HAR § 18-235-17-14 — Verification review of motion picture, digital media, and film production income tax credit claims

(a) As required by section 235-17(h), HRS, and Section 6 of Act 143, Session Laws of Hawaii 2017, a taxpayer claiming the tax credit under section 235-17, HRS, must submit to the Hawaii film office a verification review, together with a production report as described in section 18-235-17-03(b), no later than ninety days following the end of the calendar year in which the qualified production costs were incurred. (b) A “verification review” is an agreed-upon procedures report prepared by a qualified certified public accountant. The agreed-upon procedures report, must: (1) Verify that the production has obtained a preproduction registration approval letter and tentative allocation of credit under section 18-235-17-04(c) from the Hawaii film office; (2) Evaluate the taxpayer’s assertion of the amounts proposed as qualified production costs within the meaning of section 235-17, HRS, for the calendar year; HRS §235-17 HRS §235-17 §18-235-17-15 (3) Test compliance with the elements set forth in section 235-17, HRS, and any relevant administrative rules or administrative guidance issued by the department and Hawaii film office; (4) V erify that the production report to be submitted to the Hawaii film office complies with section 18-235-17-03(b); (5) Separately state any costs that were deemed not qualified production costs; and (6) Separately state the total of qualified production costs for which no exceptions were noted. (c) The department, in consultation with the Hawaii film office, shall issue a Tax Information Release specifying the procedures by which the agreed-upon procedures report shall be prepared by the qualified certified public accountant. (d) There is no requirement that the preparation of the verification review start after the end of the calendar year. The process of preparing the verification review may begin after production is completed or if no further production costs will be incurred for the calendar year. Example 1: XYZ Productions finishes the filming of its feature film on July 31, 2019. The qualified certified public accountant that XYZ Productions retains may begin the preparation of the verification review on August 1, 2019 because the filming of the feature film was completed on July 31, 2019. Example 2: Assume the same facts as Example 1, except that XYZ Productions’ feature film is a split-year production, filming in calendar year 2019 will stop on November 30, 2019, and filming will be completed in March of 2020. The qualified certified public accountant that XYZ Productions retains may begin the preparation of the 2019 verification review on December 1, 2019 because the filming of the feature was stopped for calendar year 2019 on November 30, 2019. (e) It is not necessary that the verification review be addressed to, or be relied upon by, any person other than the taxpayer. (f) It is the taxpayer’s responsibility to provide all relevant information to the taxpayer’s qualified certified public accountant. (g) The cost of the verification review shall be the responsibility of the taxpayer; provided that it may be claimed as a qualified production cost as described in section 18-235-17-10(b). (h) Inclusion of a verification review with the production report does not preclude the department from auditing and adjusting the tax credit amounts claimed.