Chapter 121. TEXAS MOVING IMAGE INDUSTRY INCENTIVE PROGRAM
The Office of the Governor, Texas Film Commission (Commission) proposes new §§121.1 - 121.14, concerning the new Texas Moving Image Industry Incentive Program.
The new rules are proposed because House Bill 1634 of the 80th Legislature created an incentive program offering grants equal to 5% of total in-state spending to feature films, television programs, commercials, and video games.
Proposed §121.1 sets forth the background and purpose of the program.
Proposed §121.2 sets forth the definitions of the program.
Proposed §121.3 sets forth the eligibility requirement for an entity to apply for funds.
Proposed §121.4 sets forth an entity's ineligibility to apply for funds.
Proposed §121.5 sets forth eligible and ineligible in-state spending that can be used to calculate an entity's grant amount.
Proposed §121.6 sets forth the maximum grant that an entity can receive.
Proposed §121.7 sets forth the grant amounts for entities using underused areas.
Proposed §121.8 sets forth the application requirements and entity responsibilities.
Proposed §121.9 sets forth the application processing and review procedures conducted by the Commission.
Proposed §121.10 sets forth the reasons for an entity's disqualification from the program.
Proposed §121.11 sets forth the Commission's procedures for verifying Texas expenditures.
Proposed §121.12 sets forth the requirements for disbursement of funds.
Proposed §121.13 sets forth the procedures for the program to receive additional funding.
Proposed §121.14 sets forth the parameters for revocation and recapture of incentives.
Bob Hudgins, Director of the Texas Film Commission, has determined that there will be no fiscal implications to the state or to local governments as a result of the proposed new rules. No cost to either government or the public will result from the proposed new rules. There will be no impact on small businesses or micro-businesses.
Mr. Bob Hudgins has also determined that the public benefit anticipated as a result of the proposed new rules is a clearer understanding of the program's scope and participation in the program. No economic costs are anticipated to persons who are required to comply with the proposed new rules.
Written comments on the proposed new rules may be hand delivered to the Office of the Governor, General Counsel Division, 1100 San Jacinto, Austin, Texas 78701, mailed to P.O. Box 12428, Austin, Texas 78711-2428, or faxed to (512) 463-1932 and should be addressed to the attention of Michael Bryant, Assistant General Counsel. Comments must be received within 30 days of publication of the proposed new rules in the Texas Register.
The new rules are proposed pursuant to the Texas Government Code, §485.022, which directs the Commission to develop a procedure for the submission of grant applications and the awarding of grants, and Government Code, Chapter 2001, Subchapter B, which prescribes the standards for rulemaking by state agencies.
No other codes, statutes, or articles are affected by this proposal.
§121.1.Background and Purpose.
(a) Background.
(1) The Texas Moving Image Industry Incentive Program offers grants equal to 5% of total in-state spending, including wages paid to Texas residents. Grants are available upon project completion to feature films, television programs, commercials, and video games. Both live-action and animated projects are eligible. These grants are in addition to our existing Sales Tax Exemptions.
(2) The State of Texas has allocated $10,000,000 for fiscal year 2008 (September 1, 2007 to August 31, 2008) and $10,000,000 for fiscal year 2009 (September 1, 2008 to August 31, 2009) for the Incentive Program. Applicants will not be able to receive funding until after September 1, 2007.
(b) Purpose.
(1) The Texas Moving Image Industry Incentive Program was implemented to increase employment opportunities for Texas industry professionals, as well as boost economic activity in Texas cities and the overall Texas economy. Rather than Texas being an exporter of talent, Texas can now attract a wide range of projects from traditional film and commercial productions to the technology driven animation and video game productions.
(2) This program allows for growth of the indigenous segments of production. It is an important goal of this program to have Texas' talented workforce stay in Texas and realize real professional growth in the industry. The incentive program increases the value of the Texas workforce and the viability of the small businesses that rely on production activity, increasing Texas' capacity to take on more production activity and increasing Texas competitive edge.
§121.2.Definitions.
The following words and terms, when used in this chapter, shall have the following meanings, unless the context clearly indicates otherwise:
(1) Applicant--The potential financial recipient of the grant either producing the project or the owner of the copyright.
(2) Business day--A day other than Saturday, Sunday or a legal holiday.
(3) Cast--All people who appear or perform in front of the camera, including but not limited to, featured actors, extras, and interviewees.
(4) Department head--A manager or lead person who supervises and directs a department or group of one or more people, and who is ultimately responsible for the management of a particular division within a project.
(5) Eligible projects--Feature films, television programs, commercials, and video games that meet the qualifying requirements described in §121.3 of this chapter.
(6) Final expended budget--The total of in-state spending at the completion of the project that includes all receipts, invoices, pay orders, and any other documentation considered necessary for audit.
(7) Game console--An electronic device or machine used by consumers primarily for the purpose of playing video games, including, but not limited to, the Nintendo Wii, the Sony PlayStation 3, the Sony PlayStation 2 and the Microsoft Xbox360.
(8) Goods and services--Physical products and services directly attributable to the production of a project that include, but are not limited to, contractors, subcontractors and service providers, and product or equipment purchases, rentals and leases.
(9) Handheld console--A portable electronic device used by a consumer primarily for the purpose of playing video games, including, but not limited to, the Sony PlayStation Portable, the Nintendo DS, the Nintendo Game Boy Advanced and the Nintendo Game Boy Color.
(10) Ineligible projects--Projects that do not qualify for the grant, as stated in §121.4 of this chapter.
(11) In-state spending (Texas spend)--The amount of money spent in Texas by a production company during pre-production, production and postproduction of the project.
(12) Mobile electronic--A portable electronic device used by a consumer for the purpose of mobile computing and communication, including, but not limited to, personal digital assistants (PDAs) and mobile phones.
(13) Pass through company--A company or person that acts as an agent or broker for companies or persons outside of Texas to provide goods or services for the purpose of taking advantage of the Texas Moving Image Industry Incentive Program.
(14) Personal computer--An electronic device or machine used by a consumer for a variety of applications, including playing games. Games for this platform include those which play on the computer's CPU, as well as web and online game applications that are played using the personal computer.
(15) Physical production--The period encompassing pre-production, production, and postproduction.
(16) Postproduction expenditures--Expenditures that occur after the end of production, as defined in paragraph (19) of this section, including, but not limited to, editing, music, sound, and visual effects.
(17) Pre-production--The period where preparations are made for principal photography.
(18) Principal start date--
(A) For film, television, or commercial projects, this is the first day of principal photography.
(B) For video game and animated projects, this is the first day of production.
(19) Production--has different definitions for film, television, commercial, and video game projects.
(A) For film, television, or commercial projects, this is the period between the first and last days of principal photography, inclusive.
(B) For video game and animated projects, this is the period between the end of pre-production and the creation of the gold master.
(20) Production company--A film production company, television production company, video game developer, commercial production company, or film and television production company.
(21) Series of commercials--More than one commercial created in a contiguous production period and promoting the same product, service, or idea.
(22) Stand-alone arcade machine--An electronic device used by a business or consumer solely for bona fide amusement purposes that reward the player exclusively with non-cash merchandise prizes or a representation of value redeemable for those items, as outlined in Texas Penal Code, §47.01.
(23) Texas crew--An individual directly employed by the production company that is involved in the creation of this specific project.
(24) Texas resident--An individual who has resided in Texas for at least 120 days prior to the principal start date.
(25) Underused area--Any area of Texas outside a 30-mile radius from Austin City Hall or Dallas City Hall.
§121.3.Eligible Projects.
(a) A project may be eligible for a grant under the Texas Moving Image Industry Incentive Program if it is a permitted project listed below that meets the minimum requirements.
(b) Feature Films.
(1) A feature film is defined as any:
(A) live-action or animated for-profit production, narrative or documentary;
(B) that is more than 30 minutes in length; and
(C) that is produced for distribution in theaters or by DVD, internet, or mobile electronic device.
(2) Minimum Requirements:
(A) Feature films must have minimum in-state spending of $1 million.
(B) 80% of the production days must be completed in Texas.
(C) 70% of the total number of paid crew must be Texas residents.
(D) 70% of the total number of paid cast, including extras, must be Texas residents.
(E) Animated feature films must have 70% of the combined total of paid crew and cast, including extras, be Texas residents.
(c) Television Programs.
(1) A television program is defined as any:
(A) live-action or animated for-profit production, narrative or documentary, including, but not limited to:
(i) an episodic series;
(ii) a miniseries;
(iii) a television movie ("MOW");
(iv) a television pilot; or
(v) a television episode;
(B) that is produced for distribution via broadcast or digital distribution via cable, satellite, the internet, or mobile electronic devices.
(2) Minimum Requirements:
(A) Television programs must have minimum in-state spending of $1 million per season.
(B) 80% of the production days must be completed in Texas.
(C) 70% of the total number of paid crew must be Texas residents.
(D) 70% of the total number of paid cast, including extras, must be Texas residents.
(E) Animated television programs must have 70% of the combined total of paid crew and cast, including extras, be Texas residents.
(d) Commercials.
(1) A commercial is defined as any:
(A) live-action or animated production;
(B) that is an individual commercial, series of commercials, music video, infomercial, or interstitial;
(C) that is less than 30 minutes in length;
(D) that is made for the purpose of promoting a product, service, or idea; and
(E) that will receive distribution via broadcast or digital distribution via cable, satellite, the internet, or mobile electronic devices.
(2) Minimum Requirements:
(A) Commercials must have minimum in-state spending of $100,000.
(B) 80% of the production days must be completed in Texas.
(C) 70% of the combined total of paid crew and cast, including extras, must be Texas residents.
(e) Video Games.
(1) A video game is defined as any:
(A) piece of software that provides a user or users with a game to play for the purpose of entertainment or education, such as for military or medical functions; and
(B) that is created for a game console, personal computer, handheld console, mobile electronic or stand-alone arcade machine.
(2) Minimum Requirements:
(A) Video games must have minimum in-state spending of $100,000.
(B) 80% of the production days must be completed in Texas.
(C) 70% of the combined total of paid crew and cast must be Texas residents.
§121.4.Ineligible Projects.
(a) The following types of projects are not eligible for grants under this program:
(1) unscripted television productions, such as reality shows;
(2) pornography, as defined by Texas Penal Code, §43.21;
(3) news, current event or public programming, or programs that include weather or market reports;
(4) talk shows, game shows, questionnaire or contest shows;
(5) sporting events or activities;
(6) awards shows, galas or telethons;
(7) educational, corporate, or training videos;
(8) films intended for undergraduate or graduate course credit;
(9) application software, system software, or middleware; or
(10) casino-type video games directly used in a gambling device, as pursuant to Texas Penal Code, §47.01.
(b) Not every project will qualify for a grant. The State of Texas is not required to make grants to projects that include inappropriate content or content that portrays Texas or Texans in a negative fashion. As part of the preliminary application process, the Texas Film Commission will review the script or game design document, and will advise the applicant on whether the content will exclude the project from receiving a grant.
(c) Once an approved project has been completed, the Texas Film Commission will review the final script or game content before issuing the grant, to ensure that revisions made during production have not created an extreme difference from the content as initially approved.
§121.5.Eligible and Ineligible In-State Spending.
(a) The following are eligible expenditures:
(1) Wages and per diems paid to Texas residents, including additional compensation paid as part of a contractual or collective bargaining agreement.
(A) For the purpose of calculating the grant amount for feature films, video games, and commercials, only the first $50,000 in wages to each Texas resident, and only the first $200,000 of each Texas resident working as a department head, will be included.
(B) For the purpose of calculating the grant amount for episodic television, only the first $100,000 in wages to each Texas resident, and only the first $200,000 of each Texas resident working as a department head, will be included.
(2) Payments made to Texas companies for goods and services domiciled in Texas that are directly attributable to the physical production of the feature film, television program, commercial or video games. In the case of video games, the amount attributed to pre-production and research and development costs will be limited to an amount not to exceed 30% of the project's overall in-state spending.
(3) Payments for shipping on items shipped from or within Texas.
(4) Air travel to and from Texas on a Texas-based airline, including American Airlines, Continental Airlines and Southwest Airlines, or on a Texas-based air charter service.
(5) Rentals, leases and purchases of vehicles registered and licensed in the State of Texas.
(6) Music that is specifically created for the project and fees paid to Texas residents hired to create, orchestrate and perform the music.
(7) Legal fees directly attributable to the production.
(b) The following are ineligible expenditures:
(1) Payments made to non-Texas companies.
(2) Payments made for goods and services not domiciled in Texas.
(3) Payments made for goods and services that are not directly attributable to the physical production.
(4) Payments made by video game projects for pre-production costs that exceed 30% of the project's overall in-state spending.
(5) Expenses related to distribution, publicity, marketing, or promotion of the project.
(6) Rental, Lease or Mortgage payments, that includes, but is not limited to utilities and insurance, on facilities that are part of the permanent/continuous business operation.
(7) Wages and per diems paid to non-Texas residents.
(8) Payments made to pass-through companies.
(9) Fees for story rights, music rights or clearance rights.
(c) The Texas Film Commission reserves the right to determine which expenses are eligible or ineligible. These lists are not all inclusive.
§121.6.Maximum Award.
(a) Feature Films. The maximum grant amount for a feature film is $2 million.
(b) Television Programs. The maximum grant amount for a television program is $2.5 million. This is for an entire season of an episodic television series.
(c) Commercials. The maximum grant amount for a television commercial, series of commercials, music video, infomercials or interstitial is $200,000.
(d) Video Games. The maximum grant amount for a video game is $250,000.
§121.7.Underused Areas.
(a) Projects that complete at least 25% of their total production in underused areas may receive an additional 1.25% of total in-state spending. The additional 1.25% applies to all spending in all areas of Texas; it is not restricted to the underused-area spending.
(b) The underused-area clause does not increase the maximum grant per project, but it does allow a project to reach the maximum more quickly.
§121.8.Grant Application.
(a) Initial Submission.
(1) Qualifying Applications are available at the Texas Film Commission web site: http://www.governor.state.tx.us/divisions/film/incentives/application, or by contacting the Texas File Commission if internet access is not available or special needs facilitation is required.
(2) Applications will not be accepted earlier than 30 calendar days prior to a project's principal start date.
(3) Applications must be received no later than 5:00 p.m. Central Time on the last business day prior to the principal start date.
(4) Only one application and applicant per project is allowed.
(5) An application package must include:
(A) A completed Qualifying Application for the Moving Image Industry Incentive Program;
(B) An itemized budget of eligible Texas expenditures. Ineligible expenditures are not required; and
(C) A script.
(i) For feature films and television programs, a full script.
(ii) For episodic television, the full script of the first episode to be filmed in Texas, and subsequent episode scripts as available.
(iii) For commercials, the script and/or storyboard.
(iv) For video games, the game design document.
(b) Additional Requirements.
(1) An applicant must confirm with the Texas Film Commission in writing that production began on time, within 5 days of the start date indicated on the application. If the start of the project is delayed for more than 30 days, an application will be discarded and the production must reapply.
(2) Upon commencement of the production, an applicant will be required to submit a crew and vendor/services provider contact list to the Texas Film Commission. The applicant will also be required to show proof of the residency status of employees.
§121.9.Processing and Review of Applications.
(a) All applications will be reviewed in the order they are received.
(b) Initial Review.
(1) Each application will go through an initial review process when the qualifying application has been received.
(A) If a project submits an application with required materials, and meets all qualifications, the applicant will receive an email notifying them that the Texas Film Commission has received their complete application and the review process will begin.
(B) If a project submits an application without the required materials, but initially appears to meet the minimum qualifications, the applicant will receive an email notifying them that their application requires additional materials or documentation, and that not receiving them in a timely manner may result in an application being disqualified.
(C) If a project submits an application with or without required materials and does not meet the minimum qualifications, the applicant will receive an email notifying them that they do not qualify for the incentive program, but may reapply before 5:00 p.m. Central Time on the last business day prior to the principal start date.
(2) After an email is sent to a qualifying applicant, the Texas Film Commission will contact the applicant to verify that all the information on the application is correct. Applicants will have the ability at that time to amend their application. The Texas Film Commission may determine whether an applicant's amendment(s) will require them to reapply or not.
(c) Preliminary Award Determination.
(1) During the preliminary award determination process, the Texas Film Commission will review the project's budget to identify eligible expenditures and to determine if the applicant meets the minimum in-state spending.
(2) Texas Film Commission will provide a summary to the Governor's Office of Budget and Planning for verification and determination of the grant agreement.
(3) The Texas Film Commission will also review project's content to determine if it is appropriate.
(d) Grant Agreement.
(1) Upon Texas Film Commission approval of the Qualifying Application and additional materials, a grant agreement will be executed between the Texas Film Commission and the applicant. The estimated grant amount will be based upon the applicant's estimated in-state spending, with a 10% contingency included in the encumberment. The project's application summary will be attached to the grant agreement.
(2) The grant agreement must be returned to the Texas Film Commission within 7 business days with original signatures.
(e) Periodic Tracking and Review. Once the grant agreement has been executed by both parties, the Texas Film Commission and/or the Governor's Office of Budget and Planning may periodically review production activity including, but not limited to, in-state spending, shooting locations and number of Texas residents hired, and may require documentation for all of the above.
(f) Verifying Texas Residency. During the production of the project, the applicant will be required to provide the Texas Film Commission with proof of each employee's residency status. This will verify that the applicant indeed meets the minimum crew and cast requirements. The applicant can show proof by providing each employee's I-9 form.
§121.10.Disqualification of an Application.
(a) An applicant may be disqualified at any time if a project does not meet the necessary requirements or if an application is incomplete. If a project is disqualified, the applicant will be notified by email. Applications that have been disqualified may be resubmitted with the required changes, no earlier than 30 calendar days before the principal start date, and no later than 5:00 p.m. Central Time on the business day preceding the principal start date.
(b) In the case of a change in principal start or completion date, the applicant must notify the Texas Film Commission by email of the new principal start or completion date, and must give the reason(s) for the change. If the start of the project is delayed for more than 30 days, an application will be discarded and the production must reapply.
(c) An application may also be disqualified for the following reasons:
(1) Failure to submit required documents and notifications, or additional documents as requested;
(2) Failure to meet minimum thresholds for in-state spending, number of Texas residents hired, and/or adequate percentage of production days;
(3) Submission of false information;
(4) Inappropriate content or content that portrays Texas or Texans in a negative fashion described in Texas Penal Code Annotated §43.23; or
(5) Ineligible project as listed in §121.4 of this chapter.
§121.11.Confirmation and Verification of Texas Expenditures.
(a) Film Commission will be responsible for collecting, authenticating and assembling incentive documentation from the productions for audit by the Governor's Financial Services Division.
(b) The following items must be received by the Texas Film Commission within 60 days of completing Texas expenditures:
(1) A final expended budget, in a format acceptable to the Office of the Governor, Financial Services Division, reflecting all in-state spending and including all receipts, invoices, pay orders, and any other documentation considered necessary by the Financial Services Division for audit.
(2) Feature films and television programs must submit a copy of the final script for review.
(3) Commercials and video games must submit final content for review.
(4) Additional documentation may be required including, but not limited to, the following:
(A) Financials, including all reports of expenditures
(B) Call sheets/Production reports
(C) Production Cost reports
(D) Video game production calendar
(E) Texas Residents--I-9 Forms
§121.12.Disbursement of Funds.
(a) Disbursement of funds will not occur until the production company has paid all financial obligations incurred in the State of Texas, and a final compliance audit has been completed and approved.
(b) In the event of disputed amounts, the Texas Film Commission will determine whether or not to withhold final grant approval, pending settlement.
§121.13.Additional Funding.
(a) Additional funding for the Texas Moving Image Industry Incentive Program may be authorized under Appropriations Bill (House Bill 1).
(b) Projects that have applied and initially approved for participation in the program, after the initial funding source has been encumbered, will be notified that the funds for their project will be dependent on verification by the Comptroller of Public Accounts before submission of the financial plan to the Legislative Budget Board and the Office of the Governor.
(c) The Texas Film Commission will base additional requests for funding on applications received for the fiscal year that the payment of the award will be made. Once $10M of funds have been encumbered for a fiscal year, the Film Commission will present additional applications to the Comptroller of Public Accounts to determine that the requests have met the required criteria of fiscal responsibility. Once the value of the applicants' projects has been determined, the Comptroller of Public Accounts and the Film Commission will present the proposed allocation of funds to the Legislative Budget Board and the Office of the Governor for approval.
§121.14.Revocation and Recapture of Incentives.
(a) An applicant's eligibility for funds can be revoked after the project is completed for reasons such as obscene content, failure to provide receipts of Texas expenditures, providing false information, or inability to complete the project.
(b) If an applicant has already received the grant and is determined to not meet a requirement in any way, the Texas Film Commission can require that the applicant refund any sum of money paid to the applicant by the Texas Film Commission.
This agency hereby certifies that the proposal has been reviewed by legal counsel and found to be within the agency's legal authority to adopt.
Filed with the Office of the Secretary of State on January 4, 2008.
TRD-200800049
Michael Bryant
Assistant General Counsel
Texas Film Commission
Earliest possible date of adoption: February 17, 2008
For further information, please call: (512) 463-5846