Chapter 121. TEXAS MOVING IMAGE INDUSTRY INCENTIVE PROGRAM
The Office of the Governor, Texas Film Commission (Commission) adopts new Chapter 121, §§121.1 - 121.14, concerning Texas Moving Image Industry Incentive Program. Sections 121.2, 121.3, 121.5, 121.9, and 121.11 are adopted with changes to the proposed text as published in the January 18, 2008, issue of the Texas Register (33 TexReg 462). Sections 121.1, 121.4, 121.6 - 121.8, 121.10, and 121.12 - 121.14 are adopted without changes to the proposed text and will not be republished.
These rules establish the requirements and procedures for the Texas Moving Image Industry Incentive Program. Legislation enacted in 2007 created the incentive program offering grants equal to 5% of total in-state spending to feature films, television programs, commercials and video games.
The rules will provide a clearer understanding of the program's scope and how an entity can participate in the program, and help the Commission administer the program.
No comments were received regarding adoption of the new rules. The Commission, however, has made a few changes to the rules that do not change the nature of the proposed rules. The changes included a more expanded definition of "applicant" and "Texas resident" in §121.2; clarifying what types of distribution feature films, television programs, and commercials need to qualify; modifying the wage cap calculations in §121.5 to be in a 12-month period; clarifying how Texas residency will be verified in §121.9; and rewriting §121.11(b)(1)(E) for more accuracy.
The new rules are adopted 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.
§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. For commercials, this could be the production company, Ad Agency, or client. Only one application and applicant per project is allowed.
(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, unless enrolled as a full-time student at a Texas Institution of Higher Education, as defined by Texas Education Code §61.003.
(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 via any digital format, including, but not limited to 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, cable or any digital format, including, but not limited, to cable, satellite, internet, or mobile electronic device.
(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 is produced for distribution via broadcast, cable or any digital format including but not limited to cable, satellite, internet, or mobile electronic device.
(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.
§121.5.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 in a 12-month period to each Texas resident, and only the first $200,000 in wages in a 12-month period 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 in a 12-month period to each Texas resident, and only the first $200,000 in wages in a 12-month period 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.
§121.9.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. The applicant will be required to provide the Texas Film Commission with proof of each employee's residency status. The applicant can show proof by providing a copy of each employee's I-9 form if it has been verified with a current Texas driver license or identification certificate. If the I-9 form is verified with a document other than a Texas driver license or identification certificate, the applicant must provide a copy of the employee's I-9 and a copy of one of the following documents:
(1) Current Texas driver license or identification certificate.
(2) Current Texas voter registration card.
(3) Current student identification card from a Texas Academic Institution.
(4) A utility bill in the employee's name that verifies residency at a Texas address at least 120 days prior to the principal start date.
§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) Proof of employees' Texas residency
This agency hereby certifies that the adoption has been reviewed by legal counsel and found to be a valid exercise of the agency's legal authority.
Filed with the Office of the Secretary of State on February 19, 2008.
TRD-200800982
Michael Bryant
Assistant General Counsel
Texas Film Commission
Effective date: March 10, 2008
Proposal publication date: January 18, 2008
For further information, please call: (512) 463-9200