AB1033,,22An Act to amend 71.05 (6) (a) 15., 71.10 (4) (i), 71.21 (4) (a), 71.26 (2) (a) 4., 71.30 (3) (f), 71.34 (1k) (g), 71.45 (2) (a) 10. and 71.49 (1) (f); and to create 20.835 (2) (de), 71.07 (11), 71.28 (11), 71.47 (11), 71.748 and 73.03 (78) of the statutes; relating to: creating a digital interactive media tax credit, granting rule-making authority, and making an appropriation.

This bill creates a refundable digital interactive media income and franchise tax credit. The credit is equal to the sum of the following 1) 30 percent of the salary or wages paid by a claimant to employees residing in this state for producing digital interactive media or entertainment; and 2) 30 percent of the eligible expenditures. Under the bill, “digital interactive media or entertainment” is generally a product or platform intended for commercial use that uses text, sound, fixed images, animated images, video, or three-dimensional geometry and that uses a system in which users are able to input information or data in response to the information or data provided through the system. “Digital interactive media or entertainment” does not include largely static Internet sites, social media, and gambling products or services. The bill also defines “eligible expenditures” as expenditures related to creating digital interactive media or entertainment, such as testing, source code development, and leases of facilities and equipment. The credit under the bill is refundable, which means that if the credit exceeds the claimant’s tax liability, the claimant will receive the difference as a refund check.

To claim the credit for a taxable year, a person must file an application with the Department of Revenue and receive a certificate of eligibility for the credit. To grant a certificate, DOR must determine that the applicant will have at least $25,000 in eligible expenditures in the taxable year, and DOR, or an auditor certified by DOR, must conduct an audit of the applicant. The bill requires auditors to comply with various requirements in conducting the audits, including using sampling methods adopted by DOR and verifying each expenditure covered by the audit. Applicants must reimburse DOR for its costs related to the audits. DOR must also certify as eligible to conduct those audits certified public accountants who submit an application and satisfy various requirements under the bill. Every two years, DOR must submit a report to the governor and standing committees of the legislature related to taxation that includes the number of applications approved for the credit, the amount of credits claimed, the number of people employed in the state in the industries eligible for the credit, the economic impact of the credit, and the community impact of the industries eligible for the credit.