, or
  • Hires a majority of Minnesota residents in below-the-line crew positions.
  • Projects must promote Minnesota (logo display in end credits) and be produced in Minnesota with eligible costs spent in Minnesota.

• Eligible projects and thresholds

  • For film projects (including television programming) that promote Minnesota, the taxpayer must have expended a substantial amount on eligible production costs in a 12-month period and, to the extent practicable, hire Minnesota residents.
  • For projects that include a television commercial or Minnesota script/screenplay production, the taxpayer must have spent at least a lower threshold in a 12-month period (specific dollar amounts are indicated in the bill; one threshold for film projects and a separate threshold for TV commercials/script projects are noted).
  • Televised advertising components and Minnesota-based script work are included under project eligibility, with distinct expenditure requirements.

• Promotion and logos

  • Each eligible project must include the visible display of a Minnesota-promoting logo approved by the director in the end credits for the life of the project.

Administrative Process and Caps

• Allocation process and cap

  • The director, working with the Department of Revenue, issues allocation certificates/letters to verify eligibility and indicate the anticipated credit amount (up to 25% to 45% of eligible costs) and the taxable year of allocation.
  • The program has a hard annual cap of up to 24,950,000 dollars in credits for allocations each year.
  • If all credits aren’t allocated in a given year, the remaining amount can be allocated over the next four taxable years, until the total allocation is exhausted.
  • No credits may be awarded for taxable years beginning after December 31, 2030; any unallocated amounts cancel on that date.
  • Allocation is on a first-come, first-served basis.

• Verification, final credit, and claiming

  • After project completion, the taxpayer must submit a cost verification report prepared by an independent Minnesota-licensed CPA and in accordance with GAAP.
  • The director uses the cost verification report and other required documents to determine the final eligible production costs and issue a credit certificate to the taxpayer.
  • The final credit cannot exceed the amount stated on the allocation certificate; if the final credit is less than anticipated, the difference goes back into the pool of credits available for allocation.

• Claiming the credit on tax returns

  • To claim the credit, taxpayers must include a copy of the credit certificate with their tax return.

Timing, Reporting, and Oversight

• Interim and final reporting

  • The Department of Revenue, in consultation with the director, must provide a report by January 15, 2025, to legislative chairs and ranking minority members about:
  • The amount of credit certifications issued each year, the number of applications, and the number of allocation certificates issued.
  • The number of completed project reports and credit certificates issued.
  • The types of projects eligible for the credit.
  • The total economic impact, including job data for Minnesota residents in projects with NAICS code 512110 (motion picture and sound recording industries) for years 2019–2023.
  • The number of taxpayers per tax type assigned credit certificates.
  • Minnesota taxes paid by businesses in the 512110 category for taxable years 2019–2023.
  • Any other information necessary for claiming and administering the credit.

• Definitions and administration

  • The director is the Explore Minnesota official responsible for administering the credit and ensuring the promotion of Minnesota through eligible projects.
  • The availability and administration of credits rely on cost verification, GAAP-compliant reporting, and CPA verification.

Significant Changes to Existing Law (Overview)

• Expands and clarifies the definitions around eligible production costs and project eligibility.
• Creates a more detailed framework for credit allocation, including annual caps, carry-forward rules, and sunset provisions.
• Adds requirements for cost verification by independent CPAs and GAAP compliance.
• Ties eligibility to the promotion of Minnesota via end-credit logos and to employing Minnesota residents in various roles.
• Introduces a two-tier credit rate with an additional 5% potential under specified conditions.
• Establishes a formal reporting requirement to track program impact and economics, including job and tax data for a defined industry sector.

Notable Dates and Sunset

• Annual credit allocation cap: up to 24,950,000 per year.
• Credits cannot be awarded for taxable years beginning after December 31, 2030.
• Unallocated credits may carry forward for four years.

Practical Implications

• For film and TV projects produced in Minnesota, the bill creates a financial incentive structure to encourage local job creation, especially for Minnesota residents in key creative roles and in below-the-line crew.
• The program emphasizes measurable reporting to inform policymakers about job creation and economic impact, focusing on the motion picture and related sectors.
• The credit is administered with a two-stage approach (allocation certificate letters followed by final credit certificates) and requires independent verification of costs.

Relevant Terms - Allocation certificate letter - Credit certificate - Director (Explore Minnesota) - Eligible production costs - Below-the-line crew position - Key creative role - Minnesota script or screenplay production - Project (film including television programming) - Promotion of Minnesota / promotion - End credits logo - Independent certified public accountant (CPA) cost verification report - Generally Accepted Accounting Principles (GAAP) - First-come, first-served - Annual credit cap (24,950,000) - Sunset / 2030 end date - Carry-forward period (four years) - NAICS 512110 (motion picture and sound recording industries) - Taxable year allocation - Credit certificate vs. allocation certificate - TV commercials exemption

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