[Congressional Bills 108th Congress]
[From the U.S. Government Publishing Office]
[H.R. 4736 Introduced in House (IH)]
108th CONGRESS
2d Session
H. R. 4736
To amend the Internal Revenue Code of 1986 to encourage the production
of independent motion picture films in the United States.
_______________________________________________________________________
IN THE HOUSE OF REPRESENTATIVES
June 25, 2004
Ms. McCarthy of Missouri (for herself, Mr. Rangel, Mr. Burton of
Indiana, Ms. Slaughter, Mr. Doggett, Mr. Kucinich, Mr. Schiff, Mr.
McIntyre, Mr. McGovern, and Ms. Millender-McDonald) introduced the
following bill; which was referred to the Committee on Ways and Means
_______________________________________________________________________
A BILL
To amend the Internal Revenue Code of 1986 to encourage the production
of independent motion picture films in the United States.
Be it enacted by the Senate and House of Representatives of the
United States of America in Congress assembled,
SECTION 1. SHORT TITLE.
This Act may be cited as the ``Independent Film Small Business Job
Creation Act of 2004''.
SEC. 2. DEDUCTION FOR INDEPENDENT FILM PRODUCTION INVESTMENTS.
(a) In General.--Part VI of subchapter B of chapter 1 of the
Internal Revenue Code of 1986 (relating to itemized deduction for
individuals and corporations) is amended by adding at the end the
following new section:
``SEC. 199. INDEPENDENT FILM PRODUCTION INVESTMENTS.
``(a) Allowance of Deduction.--
``(1) In general.--In the case of a taxpayer who holds a
qualified investment during any portion of the taxable year,
there shall be allowed as a deduction for the taxable year an
amount equal to the applicable percentage of the qualified
expenditures relating to such investments.
``(2) Applicable percentage.--For purposes of paragraph
(1), the applicable percentage shall be determined on the basis
of the amount which bears the same ratio to the qualified
expenditures made during the portion of the taxable year
referred to in paragraph (1) as the amount of the taxpayer's
qualified investment in the eligible independent film
production entity bears to the aggregate qualified investment
in such entity.
``(b) Qualified Expenditures.--For purposes of this section--
``(1) In general.--The term `qualified expenditures' means
amounts paid or incurred by an eligible independent film
production entity for preproduction, production, and post-
production of a qualified motion picture film.
``(2) Post production.--The term `post-production' means,
with respect to any motion picture film, distribution and
promotion of such film.
``(3) Denial of double benefit.--Except as provided by
subsection (a), qualified expenditures shall be disregarded in
determining--
``(A) the adjusted basis of any property held at
the entity level, and
``(B) any deduction allowed at the entity level or
at the partner or similar level.
``(c) Qualified Investment.--For purposes of this section--
``(1) In general.--The term `qualified investment' means
any equity investment in an eligible independent film
production entity if--
``(A) such investment is acquired by the taxpayer
at its original issue (directly or through an
underwriter) solely in exchange for cash,
``(B) substantially all of such cash is used by the
eligible independent film production entity for
qualified expenditures, and
``(C) such investment is designated to be used for
preproduction, production, and post-production of a
qualified motion picture film by the eligible
independent film production entity.
``(2) Treatment of subsequent purchasers.--The term
`qualified investment' shall include any equity investment
which would (but for paragraph (1)(A)) be a qualified
investment in the hands of the taxpayer if such investment was
a qualified investment in the hands of a prior holder.
``(3) Redemptions.--A rule similar to the rule of section
1202(c)(3) shall apply for purposes of this subsection.
``(4) Equity investment.--The term `equity investment'
means--
``(A) any stock (other than nonqualified preferred
stock as defined in section 351(g)(2)) in an entity
which is a corporation, and
``(B) any capital interest in an entity which is a
partnership.
``(d) Eligible Independent Film Production Entity.--
``(1) In general.--The term `eligible independent film
production entity' means any domestic corporation or
partnership (and any person related to such corporation or
partnership)--
``(A) which is organized and operated for the
primary purpose of producing a qualified motion picture
film outside the formal studio structure, and
``(B) which takes such film into preproduction,
production, and post production through financial
funding of its own money or assets, private investors,
financial institutions, guarantees, presale advances,
or distribution contracts.
``(2) Related person.--For purposes of paragraph (1), a
person is a related person to another person if--
``(A) the relationship between such persons would
result in a disallowance of losses under section 267 or
707(b), or
``(B) such persons are members of the same
controlled group of corporations (as defined in section
1563(a), except that `more than 50 percent' shall be
substituted for `at least 80 percent' each place it
appears therein).
``(3) Release of film not taken into account.--For purposes
of paragraph (1), whether a motion picture film is released
theatrically, directly to video cassette, DVD, or any other
format, television or cable programming movie-of-the-week,
miniseries, or pilot production shall not be taken into
account.
``(e) Qualified Motion Picture Film.--For purposes of this
section--
``(1) In general.--The term `qualified motion picture film'
means a motion picture film--
``(A) the budget of which is greater than
$2,000,000 and less than $20,000,000, and
``(B) not less than 95 percent of the wages or
self-employment income paid or incurred for producing
such film (including the preproduction, production, and
post-production stages) is for services provided within
the United States or any of its possessions.
``(2) Exception.--The term `qualified motion picture film'
shall not include any motion picture film which contains actual
sexually explicit conduct (as defined by section 2257(h)(1) of
title 18, United States Code.
``(3) Budget.--The budget for a motion picture film--
``(A) shall not exceed the face amount of the
aggregate completion bonds issued with respect to the
motion picture film, and
``(B) shall include the preproduction, production,
and post-production stages of producing such film.
``(4) Wages; self-employment income.--
``(A) Wages.--The term `wages' has the meaning
given to such term by section 3121.
``(B) Self-employment income.--The term `self-
employment income' has the meaning given to such term
by section 1402.
``(5) Inflation adjustment.--In the case of a taxable year
after 2005, the dollar amounts contained in paragraph (1)(A)
shall each be increased by an amount equal to--
``(A) such dollar amount, multiplied by
``(B) the cost-of-living adjustment determined
under section 1(f)(3) for such calendar year by
substituting `calendar year 2004' for `calendar year
1992' in subparagraph (B) thereof.
Any increase under this subparagraph which is not a multiple of
$1,000 shall be rounded to the next lowest multiple of $1,000.
``(f) Recapture In Certain Cases.--
``(1) In general.--If, at any time during the 5-year period
beginning on the date of the original issue of a qualified
investment in a eligible independent film production entity,
there is a recapture event with respect to such investment,
then the tax imposed by this chapter for the taxable year in
which such event occurs shall be increased by the credit
recapture amount.
``(2) Recapture amount.--For purposes of paragraph (1), the
recapture amount is an amount equal to the sum of--
``(A) the aggregate decrease in the deductions
allowed to the taxpayer under this chapter for all
prior taxable years which would have resulted if no
deduction had been determined under this section with
respect to such investment, plus
``(B) interest at the underpayment rate established
under section 6621 on the amount determined under
subparagraph (A) for each prior taxable year for the
period beginning on the due date for filing the return
for the prior taxable year involved.
No deduction shall be allowed under this chapter for interest
described in subparagraph (B).
``(3) Recapture event.--For purposes of paragraph (1),
there is a recapture event with respect to an equity investment
in a eligible independent film production entity if--
``(A) such entity ceases to be a eligible
independent film production entity,
``(B) the proceeds of the investment cease to be
used as required of subsection (c)(1)(B), or
``(C) such investment is redeemed by such entity.
``(4) Special rule.--Any increase in tax under this
subsection shall not be treated as a tax imposed by this
chapter for purposes of section 55.
``(g) Basis Reduction.--The basis of any qualified investment shall
be reduced by the amount of any deduction determined under this section
with respect to such investment. This subsection shall not apply for
purposes of sections 1202, 1400B, and 1400F.
``(h) Election to have credit not apply.--A taxpayer may elect to
have this section not apply for any taxable year.
``(i) Regulations.--The Secretary shall prescribe such regulations
as may be appropriate to carry out this section, including
regulations--
``(1) which prevent the abuse of the purposes of this
section, and
``(2) which impose appropriate reporting requirements.''.
(b) Conforming Amendment.--Subsection (a) of section 1016 of such
Code is amended by striking ``and'' at the end of paragraph (27), by
striking the period at the end of paragraph (28) and inserting ``;
and'', and by adding at the end the following new paragraph:
``(29) to the extent provided in section 199(g).''.
(c) Clerical Amendment.--The table of sections for part VI of
subchapter B of chapter 1 of such Code is amended by adding at the end
the following new item:
``Sec. 199. Independent film production
investments.''.
(d) Effective Date.--The amendments made by this section shall
apply to investments made after December 31, 2004.
<all>