KRS 139.538 — Encouragement of motion picture industry -- Legislative purpose -- Definitions -- Tax credit -- Administrative regulations

(1) It is the intent and purpose of the General Assembly in enacting this section and
KRS 139.990(5), to encourage the motion picture industry to choose locations in the
Commonwealth for the filming or producing of motion pictures, by providing an
exemption from sales and use taxes. The exemption is accomplished by granting a
refundable credit for sales and use taxes paid o n purchases made in connection with
the filming or producing of motion pictures in Kentucky.
(2) (a) On or after April 27, 2018, and until July 1, 2022, the department shall not
accept any new applications as provided by subsection (4) of this section.
(b) On or before June 1, 2019, the department shall provide the following
information to the Interim Joint Committee on Appropriations and Revenue
for all fiscal years data is available:
1. The name of the motion picture company;
2. The filming location or locations in this state;
3. A brief description of the production;
4. The amount of sales and use tax refunded; and
5. The total amount of all sales and use tax refunded to motion picture
production companies during each fiscal year reported.
(3) As used in this section and KRS 139.990(5):
(a) "Financial institution" means any bank or savings and loan institution in the
Commonwealth which carries FDIC or FSLIC insurance;
(b) "Motion picture production company" means a company engaged in the
business of produc ing motion pictures intended for a theatrical release or for
exhibition on national television either by a network or for national
syndication, or television programs which will serve as a pilot for or a
segment of a nationally televised dramatic series, e ither by a network or for
national syndication; and
(c) "Secretary" means the secretary of the Kentucky Finance and Administration
Cabinet.
(4) Any motion picture production company that intends to film all or parts of a motion
picture in the Commonwealth and desires to receive the credit provided for in
subsection (7) of this section shall, prior to the commencement of filming:
(a) Provide the de partment with the address of a Kentucky location at which
records of expenditures qualifying for the tax credit will be maintained, and
with the name of the individual maintaining these records; and
(b) File an application for the tax credit within sixty ( 60) days after the
completion of filming or production in Kentucky. The application shall
include a final expenditure report providing documentation for expenditures in
accordance with administrative regulations promulgated by the department.
(5) To qualif y as a basis for the financial incentive, expenditures must be made by
check drawn upon any Kentucky financial institution.
(6) The twelve (12) month period during which expenditures may qualify for the tax
credit shall begin on the date of the earliest expenditure reported.
(7) Any motion picture production company which films or produces one (1) or more
motion pictures in the Commonwealth during any twelve (12) month period shall,
upon making application therefor and meeting the other requirements prescri bed in
this section, be entitled to a refundable tax credit equal to the amount of Kentucky
sales and use tax paid for purchases made in connection with the filming or
production of a motion picture.
(8) The department shall, within sixty (60) days followi ng the receipt of an application
for a credit for sales and use tax paid, calculate the total expenditures of the motion
picture production company for which there is documentation for funds expended in
the Commonwealth, calculate the amount of credit to w hich the applicant is
entitled, and certify the amount of the credit to the secretary. In the case of an audit,
as provided for in subsection (13) of this section, the department shall certify the
amount of the credit due to the secretary within one hundre d eighty (180) days
following the receipt of the motion picture production company's application.
(9) Upon receipt of the certification of the amount of credit from the department, the
secretary shall cause the refund of sales taxes paid to be remitted to the motion
picture production company. For purposes of payment and funding thereof, the
credit shall be paid in the same manner as other claims on the State Treasury are
paid. They shall not be charged against any appropriation but shall be deducted
from tax receipts for the current fiscal year.
(10) The sales and use taxes paid by the motion picture production company for which a
refundable tax credit is granted shall be deemed not to have been legally paid into
the State Treasury, and the refund of the cr edit shall not be in violation of Section
59 of the Kentucky Constitution.
(11) Any tax credit or part thereof paid to a motion picture production company as a
result of error by the department shall be repaid by such company to the secretary.
(12) Any tax credit or part thereof paid to a motion picture production company as a
result of error or fraudulent statements made by the motion picture production
company shall be repaid by such company to the secretary, together with interest, at
the tax interest rate provided for in KRS 131.010(6).
(13) The department may require that reported expenditures and the application for the
tax credit from a motion picture production company be subjected to an audit by the
department auditors to verify expenditures.
(14) For companies in the business of producing films or television shows other than
those which would qualify them for the credit under the definition of "motion
picture production company," the department may require separate accounting
records for the reporti ng of expenditures made in connection with the application
for a refundable tax credit.
(15) The department may promulgate appropriate administrative regulations to carry out
the intent and purposes of this section.