5442396 Motion Picture and Television Development, Office of - Notice of Emergency and Proposed Rulemaking - Film DC Economic Incentive Fund Program

OFFICE OF MOTION PICTURE AND TELEVISION DEVELOPMENT

 

NOTICE OF EMERGENCY AND PROPOSED RULEMAKING

 

The Office of Motion Picture and Television Development (MPTD), pursuant to authority set forth in the Film DC Economic Incentive Act of 2006, effective March 14, 2007 (D.C. Law 16-290; D.C. Official Code § 39-502 (2012 Repl.)); and Mayor’s Order 2009-213, dated December 8, 2009, hereby gives notice of emergency and proposed rulemaking action to adopt amendments to Chapter 31 (Film DC Economic Incentive Grant Fund Program), of Title 1 (Mayor and Executive Agencies) of the District of Columbia Municipal Regulations (DCMR).

 

These amendments would place the MPTD’s rulemakings in conformity with the Film DC Economic Incentive Act of 2006 (Act), effective March 14, 2007 (D.C. Law 16-290; D.C. Official Code §§ 39-501 et seq. (2012 Repl.)).  This emergency rulemaking is necessary to ensure that the MPTD can administer the program in fiscal year 2015. 

 

The emergency and proposed rulemaking was adopted on April 21, 2015 and became effective on that date.  The emergency rules shall remain in effect for one hundred twenty (120) days or until August 21, 2015, unless superseded by publication of a Notice of Final Rulemaking in the D.C. Register. 

 

Chapter 31, FILM DC ECONOMIC INCENTIVE GRANT FUND PROGRAM, of Title 1 DCMR, MAYOR AND EXECUTIVE AGENCIES, is amended in its entirety to read as follows:

 

CHAPTER 31           FILM DC ECONOMIC INCENTIVE FUND PROGRAM

 

3100                AUTHORITY AND SCOPE

3101                DETERMINATION OF FILM DC ECONOMIC INCENTIVE FUND PROGRAM ELIGIBILITY

3102                APPLICATION PROCEDURES

3103                INCENTIVE FUND AWARD DISBURSEMENT PROCEDURES

3199                DEFINITIONS

 

3100                AUTHORITY AND SCOPE

 

3100.1             Subject to the Film DC Economic Incentive Act of 2006, effective March 14, 2007 (D.C. Law 16-290; D.C. Official Code §§ 39-501 et seq.) (Act), the Film DC Economic Incentive Fund Program is administered by the Office of Motion Picture and Television Development (MPTD). The Film DC Economic Incentive Fund Program is intended to encourage the use of the District of Columbia as a site for movies, television shows, and other video productions as well as film and digital media infrastructure projects; to encourage the hiring of District residents as cast and crew; and to encourage the use of District-based service and equipment companies in support of these productions. These rules describe the standards and procedures under which the MPTD shall determine whether to provide production support funding to the Film DC Economic Incentive Fund Program applicant.

 

3101                DETERMINATION OF FILM DC ECONOMIC INCENTIVE FUND PROGRAM ELIGIBILITY

 

3101.1             Subject to D.C. Official Code § 39‑501.01, the Director of the Office of Motion Picture and Television Development (MPTD)  determines whether individual movie, television, and other video productions, and the expenditures associated with those projects, qualify for incentives under the Act. Subject to D.C. Official Code § 39‑501.01 and the availability of funds, the recipient of the incentive may receive an amount equal to the following:

 

(a)                The sum of forty-two percent (42%) of the company’s qualified production expenditures that are subject to taxation in the District;

 

(b)               The sum of twenty-one percent (21%) of the company’s qualified production expenditures that are not subject to taxation in the District;

 

(c)        The sum of thirty percent (30%) of the company’s qualified personnel expenditures;

 

(d)       The sum of fifty percent (50%) of the company’s qualified job training expenditures; and

 

(e)        The sum of twenty-five percent (25%) of the company’s base infrastructure investment; provided, that if the base infrastructure investment is in a facility that may be used for purposes unrelated to production or postproduction activities, then the base infrastructure investment shall be eligible for the twenty-five percent (25%) incentive payment only if the Director of the MPTD determines that the facility will support and be necessary to secure production or postproduction activity.

 

Incentive payment funds will be disbursed following the MPTD’s receipt and approval of the final certified accounting and cost report of production expenditures prepared by the production company as required by § 3101.7(d).

 

3101.2             Subject to D.C. Official Code § 39‑501.02, the Director of the MPTD determines whether individual film and digital media infrastructure projects qualify for an incentive to support the creation of production and postproduction facilities in the District. Subject to the availability of funds, the recipient of the incentive may receive:

 

(a)                A payment of twenty-five percent (25%) of the taxpayer's base infrastructure investment; provided, that if all or a portion of the base infrastructure investment is in a facility that may be used for purposes unrelated to production or postproduction activities, then the base infrastructure investment shall be eligible for the twenty-five percent (25%) payment only if the Director of the MPTD determines that the facility will support and be necessary to secure production or postproduction activity.

 

3101.3             In evaluating whether a production or infrastructure project is eligible for incentive funding, the Director of the MPTD will take into consideration the mandatory and discretionary criteria set forth in this section. The MPTD shall require all applicants to meet the mandatory criteria. The Director of the MPTD will be entitled to give priority, or more or less weight, to any of the discretionary criteria based on the MPTD's assessment of the current needs of the District of Columbia. The discretionary criteria are not intended to be used in a mathematical equation; consequently, mere compliance with a majority of these discretionary criteria does not guarantee receiving Film DC Economic Incentive Fund Program funds. The MPTD may also consider other factors in determining whether a particular project is eligible for incentive payment funding, provided that the additional factors are reasonably related to the goals of the Act.

 

3101.4             MANDATORY CRITERIA

 

To be eligible to receive production incentive funding under D.C. Official Code § 39‑501(b) or infrastructure incentive funding under D.C. Official Code § 39‑501(c), the applicant must:

 

(a)                Spend at least two hundred fifty thousand dollars ($250,000) in the District for the development, preproduction, production, or postproduction costs of a qualified production, or invest and expend at least $250,000 for a qualified film and digital media infrastructure project in the District;

 

(b)        File an application with the MPTD;

 

(c)        Enter into an incentive agreement with the MPTD;

 

(d)       Comply with the terms of the agreement; and

 

(e)        Not be delinquent in a tax or other obligation owed to the District or be owned or under common control of an entity that is delinquent in a tax or other obligation owed to the District.

 

3101.5             DISCRETIONARY CRITERIA

 

(a)                To determine whether to enter into an incentive agreement with the applicant under D.C. Official Code §§ 39‑501(b)-(c), the MPTD may consider:

 

(1)        Written documentation, verification, and proof that the production or film and digital media infrastructure project has the necessary financing in place to begin and complete project;

 

(2)        The record of the applicant in completing commitments to engage in a production or film and digital media infrastructure project;

 

(3)        The extent to which the production or film and digital media infrastructure project will attract motion picture, television, and video production to the District;

 

(4)        The extent to which the production or film and digital media infrastructure project will create contracting and procurement opportunities for certified business enterprises (CBE) and registered District business entities, including written assurances of the number of CBEs and District businesses agreed to use, and the establishment of production support vendor agreements with registered District business entities;

 

(5)        The extent to which the production or film and digital media infrastructure project will create jobs, job training opportunities, and apprenticeships for District residents;

 

(6)        The extent to which the production or film and digital media infrastructure project will produce employment opportunities for District youth;

 

(7)        The extent to which the production or film and digital media infrastructure project will promote economic development and neighborhood revitalization in the District;

 

(8)        The potential that, in the absence of a payment under D.C. Official Code § 39‑501.02(a), the production or film and digital media infrastructure project will be produced or constructed in a location other than the District;

 

(9)        In the case of a film and digital media infrastructure project, the extent to which an incentive payment will attract private investment for the production of other productions or base infrastructure investments in the District;

 

(10)      The amount and percentage of the production budget that will be spent in the District;

 

(11)           The extent to which the production will promote the District as a tourist destination;

 

(12)           In the case of a production, how many days the production will film in the District;

 

(13)           In the case of a production, the percentage of the production to be filmed in the District;

 

(14)           In the case of a production, the extent to which the production has a bona fide film distribution plan, including the date the completed content will be released for distribution, or has the secured financing in place to effectively self-distribute the content;

 

(15)           The extent to which the production schedule follows a reasonable timeline leading to completion of the project;

 

(16)           Whether the production will establish temporary hotel or other occupancy arrangements in the District for its principals and out-of-state crew;

 

(17)           The credentials and references of the production company and its principals and producers;

 

(18)           Whether the applicant or its principals have or plan to establish a long-term, sustainable media production footprint in the District;

 

(19)           Whether the applicant will locate its permanent or temporary production offices in the District;

 

(20)            The existence of an acceptable completion bond and insurance policy in place with industry recognized providers;

 

(21)           The extent to which the applicant has complied with MPTD application and information disclosure requirements;

 

(22)           That the applicant has not applied for or received any incentive support from a different District agency for the same project;

 

(23)           In the case of a qualified production, agree to contain a five (5)-second long “Filmed in the District of Columbia” credit and logo(s) provided by the MPTD in the final production, and a link to the District of Columbia and Destination DC on the project’s web page, as directed by the MPTD.  In lieu of this recognition, the qualified production company may offer alternative marketing opportunities to be evaluated by the MPTD to ensure that those opportunities offer equal or greater promotional value to the District of Columbia; and

 

(24)Any other factor considered appropriate by the MPTD.

 

(b)        Priority will be given to eligible production companies and infrastructure projects that hold the most promise for benefiting the District by hiring District residents, using local suppliers, being bonded and insured, and having a bona fide distribution plan in place.

 

3101.6             STATUTORY DISQUALIFICATION

 

Any production company shall be statutorily disqualified from receiving incentive payment funds if it:

 

(a)        Fails to spend, or any film and digital media infrastructure project that fails to invest and expend, at least two hundred fifty thousand dollars ($250,000) in the District;

 

(b)        Fails to comply with the terms of the incentive agreement with the MPTD; or

 

(c)        Is delinquent in a tax or other obligation owed to the District or is owned or under common control of an entity that is delinquent in a tax or other obligation owed to the District.

 

3101.7             PROGRAMMATIC DISQUALIFICATION

 

Any production company or film and digital media infrastructure project applicant may be disqualified from the Film DC Economic Incentive Fund Program during the application process or after the incentive has received preliminary approval, based on programmatic considerations, at the discretion of the MPTD, including, but not limited to:

 

(a)        Failure to begin qualifying project activity within same fiscal year as the date on the Qualifying Project Letter, unless a waiver is granted by the MPTD;

 

(b)        Failure to file any required reports;

 

(c)                Failure to pay industry standard wages;

 

(d)               Failure to submit, upon the conclusion of filming in the District, a certified

accounting and cost report of project expenditures, prepared in accordance with generally accepted accounting principles, that is performed by an independent certified public accountant selected and paid for by the Incentive Awardee (Awardee) prior to the reimbursement of qualified expenditures. The Awardee is not precluded from engaging its regular independent certified public accountant, if applicable, to perform this activity;

 

(e)                Engaging in economic transactions, business relationships and business structures without substance for the purpose of increasing the amount of the incentives or altering the appearances of expenditures or vendors in order to meet the qualifications for the incentives;

 

(f)                Violation of any agreement made with the District with regard to residency, District resident employment, or job development programs;

 

(g)               Failure to practice responsible production practices or adhere to the Code of Conduct as specified in the California Film Commission’s Filmmaker’s Code of Professional Responsibility, which the District has adopted as a guiding standard of conduct for its incentive fund;

 

(h)               Loss of funding required to complete the project as originally represented to the MPTD during the application process;

 

(i)                 Failure to disclose applicant’s application for additional incentive funds from a different District agency for the same project; or

 

(j)                 In the case of a production company, fails to provide a five (5)-second long “Filmed in the District of Columbia” credit and logo(s) provided by the MPTD in the final production, and a link to the District of Columbia and Destination DC on the project’s web page, as directed by the MPTD.  In lieu of this recognition, the qualified production company may offer alternative marketing opportunities to be evaluated by the MPTD to ensure that those opportunities offer equal or greater promotional value to the District of Columbia.

 

3102                APPLICATION PROCEDURES

 

3102.1             The Office of Motion Picture and Television Development (MPTD) will provide application forms upon request to parties wishing to apply for a production or infrastructure incentive under the Film DC Economic Incentive Fund Program. The application will require that specific information be submitted concerning the production company, production, production timelines, film and digital media infrastructure project, construction timeline, total anticipated expenditures, anticipated District expenditures, and other pertinent information.

 

3102.2             All financial reports submitted to the MPTD must be prepared in accordance with generally accepted accounting principles and certified by an authorized representative of the production company or film and digital media infrastructure project.

 

3102.3             The MPTD will notify the applicant of its incentive funding determination in writing within twenty (20) business days from the date the MPTD receives the Film DC Economic Incentive Fund application by sending a Qualifying Project Letter to the applicant. The Qualifying Project Letter must be signed by a person authorized to sign on behalf of the applicant and returned to the MPTD within fourteen (14) business days of the date of the letter.

 

3102.4             In the event an applicant does not meet the minimum program requirements, or the incentive payment application is not accepted or approved for any reason, the MPTD will notify the applicant in writing of its disapproval of the incentive support application by sending a Disapproval Letter within twenty (20) business days from the date the MPTD receives the Film DC Economic Incentive Fund application.

 

3102.5             If the MPTD requires additional information from the applicant in order to make a final determination of an incentive award, the MPTD will make a formal request for additional information or deliverables by sending a Request for Supplementary Information Letter within fourteen (14) business days from the date the MPTD receives the Film DC Economic Incentive Fund application.

 

3102.6             The applicant must submit to the MPTD the additional information or deliverables for further consideration and review within fourteen (14) business days of the postmarked date on the Request for Supplementary Information Letter.

 

3102.7             If the applicant does not submit the supplemental information within fourteen (14) business days of the Request for Supplementary Information Letter, the MPTD will notify the applicant of its incentive funding determination in writing within seven (7) business days.

 

3102.8             If the applicant does submit the supplemental information within fourteen (14) business days, the MPTD will notify the applicant of its final incentive funding determination in writing within seven (7) business days from the receipt of the supplementary deliverables.

 

3102.9             In order for the government of the District to reserve incentive payment funds for the Incentive Awardee, the Awardee must begin verifiable production activity or infrastructure construction in the District during the same fiscal year as the date on the Qualifying Project Letter, unless the Awardee is granted an "Extension Waiver" from the MPTD.

 

3102.10           The MPTD will schedule a production planning meeting between the Incentive Awardee and the MPTD as soon as possible after it receives a signed copy of the Qualifying Project Letter.

 

3103                INCENTIVE FUND AWARD DISBURSEMENT PROCEDURES

 

3103.1             Production and film and digital media infrastructure incentive fund awards will not be released to the Incentive Awardee until after the production period or construction project is completed and the qualifying Incentive Awardee has provided the Office of Motion Picture and Television Development (MPTD) all required receipts and proof of local qualifying expenditures subject to D.C. Official Code §§ 39‑501.01-39.501.03.

 

3103.2             The MPTD, or its accounting agent, will have up to ninety (90) business days to verify and certify the Incentive Awardee's request for the incentive award after the submission of all receipts and proof of qualifying expenditures. The MPTD will send the Incentive Awardee an itemized accounting of all certified eligible spending in the form of a Certified Qualifying Spend Letter for the Awardee to review and execute. The Certified Qualifying Spend Letter must be signed by a person authorized to sign on behalf of the Incentive Awardee and returned to the MPTD within fourteen (14) business days of the postmarked date of the Certified Qualifying Spend Letter. After the MPTD receives that signed letter, the incentive award payment will be sent to the Incentive Awardee within forty-five (45) business days.

 

3103.3             If the Incentive Awardee wishes to appeal or dispute any of the submissions that have been disqualified or have any other dispute with regard to the findings in the Certified Qualifying Spend Letter, the Incentive Awardee must alert the MPTD by mail within fourteen (14) business days of the date on the Certified Qualifying Spend Letter that the Incentive Awardee wishes to dispute, after which the Incentive Awardee will have up to thirty (30) business days to prepare its dispute or appeal response and forward it to the MPTD in the form of a Request for Reconsideration Letter. In this letter, the Incentive Awardee can itemize and substantiate any disputed qualifying spends and make a case for reconsideration. If the MPTD does not receive the dispute or appeal letter within the designated time period, the Incentive Awardee waives all rights to dispute and will agree to receive only the incentive awards outlined in the MPTD’s original Certified Qualifying Spend Letter. 

 

3103.4             If the Incentive Awardee submits its Request for Reconsideration Letter within the designated time period, the MPTD will have thirty (30) business days to review the appeal and make its final determination. A Final Certified Qualifying Spend Letter will be sent to the Incentive Awardee by the MPTD indicating the final determination of all issues in question. This determination will be final. The Final Certified Qualifying Spend Letter must be signed by a person authorized to sign on behalf of the Incentive Awardee and returned to the MPTD within fourteen (14) business days of the date of the Final Certified Qualifying Spend Letter. After the MPTD receives that signed letter, the incentive award payment will be sent to the Incentive Awardee within forty-five (45) business days. If the Incentive Awardee fails to sign the Final Certified Qualifying Letter, the Incentive Awardee waives all rights to any set aside incentive funds.

 

3199                DEFINITIONS

 

3199.1             For purposes of this section, the following terms shall have the meanings ascribed:

 

(a)                “Above-the-line Crew” means a person or persons employed by an eligible production company for a qualified production such as producers, directors, cinematographers, writers, and actors, excluding “below-the-line” crew.

 

(b)               “Act” means the Film DC Economic Incentive Act of 2006, effective March 14, 2007 (D.C. Law 16-290; D.C. Official Code §§ 39-501 et seq.).

 

(c)                “Base Infrastructure Investment” means the cost, including renovation, rehabilitation, fabrication and installation, expended by a person in the development of a qualified film and digital media infrastructure project for tangible assets of a type that are, or under the United States Internal Revenue Code will become, eligible for depreciation, amortization, or accelerated capital cost recovery for federal income tax purposes that are physically located in the District for use in a business activity in the District and that are not mobile tangible assets. The term "base infrastructure investment" does not include qualified production expenditure or qualified personnel expenditure.

 

(d)               “Below-the-line Crew” means a person or persons employed by an eligible production company for a qualified production after production begins and before production is completed, excluding above-the-line crew such as a producer, director, writer, actor, or other person in a similar position.

 

(e)                “Certified Qualifying Expenditure Letter” means a letter drafted by the Office of Motion Picture and Television Development (MPTD) that itemizes all of the approved qualified spend made by the Incentive Awardee and indicates the final total award amount due to the Incentive Awardee pursuant to the Film DC Economic Incentive Fund Program.

 

(f)                “Digital Interactive Media Production” means any interactive entertainment intended for commercial exploitation, including, but not limited to:

 

(1)               Video game projects;

 

(2)               Console games;

 

(3)               Handheld console games;

 

(4)               Mobile electronic device games; and

 

(5)               Massively multi-player online video games and virtual worlds thatmeet the requirement of multi-market distribution via the Internet or any other channel of exhibition.

 

(g)               “Disapproval Letter” means a letter to the program applicant from the MPTD that contains a final determination that the production company does not qualify for incentive funding through the Film DC Economic Incentive Fund Program.

 

(h)               “Eligible Production Company” means an entity in the business of producing qualified productions.

 

(i)                 “Extension Waiver” means a waiver issued to the Incentive Awardee allowing an extension to the rule mandating all approved incentive qualifying project activity begin within the same fiscal year as the issuance of the Qualifying Project Letter.

 

(j)                 “Film DC Economic Incentive Fund Program” means the economic incentive fund program established by the Act.

 

(k)               “Final Certified Qualifying Expenditure Letter” means a letter from the MPTD to the Incentive Awardee in response to the Awardee's formal dispute or request for reconsideration in response to the MPTD's original Certified Qualifying Expenditure Letter.

 

(l)                 “Fiscal Year” means the budget and accounting year of the District, commencing on the first day of October of each year and ending on the thirtieth (30^th) day of September of the succeeding calendar year.

 

(m)             “Incentive Awardee” means a qualifying applicant that has received a Qualifying Project Letter indicating a preliminary determination by the MPTD that the incentive program applicant qualifies for incentive funding pursuant to the Film DC Economic Incentive Fund Program.

 

(n)               “Preproduction Expenditure” means a direct expenditure in the process of preparation for actual physical production, which includes, but is not limited to, activities such as location scouting, hiring of crew, construction of sets, and the establishment of a dedicated production office.

 

(o)               “Postproduction Expenditure” means a direct expenditure for editing, Foley recording, automatic dialogue replacement, sound editing, special or visual effects, including computer-generated imagery or other effects, scoring and music editing, beginning and end credits, negative cutting, soundtrack production, dubbing, subtitling, addition of sound or visual effects, advertising, marketing, distribution, and related expenses.

 

(p)               “Production Company” means any individual, partnership, corporation or other business entity that is primarily responsible for the production of a film or television project.

 

(q)               “Qualified Film and Digital Media Infrastructure Project” means a film, video, television, or digital media production or postproduction facility located in the District, movable and immovable property and equipment related to the facility, and any other facility that is a necessary component of the primary facility. The term “qualified film and digital media infrastructure project” does not include a movie theater or other commercial exhibition facility.

 

(r)                 “Qualified Job Training Expenditure” means salary and other expenditures paid by an eligible production company to provide qualified personnel with on-the-job training to upgrade or enhance the skills of the qualified personnel as a member of the below-the-line crew for a qualified production.

 

(s)                “Qualified Personnel” means a District resident that is legally eligible for employment.

 

(t)                 “Qualified Personnel Expenditure” means an expenditure made in the District directly attributable to the production or distribution of a qualified production that is a transaction subject to taxation in the District and is a payment of wages, benefits, or fees to below-the-line crew members who are not residents of the District and includes a payment to a personal services corporation or professional employer organization for the services of qualified personnel as below-the-line crew members who are not residents of the District.

 

(u)               “Qualified Production” means motion picture, television, or video content created in whole or in part in the District, intended for nationwide distribution or exhibition by any means, including by motion picture, documentary, television programming, commercials, or internet video production and includes a trailer, pilot, or any video teaser associated with a qualified production. A motion picture film production shall include digital interactive media production. The term "qualified production" does not include production that:

 

(1)               Consists primarily of televised news or current events;

 

(2)               Consists primarily of a live sporting event, except boxing;

 

(3)               Consists primarily of political advertising;

 

(4)               Primarily markets a product or service other than a qualified production; or

 

(5)               Is a radio program.

 

(v)               “Qualified production expenditure" means a development, preproduction, production, or postproduction expenditure made in the District that is:

 

(1)        Directly attributable to the production or distribution of a qualified production;

 

(2)        Is for the production or distribution of a qualified production;

       

(3)        In accordance with generally accepted entertainment industry practices; and

 

(4)        Not a qualified personnel expenditure.

 

                 (5)        Qualified production expenditure includes the purchase of tangible

        or intangible personal property or services related to producing or distributing a qualified production, production work, production equipment, production software, development work, postproduction work, postproduction equipment, postproduction software, set design, set construction, set operations, props, lighting, wardrobe, catering, lodging, use of facilities or equipment, use of soundstages or studios, location fees, and related services, excluding services provided by the District government, and materials, use of vehicles directly attributable to the production or distribution of a qualified production, and any purchase of equipment relating to the duplication or market distribution of any content created or produced in the District, and payment of wages, benefits, or fees to any contractual or salaried employee, including above-the line crew such as producers, directors, writers, and actors, and below-the-line crew who are residents of the District, and excluding below-the-line crew who performs [sic] services in the District, including a payment to a personal services corporation or professional employer organization for the services of qualified personnel.

 

(w)       “Qualifying Project Letter” means a letter to the program applicant from the MPTD that contains a preliminary determination that the project qualifies for incentive funding pursuant to the Film DC Economic Incentive Fund Program.

 

(x)               “Request for Reconsideration Letter” means a letter that itemizes any formal dispute the Incentive Awardee has with any of the findings within the MPTD's Certified Qualifying Expenditure Letter and determination of final incentive award.

 

(y)        “Request for Supplementary Information Letter” means a letter to the program applicant from the MPTD that contains a formal request for the program applicant to submit additional information to the MPTD as part of a continuation of the application consideration process.

 

 

Comments on these rules should be submitted to Herbert Niles, Deputy Director, Office of Motion Picture and Television Development, Government of the District of Columbia, 200 I Street, SE, Suite 1800, Washington, DC 20003, via telephone at [phone], via email at [e-mail], or online at www.dcregs.dc.gov, within thirty (30) days of the date of publication of this notice in the D.C. Register.  Additional copies of these rules are available from the above address.