DAVID Y. IGE

RONA M. SUZUKI

GOVERNORDIRECTOR OF TAXATIONJOSH GREEN M.D.

DAMIEN A. ELEFANTE

LT. GOVERNOR

DEPUTY DIRECTOR

STATE OF HAWAII

DEPARTMENT OF TAXATIONP.O. BOX 259
HONOLULU, HAWAII 96809

PHONE NO: (808) 587-1530
FAX NO: (808) 587-1584

November 19, 2019

DEPARTMENT OF TAXATION ANNOUNCEMENT NO. 2019-15
RE:

New Administrative Rules Relating to the Motion Picture, Digital Media, and Film
Production Income Tax Credit, Effective November 17, 2019

On November 7, 2019, Governor David Ige signed and adopted Administrative Rulesrelating to the Motion Picture, Digital Media, and Film Production Income Tax Credit (filmcredit) under Hawaii Revised Statutes (HRS) section 235-17, as amended by Act 275, Session
Laws of Hawaii (SLH) 2019 (Act 275) and Act 143, SLH 2017 (Act 143). This Tax
Announcement serves as notice that these new administrative rules which took effect on
November 17, 2019, supersede the following previously-issued film credit guidance:
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Tax Information Release (TIR) No. 2019-01 (revised): Proposed Administrative Rules
Relating to the Motion Picture, Digital Media, and Film Production Income Tax Credit asamended by Act 143;
TIR No. 2018-04: Guidance Regarding the Motion Picture, Digital Media, and FilmProduction Income Tax Credit; Temporary Hawaii Administrative Rules (HAR) §§ 18235-17-01 to 18-235-17-20; Act 143, Session Laws of Hawaii 2017;
Temporary Hawaii Administrative Rules §§ 18-235-17-01 to 18-235-17-20;
TIR No. 2010-04: Interpretation of “Qualified Production” for purposes of Tax Credit
Claims under the Motion Picture, Digital Media, and Film Production Income Tax Credit,HRS § 235-17;
TIR No. 2009-05: Advanced Notice of Proposed Administrative Rules Relating to theTaxation of the Motion Picture and Television Film Production Industry;
TIR No. 2008-02: Advanced Notice of Proposed Administrative Rules Relating to theTaxation of the Motion Picture and Television Film Production Industry; andTIR No. 2006-02: Refundable Income Tax Credit for Persons Engaged in the Motion
Picture, Television, and Digital Media Production Business.

A summary of the notable changes regarding the administration of the film credit andrelated Hawaii tax issues:•All taxpayers claiming the film credit must submit to the Hawaii Film Office averification review as part of the post-production report as described in section 18-23517-03(b), HAR, no later than 90 days following the end of the calendar year in which thequalified production costs were incurred.

Department of Taxation Announcement No. 2019-15
November 19, 2019
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Qualified production costs are production costs that are directly attributable to andincurred by a qualified production in the State that are subject to the:o General Excise Tax (GET) at retail rate of 4% under chapter 237, HRS, if the payee isengaged in business in the State;o Use tax at retail rate of 4% under chapter 237, HRS, if the payee is not engaged inbusiness in the State, oro Income tax under chapter 235, HRS, if the costs are not subject to GET or use tax.
A motion picture, television, or film production company is not considered to be in thebusiness of “manufacturing” for purposes of the GET under chapter 237, HRS. As aresult, the 0.5% GET rate imposed under HRS section 237-18(c) does not apply toservices provided to a motion picture, television, or film production company;o A loan-out company providing services to a qualified production company is subject
to the GET at retail rate of 4%, plus any applicable county surcharge.
Airfare is a qualified production cost subject to the following rules:
o The airfare is to or from Hawaii or between the islands in the State;o The airfare does not include a scheduled layover that is twelve hours or longer;
ando The cost of airfare may not exceed $2,000 per person per way.
Qualified production costs do not include:o Any amounts paid to the taxpayer claiming the credit or to any of the taxpayer’srelated entities;o Any amounts paid as gratuity or a tip; ando Costs for which another state or county’s tax credit, rebate, or other incentive may
be claimed.
Per diem payments are a qualified production cost to the extent that the payments are
subject to Hawaii income tax if paid by an employer to an employee, or GET at the retailrate of 4% if the payee is not an employee; andFringe benefits provided by an employer to an employee are a qualified production costto the extent that the fringe benefit is reported as a wage and is subject to Hawaii incometax.

TIR 2019-01 (revised) will remain in effect until November 17, 2019, the effective dateof the Administrative Rules. If you have any questions regarding this Announcement, pleasecontact the Rules Office by email at Tax.Rules.Office@hawaii.gov or by phone at (808) 5871530.

RONA M. SUZUKI
Director of Taxation