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.

This is a preliminary draft. An analysis will be provided in a subsequent version of this draft.

For further information see the state fiscal estimate, which will be printed as an appendix to this bill.

SB970,,4 The people of the state of Wisconsin, represented in senate and assembly, do enact as follows:

SB970,1 Section 1. 20.835 (2) (de) of the statutes is created to read:

SB970,,6 20.835 (2) (de) Digital interactive media credit. A sum sufficient to make the payments under ss. 71.07 (11), 71.28 (11), and 71.47 (11).

SB970,2 Section 2. 71.05 (6) (a) 15. of the statutes is amended to read:

SB970,,8 71.05 (6) (a) 15. The amount of the credits computed under s. 71.07 (2dm), (2dx), (2dy), (3g), (3h), (3n), (3q), (3s), (3t), (3w), (3wm), (3y), (4k), (4n), (5e), (5i), (5j), (5k), (5r), (5rm), (6n), and (10), and (11) and not passed through by a partnership, limited liability company, or tax-option corporation that has added that amount to the partnership’s, company’s, or tax-option corporation’s income under s. 71.21 (4) or 71.34 (1k) (g).

SB970,3 Section 3. 71.07 (11) of the statutes is created to read:

SB970,,10 71.07 (11) Digital interactive media credit. (a) Definitions. In this subsection:

SB970,,11 1. “Claimant” means a person who engages in qualified activities, owns a copyright in digital interactive media or entertainment or has contracted directly with the copyright owner or a person acting on behalf of the copyright owner, has a viable plan for the commercial distribution of the digital interactive media or entertainment, as determined by the department, and files a claim under this subsection.

SB970,,12 2. “Digital interactive media or entertainment” means a product or platform intended for commercial production, use, or distribution, that has primarily an entertainment purpose, and that satisfies all of the following:

SB970,,13 a. Contains at least 2 of the following types of data: text, sound, fixed images, animated images, video, or 3-dimensional geometry.

SB970,,14 b. Uses discrete values that are ordinarily symbolized numerically to represent information for input, processing, transmission, and storage, including information input, processed, transmitted, and stored via the Internet.

SB970,,15 c. Uses a system for inputting, processing, transmitting, or storing information or data in which users of the system are able to respond to the system by inputting, processing, transmitting, or storing information or data in response to the information or data provided to them through the system.

SB970,,16 d. Uses communication tools to store, transmit, distribute, and deliver information and data, including distributed networks such as the Internet and physical media such as compact discs, CD-ROM, DVD, and other removable storage drives or devices.

SB970,,17 3. “Digital interactive media or entertainment” does not include any of the following:

SB970,,18 a. Software designed and developed primarily for the internal or operational purposes of an entity.

SB970,,19 b. Largely static Internet sites designed primarily to provide information about a person, business, company, or firm, including Internet sites that are primarily social media, user generated videos, podcasting, interactive advertising, or journalism.

SB970,,20 c. Products or services regulated under chs. 562 to 569 or any software or application primarily involving gambling or wagering.

SB970,,21 d. Software or applications that contain content in violation of s. 944.21.

SB970,,22 4. “Eligible expenditures” means expenditures in this state directly related to qualified activities and that have economic substance and a business purpose, including all of the following:

SB970,,23 a. Testing software, source code development, patches, updates, sprites, 3-dimensional models, engine development and other back-end programming activities, performance and motion capture, audio production, tool development, original scoring, and level design.

SB970,,24 b. Photography, sound synchronization, lighting, and related services.

SB970,,25 c. Information technology support, data analysis, and activities related to a community of users of digital interactive media or entertainment.

SB970,,26 d. Leases of facilities and equipment.

SB970,,27 e. Prepackaged audio files, video files, photographic files, or libraries.

SB970,,28 f. Licenses to use prerecorded audio files, video files, or photographic files.