Amendment #293 to H.5562

Amendment #293 to H5562

Video Games Tax Credit

Mr. Donahue of Worcester moves to amend the bill by adding the following new sections:-

SECTION XX. Section 6 of chapter 62 of the General Laws is hereby amended by adding the following new subsection:-

(jj)(1) As used in this subsection, the following words shall, unless the context clearly requires otherwise, have the following meanings:

"Development costs", ordinary and necessary costs directly attributable to qualified digital game development, including, but not limited to, software engineering, programming, game design, writing, art, animation, visual effects, audio production, music composition, quality assurance, localization, user interface and user experience design, performance capture, motion capture, testing, live operations, post-launch support, downloadable content, development hardware and software, licensing costs directly related to development and professional services directly related to development.

Development costs shall not include expenditures for marketing, advertising, promotion, distribution, general corporate overhead unrelated to qualified digital game development, financing costs, lobbying expenses, costs associated with the transfer of tax credits or amounts reimbursed by the commonwealth.

"Digital game development company", a corporation, partnership, limited liability company or other business entity engaged in qualified digital game development; provided, however, that a digital game development company shall not include any company that is more than 25 per cent owned, affiliated or controlled by any company or person that is in default on a loan made by the commonwealth or a loan guaranteed by the commonwealth.

"Massachusetts development costs", development costs attributable to property used or services performed within the commonwealth directly related to qualified digital game development.

"Massachusetts payroll", salaries, wages and other compensation constituting Massachusetts source income and paid to employees directly engaged in qualified digital game development; provided, however, that compensation paid to any individual employee in excess of $1,000,000 during the taxable year shall not be included.

"Qualified digital game development", the design, development, programming, engineering, production, testing, modification, localization, deployment, maintenance, support or live operation of an interactive digital game intended for commercial distribution or use on a computer, console, mobile device, cloud-based platform or other digital platform, including downloadable content, expansion content, post-launch content updates and game development tools developed for commercial use.

Qualified digital game development shall not include: (i) software developed primarily for the internal operations of a business; (ii) internet websites or applications whose primary purpose is advertising, marketing or electronic commerce; (iii) gambling, casino gaming, sports wagering or fantasy sports platforms; or (iv) products developed primarily for political advocacy.

“Secretary”, the secretary of economic development.

(2) A taxpayer that is a digital game development company shall be allowed a credit against the taxes imposed by this chapter equal to 25 per cent of: (i) Massachusetts payroll; and (ii) Massachusetts development costs other than Massachusetts payroll; provided, however, that Massachusetts development costs shall equal or exceed $50,000 during the taxable year.

(3) A taxpayer shall be allowed an additional credit against the taxes imposed by this chapter equal to 25 percent of all Massachusetts Development Costs, where the development take place in a gateway municipality.

(3) The credit allowed pursuant to this subsection shall be allowed for the taxable year in which the credit is issued. Any amount of the credit not used in the taxable year may be carried forward for not more than 5 taxable years.

(4) A taxpayer entitled to a credit under this subsection may transfer, sell or assign the credit, in whole or in part, in the manner prescribed by the commissioner.

(5) The secretary of economic development, in consultation with the commissioner, shall establish procedures for the certification of digital game development companies, qualified digital game development and Massachusetts development costs.

(6) The commissioner, in consultation with the secretary of economic development, shall promulgate such rules and regulations as are necessary for the administration of this subsection.

SECTION 2. Chapter 63 of the General Laws is hereby amended by inserting after section 38UU the following section:-

Section 38VV. (a) As used in this section the following words shall, unless the context clearly requires otherwise, have the following meanings:—

''Commissioner'', the commissioner of revenue.

''Development cost'' or ''development costs'', expenditures directly incurred in qualified digital game development. The term shall include wages and salaries paid to individuals employed in qualified digital game development; software engineering; programming; game design; writing; art; animation; visual effects; audio production; music composition; quality assurance; localization; user interface and user experience design; performance capture; motion capture; testing; live operations; post-launch support; downloadable content; development hardware and software; licensing costs directly related to development; professional services directly related to development; and any other development expense as may be determined by the commissioner, in consultation with the secretary, to be an eligible development cost. The term shall not include costs incurred in marketing, advertising or distribution of a digital game, costs related to the transfer of tax credits or amounts paid to persons or businesses as a result of their participation in profits from the exploitation of the digital game.

''Digital game development company'', a company including its subsidiaries engaged in the business of qualified digital game development. The term ''digital game development company'' shall not mean or include any company which is more than 25 per cent owned, affiliated or controlled by any company or person which is in default on a loan made by the commonwealth or a loan guaranteed by the commonwealth.

''Massachusetts development cost'', a development cost clearly and demonstrably incurred in the commonwealth.

''Massachusetts payroll'', wages and salaries constituting Massachusetts source income paid to individuals directly engaged in qualified digital game development; provided, however, that compensation paid to any individual employee in excess of $1,000,000 during the taxable year shall not be included.

''Qualified digital game development'', the design, development, programming, engineering, production, testing, modification, localization, deployment, maintenance, support or live operation of an interactive digital game intended for commercial distribution or use on a computer, console, mobile device, cloud-based platform or other digital platform, including downloadable content, expansion content, post-launch content updates and game development tools developed for commercial use. The term ''qualified digital game development'' shall not include software developed primarily for the internal operations of a business, internet websites or applications whose primary purpose is advertising, marketing or electronic commerce, gambling, casino gaming, sports wagering or fantasy sports platforms or products developed primarily for political advocacy.

''Qualified digital game development project'', a project undertaken by a digital game development company for qualified digital game development that has been certified by the secretary pursuant to this section.

''Secretary'', the secretary of economic development.

(b) A taxpayer engaged in qualified digital game development shall be allowed a credit against the taxes imposed by this chapter for the employment of persons within the commonwealth in connection with a qualified digital game development project. The credit shall be equal to 25 per cent of the total aggregate payroll paid by a digital game development company that constitutes Massachusetts source income, when total Massachusetts development costs incurred in the commonwealth equal or exceed $50,000 with respect to a qualified digital game development project over a period not to exceed 5 consecutive taxable years. For purposes of this subsection, the term ''total aggregate payroll'' shall not include the salary of any employee whose salary is equal to or greater than $1,000,000.

(c) A taxpayer shall be allowed an additional credit against the taxes imposed by this chapter equal to 25 per cent of all Massachusetts development costs, not including the payroll expenses used to claim a credit pursuant to subsection (b), where the qualified digital game development project is also eligible for a credit pursuant to subsection (b).

(d) The tax credit shall be taken against the taxes imposed under this chapter and shall, at the election of the taxpayer, be refundable to the extent provided for in section 32E. Any amount of the tax credit that exceeds the tax due for a taxable year may be carried forward by the taxpayer to any of the 5 subsequent taxable years.

(e)(1) All or any portion of tax credits issued in accordance with the provisions of this section may be transferred, sold or assigned to other taxpayers with tax liabilities under this chapter or chapter 62. Any tax credit that is transferred, sold or assigned and taken against taxes imposed by this chapter or said chapter 62 shall not be refundable. Any amount of the tax credit that exceeds the tax due for a taxable year may be carried forward by the transferee, buyer or assignee to any of the 5 subsequent taxable years from which a certificate is initially issued by the department of revenue.

(2) An owner, transferee or assignee desiring to make a transfer, sale or assignment shall submit to the commissioner a statement which describes the amount of tax credit for which the transfer, sale or assignment of tax credit is eligible. The owner, transferee or assignee shall provide to the commissioner such information as the commissioner may require for the proper allocation of the credit. The commissioner shall provide to the taxpayer a certificate of eligibility to transfer, sell or assign the tax credits. The commissioner shall not issue a certificate to a taxpayer that has an outstanding tax obligation with the commonwealth in connection with any qualified digital game development project for any prior taxable year. A tax credit shall not be transferred, sold or assigned without a certificate.

(f) The secretary, in consultation with the commissioner, shall establish procedures for the certification of qualified digital game development projects, digital game development companies and Massachusetts development costs. The commissioner, in consultation with the secretary, shall promulgate regulations necessary for the administration of this section.

(g) Notwithstanding any other provision of this section, aggregate salary and compensation amounts including all per diems, housing and other allowances, paid to, or for the services of, an individual shall not qualify for the credit under this section or for the credit under subsection (jj)(1) of section 6 of chapter 62 to the extent that such amounts exceed $2,000,000.

SECTION 3. Section 1 of chapter 64H of the General Laws is hereby amended by adding the following definitions:-

''Digital game development company'', a company, including any subsidiaries, engaged in the business of qualified digital game development. The term ''digital game development company'' shall not mean or include any company which is more than 25 per cent owned, affiliated or controlled by any company or person which is in default on a loan made by the commonwealth or a loan guaranteed by the commonwealth.

''Qualified digital game development'', the design, development, programming, engineering, production, testing, modification, localization, deployment, maintenance, support or live operation of an interactive digital game intended for commercial distribution or use on a computer, console, mobile device, cloud-based platform or other digital platform, including downloadable content, expansion content, post-launch content updates and game development tools developed for commercial use. The term shall not include software developed primarily for the internal operations of a business; internet websites or applications whose primary purpose is advertising, marketing or electronic commerce; gambling, casino gaming, sports wagering or fantasy sports platforms; or products developed primarily for political advocacy.

SECTION 4. Section 6 of said chapter 64H is hereby amended by adding at the end thereof the following paragraph:-

Sales of tangible personal property to a qualifying digital game development company for development costs related to a qualified digital game development project.

For the purposes of this paragraph, a qualifying digital game development company shall incur in the aggregate not less than $50,000 in Massachusetts development costs with respect to a qualified digital game development project over a period not to exceed 5 consecutive taxable years and shall obtain the certification of the secretary of economic development and the approval of the commissioner.

Any digital game development company that intends to undertake a qualified digital game development project in the commonwealth and qualify for the exemption provided by this paragraph shall provide an estimate of the total Massachusetts development costs expected to be incurred in connection with such project and shall designate a member or representative of the digital game development company as a primary liaison with the commissioner for the purpose of facilitating the proper reporting of expenditures and other information as required by the commissioner. Said estimate of Massachusetts development costs shall be filed prior to the commencement of the qualified digital game development project in the commonwealth. Any qualifying digital game development company that has been certified and approved which fails to incur $50,000 in Massachusetts development costs with respect to a qualified digital game development project over a period not to exceed 5 consecutive taxable years shall be liable for the sales taxes that would have been paid had the certification and approval not been granted. The sales taxes shall be considered due as of the date that the taxable expenditures were made.

The commissioner shall promulgate rules and regulations for the implementation of this paragraph.

SECTION 5. Notwithstanding any general or special law to the contrary, the secretary of economic development shall conduct an economic impact study of video game development in the commonwealth and shall issue a report together with any recommendations no later than December 31, 2032; provided, however, that the secretary shall file annually by December 31 an economic report of all motion picture production activity in the commonwealth that receives a tax credit certificate pursuant to this act. The secretary shall file annually said report by December 31, with the clerk of the senate and house of representatives, the house and senate committees on ways and means and with the joint committee on economic development and emerging technologies.

SECTION 6. The department of revenue shall, issue a report detailing the amount of tax credit certificates issued to taxpayers pursuant to this act, the cost to the commonwealth of the tax credits, and the number of jobs created in Massachusetts as a result of this act and shall file the report by December 31, 2032 with the clerk of the senate and the house of representatives, the house and senate committees on ways and means, the joint committee on revenue and the joint committee on economic development and emerging technologies. The department shall create the forms necessary to comply with the reporting requirements of this section.