Establishes the empire state music production credit and the empire state digital gaming media production credit; repealer

Subdivision (a) lays out eligibility criteria for companies that file under the corporate franchise or personal income taxes.

Subdivision (b) limits the annual amount of refundable credits available under the program to no more that $25 million a year, allocates the available credits to three regions of the state, namely New York City at fifty percent of the total credit allocations per year, the metro New York suburbs at twenty percent and Upstate at thirty percent. A project must perform at least 60 percent of eligible costs within a region to qualify for credits in that region.

Subdivision (c) defines eligible "below the line" costs and qualified productions.

Sections 2, 3 and 4 establish the credit in Articles 9-A and 22 of the Tax Law.

Sections 5 through 8 create a new section forty-four of the Tax Law for digital gaming that mirrors the incentives for the music industry.

Section 9 authorizes the Commissioner of Economic Development to establish corresponding regulations and procedures to allow for the effective administration of the credit.

Sections 10, 11 and 12 repeal the amendments to the Excelsior Credit program adopted as part of the SFY 2016 budget.

Section 13 creates a new section 243 in the economic development law for reporting requirements for the two new programs. Reports will be filed by ESDC on a biannual basis to be sent to the Director of the Budget and the fiscal chairs of the legislature. The reports must detail the amount of credits claimed and paid, the number of projects by size and region, and the name of the taxpayer or taxpaying entity receiving the credits.

In addition, every third year ESDC will be required to produce and present a report to the Executive and the Legislature prepared by an

independent third party on how the programs are operating and the overall economic impact of the programs on the State economy.

Section 14 contains the effective date of the act and a three year sunset to the programs.

Justification

This bill is designed to provide meaningful and effective incentives two industries essential to the future of the State. Provisions hoping to aid and intent both music and digital gaming production in New York State were included in the adopted SFY 16 Budget, but unfortunately, it now appears that those incentives fail to provide any real boosts to these industries The bill would remove the in hoped-for industry support from the Excelsior program, and support production activities occurring in the State. The need for a functioning incentive program can be seen in that New York currently only generates a tiny fraction, estimated at less than four percent, of the $17 billion U.S., and less than two percent of the $55 billion global music production industry. Unfortunately, in digital gaming New York currently fares even worse, with only one percent of the U.S. $25 billion industry, and an insignificant blip of the $70 billion worldwide gaming industry.

What is truly disconcerting about these numbers is that New York is undoubtedly the home of the most creative individuals in the music industry, and graduates the finest game developers anywhere. We need robust and accessible programs to encourage these creative geniuses to work and perform in the State, for industries that have a potential for exponential growth both in Down and Up State.

Aiding either of these programs through the Excelsior template has been seen as being nearly impossible, and no one is aware of any claims for credits for the two industries since they were placed in Excelsior last year. Consequently, both industries have approached the Legislature for different, more strategic and easier to access programs.

This bill has received universal support from the music and gaming industries. The bill provides for a true "below the line" production credits that will exponentially grow these industries in New York, and create employment while not providing taxpayer funds for "stars and directors". In order to not to place any strains on the State budget, the credit for both industries is capped at $25 million a year for each industry.

The bill also provides for strong reporting requirements to determine if the incentives will produce significant company revenue and permanent employment growth in the State.

Prior legislative history

none

Fiscal implications

Up to $50 million a year in tax expenditures.

Effective date

Immediately and shall apply to taxable years beginning on or after January 1, 2017, and will be deemed to expire and be repealed on December 31, 2019.