N.J. Admin. Code § 19:31T-1.7

Current through Register Vol. 56, No. 12, June 17, 2024

Section 19:31T-1.7 - Evaluation process for tax credits; initial approval for tax credits, award of tax credits

(a) Applications for film tax credits shall be submitted to the Commission, which, upon review for content eligibility, will forward the application to the Authority with the Commission's recommendation.

1. The application for tax credits shall be considered by the Authority for initial approval on a first in time basis, subject to the annual caps at N.J.A.C. 19:31T-1.11.

2. At initial approval, the Authority will designate the maximum amount of the tax credit and will assign a tax credit vintage year to the tax credit. To assist the Authority in reviewing the application, the Authority may retain a third-party consultant, at the cost of the applicant, to review the budget submitted by the applicant to determine if the qualified film or digital media expenses are reasonable based on industry standards.

3. The Authority shall issue an initial approval letter to the approved applicant that will include conditions subsequent to receipt of the tax credit including, but not limited to, the requirement for progress reports and the date by when final documentation pursuant to (b) below is required. The approval letter shall constitute the non-binding, administrative pre-certification process for potentially eligible projects. Failure to submit timely periodic reports that demonstrate satisfactory progress or timely final documentation may lead to the forfeiture of the tax credit.

(b) In general, the final documentation required pursuant to (c) below shall be submitted to the Authority no later than four years after the Authority's initial approval if the approved applicant is seeking a credit against the tax imposed pursuant to N.J.S.A. 54:10A-5 and three years after the Authority's initial approval if the approved applicant is seeking a credit against the tax imposed pursuant to the N.J.S.A. 54A:1-1 et seq.

(c) Upon completion of total film production expenses or the total digital media content production expenses for the privilege period or taxable year identified in the initial approval, the approved applicant shall submit the following final documentation, which the Authority, in consultation with the Director and the Commission, shall process and evaluate:

1. With respect to a film, evidence satisfactory to the Commission, and written confirmation from the Commission to the Authority that principal photography commenced within the earlier of 180 days from the date of the completed application for the tax credit;

2. If the approved applicant is a studio partner or film-lease production facility, a certification from the designated studio partner or film-lease partner facility that it has continued to satisfy the requirements of a studio partner or film-lease production facility from the commencement of principal photography;

3. Actual budgets and proof of total and qualified film production expenses or total and qualified digital media content production expenses, including a listing of the name of the company or person paid; his, her, or its Federal identification number;

4. A report prepared by an independent certified public accountant licensed in the State verifying the expenses claimed by the approved applicant. The report shall be prepared by the independent certified public accountant, pursuant to agreed-upon procedures prescribed by the Authority and the Director.

i. The report shall include such information and documentation as shall be determined to be necessary by the Authority and the Director to substantiate the total and qualified film production expenses or the total and qualified digital media content production expenses of the approved applicant, and the date of the last total film production expense excluding any deferred compensation payments, including:

(1) A review of all non-payroll qualified film production expense items and non-payroll digital media content production expense items over $ 20,000;

(2) A review of 100 randomly selected non-payroll qualified film production expense items and non-payroll digital media content production expense items that are greater than $ 2,500, but less than $ 20,000;

(3) A review of 100 randomly selected non-payroll qualified film production expense items and non-payroll digital media content production expense items that are less than $ 2,500;

(4) A review of the qualified wages for the 15 employees, independent contractors, or loan-out companies with the highest qualified wages; and

(5) A review of the qualified wages for 35 randomly selected employees, independent contractors, or loan-out companies with qualified wages other than the 15 employees, independent contractors, or loan-out companies with the highest qualified wages;

ii. In the report, the approved applicant's qualified film production expenses and digital media content production expenses shall be adjusted based on any discrepancies identified for the reviewed non-payroll qualified film production expense items, non-payroll digital media content production expense items and qualified wages. The approved applicant's qualified film production expenses and digital media content production expenses also shall be adjusted based on the projection of any discrepancies identified based on the review of randomly selected expense items or wages in each strata pursuant to this subsection to the extent that the discrepancies exceed one percent of the total reviewed non-payroll qualified film production expense items, non-payroll digital media content production expense items, or qualified wages in each strata. The determination shall be provided by the independent certified public accountant, in writing, to the approved applicant, the Authority, and the Director, and the approved applicant shall include a copy of the written determination in the filing of a return that includes a claim for a tax credit allowed pursuant to this section;

iii. The amount of the qualified film production expenses or qualified digital media content production expenses in the report shall not be increased regardless of additional expenses after the date of the report;

iv. If the approved applicant is a studio partner and the qualified film production expenses include deferred compensation payments based on work or services provided on a production, the report shall include information necessary and relevant as determined by the Authority to demonstrate such deferred compensation payments; and

v. If the applicant is a film-lease production company, the report shall also include verification of principle photography shoot days as necessary to demonstrate eligibility as a film-lease production company;

5. For approved applicants that received initial approval for the production of a reality show:

i. The report required at (c)4 above shall include verification of the actual capital investment in the production facility. If the capital investment in the report is less than the minimum eligibility requirement in the definition of film, the approved applicant shall no longer be eligible for tax credits for the production;

ii. The temporary certificate of occupancy;

iii. A detailed floor plan, indicating the uses of each area, of the production facility;

iv. The executed deed, lease, or sublease evidencing site control. If the approved applicant is a tenant and the lease or sublease has a term, including renewals and options, of less than the minimum eligibility requirement in the definition of film, the approved applicant shall no longer be eligible for tax credits for the production; and

v. Any other information necessary to determine compliance with the requirements of a reality show;

6. With respect to a film, evidence satisfactory to the Commission that the film includes marketing materials, as deemed appropriate, pursuant to N.J.A.C. 19:31T-1.3(a)3;

7. If the approved applicant was initially approved for a bonus amount of tax credit for a diversity plan pursuant to N.J.A.C. 19:31T-1.6( l), evidence of achieving the relevant percentage in the diversity plan or good faith efforts to undertake the diversity plan. The bonus amount shall not be included in the amount of the final approval if the applicant fails to submit satisfactory evidence to the Authority and the Division;

8. If the approved applicant is a film-lease production company, the executed lease, sublease, or license to occupy production space in a film-lease partner facility;

9. A certification from the approved applicant that the information provided pursuant to this subsection is true pursuant to the penalty of perjury; and

10. Any other information necessary for the Authority and the Director to determine compliance with this program.

(d) The Authority, in consultation with the Division and Commission, shall determine final approval of the tax credit in an amount based on the Authority's determination of the total and qualified film production expenses or total and qualified digital media content production expenses reported in the independent certified public accountant's report, but in no event shall the tax credit be greater than the amount stated in the Authority's initial approval. The Authority shall provide, in writing, to the approved applicant, the determination of the expenses, and a copy of the written determination shall be included in the filing of a return that includes a claim for a tax credit allowed pursuant to this section.

(e) If the Authority has approved the application, the Authority shall notify the Division of the final approval. The Division shall then issue the tax credit certificate to the approved applicant. The approved applicant's use of the tax credit shall be limited pursuant to N.J.A.C. 19:31T-1.9(a) or (b), as applicable.

(f) If a studio partner received a tax credit for qualified film production expenses that included deferred compensation payments based on work or services provided on a production, the studio partner shall submit a supplemental report prepared by a certified public accountant pursuant to agreed-upon procedures prescribed by the Authority and the Director no later than two years after the date on which the production concludes, as established by the date of the last total film production expense, excluding any deferred compensation payments.

N.J. Admin. Code § 19:31T-1.7

Administrative correction.
See: 51 N.J.R. 173(b).
Amended by R.2020 d.007, effective 1/6/2020.
See: 51 N.J.R. 1256(a), 52 N.J.R. 58(b).
In (a), deleted ", which will be the fiscal year in which the application receives initial approval" from the end of the third sentence; and in (c)1, inserted "the earlier of" and substituted "completed" for "original".
Special amendment, R.2024 d.022, effective 2/26/2024 (to expire 2/22/2025).
See: 56 N.J.R. 491(a),.
Section was "Evaluation process for tax credits; initial approval for tax credits, award of tax credits; appeals". Rewrote the section.

Recodified from 19:31-21.7 56 N.J.R. 807(a), effective 5/6/2024