I

106TH CONGRESS

2D SESSION H. R. 5497

To amend the Internal Revenue Code of 1986 to allow a credit against

income tax for certain audio or video postproduction equipment.

IN THE HOUSE OF REPRESENTATIVES

OCTOBER 18, 2000

Mr. WELLER (for himself, Mr. FOLEY, Mr. BECERRA, Mr. MATSUI, Mr.

RAMSTAD, Mr. ENGLISH, Mr. ROGAN, Mr. SESSIONS, Mr. SENSENBRENNER, Mr. LEWIS of Georgia, Mr. COYNE, Mrs. MALONEY of New

York, Mrs. JONES of Ohio, Mr. WAXMAN, Mr. CONDIT, and Mr. BERMAN) 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 allow a

credit against income tax for certain audio or video

postproduction equipment.

1 Be it enacted by the Senate and House of Representa2 tives of the United States of America in Congress assembled,

3 SECTION 1. CREDIT FOR BUSINESS USE OF AUDIO AND

4 VIDEO POSTPRODUCTION EQUIPMENT.

5 (a) IN GENERAL.—Subpart D of part IV of sub6 chapter A of chapter 1 of the Internal Revenue Code of

7 1986 (relating to business related credits) is amended by

8 adding at the end the following new section:
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1 ‘‘SEC. 45D. AUDIO AND VIDEO POSTPRODUCTION EQUIP2 MENT.

3 ‘‘(a) IN GENERAL.—For purposes of section 38, the

4 postproduction equipment credit determined under this

5 section for the taxable year is an amount equal to 20 per6 cent of the excess (if any) of—

7 ‘‘(1) the aggregate basis of qualified

8 postproduction equipment placed in service by the

9 taxpayer during the taxable year, over

10 ‘‘(2) an amount equal to 5 percent of the tax11 payer’s average annual gross receipts from digital

12 postproduction services for the 4 preceding taxable

13 years.

14 ‘‘(b) DEFINITIONS.—For purposes of this section—

15 ‘‘(1) QUALIFIED POSTPRODUCTION EQUIP16 MENT.—The term ‘qualified postproduction equip17 ment’ means any tangible personal property (not in18 cluding a building and its structural components)

19 but only if—

20 ‘‘(A) it is reasonable to expect that at least

21 50 percent of the use of such property during

22 each of the first 3 years after being placed in

23 service by the taxpayer will be—

24 ‘‘(i) to provide digital postproduction

25 services, or
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1 ‘‘(ii) to maintain, operate, control,

2 regulate, repair, measure, or test property

3 used to provide digital postproduction serv4 ices, and

5 ‘‘(B) section 168 applies to such property.

6 ‘‘(2) POSTPRODUCTION SERVICES.—The term

7 ‘postproduction services’ means—

8 ‘‘(A) services to transform, manipulate, as9 semble, and duplicate visual moving images and

10 synchronous sound previously captured during

11 principal photography,

12 ‘‘(B) the creation of visual images and syn13 chronous sound to be used with visual moving

14 images and sound captured during principal

15 photography,

16 ‘‘(C) animation services, or

17 ‘‘(D) the providing of equipment to per18 form services referred to in any of the pre19 ceding subparagraphs.

20 ‘‘(3) DIGITAL POSTPRODUCTION SERVICES.—

21 The term ‘digital postproduction services’ means

22 postproduction services where—

23 ‘‘(A) the customer delivery requirement to

24 meet the ATSC compression format restraints

25 is one of the 23 specified image formats listed
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1 in the Advanced Television Systems Committee

2 Digital Television Standard Table 3, or

3 ‘‘(B) program audio has more than 2

4 channel sound that will be downmixed through

5 use of the AC3 compression standard specified

6 by the Advanced Television Systems Committee

7 Digital Television Standard.

8 ‘‘(c) RECAPTURE.—Rules similar to the rules of sec9 tion 50(a) shall apply to the credit determined under this

10 section; except that—

11 ‘‘(1) the recapture percentage shall be 100 per12 cent if the property is used to provide services on

13 any production subject to the record keeping re14 quirements of section 2257 of title 18, United States

15 Code (relating to record keeping requirements with

16 respect to films, etc., with sexually explicit content),

17 and

18 ‘‘(2) if, during any of the first 3 years after the

19 property is placed in service, less than 50 percent of

20 the use of the property is for purposes referred to

21 in subsection (b)(1)(A), such property shall cease to

22 be qualified postproduction equipment as of the be23 ginning of the earliest such year.

24 ‘‘(d) SPECIAL RULES.—
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1 ‘‘(1) PROPERTY USED OUTSIDE UNITED

2 STATES.—No credit shall be determined under this

3 section with respect to property which is used pre4 dominantly outside the United States.

5 ‘‘(2) CERTAIN RULES TO APPLY.—Rules similar

6 to the rules of subsections (c)(6), (f), and (g) of sec7 tion 41 shall apply for purposes of this section.

8 ‘‘(3) REDUCTION IN BASIS.—For purposes of

9 this subtitle, if a credit is determined under this sec10 tion with respect to any property, the basis of such

11 property shall be reduced by the amount of the cred12 it so determined.’’

13 (b) CONFORMING AMENDMENTS.—

14 (1) Section 38(b) of such Code is amended—

15 (A) by striking ‘‘plus’’ at the end of para16 graph (11),

17 (B) by striking the period at the end of

18 paragraph (12), and inserting ‘‘, plus’’, and

19 (C) by adding at the end the following new

20 paragraph:

21 ‘‘(13) the postproduction credit determined

22 under section 45D.’’

23 (2) Subsection (d) of section 39 of such Code

24 (relating to carryback and carryforward of unused
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1 credits) is amended by adding at the end the fol2 lowing new paragraph:

3 ‘‘(9) NO CARRYBACK OF SECTION 45D CREDIT

4 BEFORE JANUARY 1, 2001.—No portion of the un5 used business credit for any taxable year which is

6 attributable to the credit determined under section

7 45D may be carried back to a taxable year begin8 ning before January 1, 2001.’’

9 (3) The table of sections for subpart D of part

10 IV of subchapter A of chapter 1 of such Code is

11 amended by adding at the end the following new

12 item:

‘‘Sec. 45D. Audio and video postproduction equipment.’’

13 (c) EFFECTIVE DATE.—The amendments made by

14 this section shall apply to property placed in service after

15 December 31, 2000.

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