VIRGINIA MOTION PICTURE PRODUCTION TAX CREDIT DEFINITIONS

“Actor” means an individual paid by the productioncompany for performing a role in Virginia, including, but not limited to, featured actors, stunt performers, voice-over talent, hosts, judges, announcers and roles or performers that appear on a recurring basis.

“Amounts Spent in the Commonwealth” means, in the case of tangible property, expenses for goods and materials purchased or leased from a qualified vendor that are actually and physically provided, supplied, consumed or used within Virginia and, in the case of services, means expenses for services performed within Virginia.

“Certification Letter” means a document issued by the VFO upon completion of a qualified production reflecting the credit amount to be allocated to the production company.

“Commercial Advertisement” means advertisements recorded on film, videotape or digital medium for multimarket distribution which extends outside the state of Virginia by way of broadcast television networks, cable, satellite, Internet, DVD, home video or motion picture theaters. Branding, marketing, promotion and/or e-advertising campaigns do not qualify. Certain animated productions may qualify.

“Compensation and Wages” means “wages” as defined in § 3401 of the Internal Revenue Code. Payment methods may include, but are not limited to, direct payments or indirect payments such as payments through an agent or agency, or payments through a personal service company or an employee leasing company that pays the individual.

“Credit Allocation Letter of Intent” means a document issued by the VFO after receipt and approval of a production company’s initial application outlining the terms and conditions of the credit, which shall include the maximum amount of credits to be received by a production company based on an estimate of qualifying expenses.

“Digital Interactive Media Production” means any
interactive entertainment intended for commercial exploitation, including, but not limited to:

• video game projects;
• console games;
• computer games;
• handheld console games;
• mobile electronic device games;
• and massively multi-player online video games (MMOG) and virtual worlds that meet the requirement of multi-market distribution via the Internet or any other channel of exhibition.

“Economically Distressed Area” means an area designated as such by the Virginia Economic Development Partnership.

“Employed for the First time as an Actor or Member of a Production Crew” means receiving compensation and wages for the first time in Virginia as either an actor or as a member of the production crew as verified by the VFO.

“Employed in Connection with the Production of a Film in the Commonwealth” means any individual listed on a production company’s payroll for the production for which the production company is receiving the credit.

“Employee Leasing Company” means a business, which by agreement and for a fee, places employees of a client company on the leasing company’s payroll. In turn, the leasing company “leases” these employees back to their original employer, usually for an unlimited period of time.

“Episodic Television Series” means a television program consisting of multiple episodes of a single season. For the purpose of these Guidelines, an entire season of episodes shall be deemed one motion picture production.

“Filmed” means the creation or digital manipulation of a moving image project; the actual production activity for various industry segments:

• for a live action feature film, television program, or commercial project, the production of the project involving the capture of images by a camera;
• for an animated feature film, television program, or commercial, the creation of computer generated digital images or the use of a camera to film with stop motion or time lapse photography;
• for a video game, the use of computers or software to create interactive digital images and visual effects; and
• for a visual effects project, the finishing of a feature film, television program, or commercial with the creation of visual effects including, but not limited to, editing, visual effects, sound effects, music or animation.

“Filmed in the Commonwealth” means a motion picture production that has made best faith efforts to film at least 50 percent of its principal photography days within the Commonwealth.

“Goods and Services” means physical products and services domiciled and used in Virginia that are directly attributable to the production of a project including, but not limited to, contractors, subcontractors and service providers, and product or equipment purchases, rentals, and leases. For goods with a purchase price of $25,000 or more, the amount included in qualifying expenses is the purchase price less the fair market value of the good at the time the production is completed.

Example: Elite Motion Pictures purchases a new car for $50,000 to be used as a prop on the set of their movie for filming. At the completion of production the car’s value has depreciated to $40,000. Elite Motion Pictures may only report $10,000 worth of expenses for the cost of the car to qualify for the credit.

“Member of a Production Crew” means persons employed as production staff or on-set technicians, including, but not limited to, accountants, coordinators, secretaries, camera, casting, construction, costume, electric, editing, grip, location, hair, make-up, props, swing gang, set decorating, sound, special effects, transportation, and visual effects.

“Memorandum of Understanding” means a document issued by the VFO to be signed by both the VFO and the production company as an agreement of the terms and conditions that must be met in order for the production company to receive the tax credits.

“Motion Picture Production” means any recorded audiovisual project using a series of moving images intended for distribution or commercial use including, but not limited to, feature films, episodic television series, commercials, etc. On January 1, 2013, this term will include digital interactive media productions. “Film”, “production”, and “project” mean the same as “motion picture production” for the purpose of these Guidelines.

“Motion Picture Production Company” means any individual, corporation, partnership, electing small business corporation (S corporation), limited liability company, or other form of business association producing a motion picture production. “Production company” shall mean the same as “motion picture production company” for the purpose of these Guidelines.

“Obscene Material” means any material which, considered as a whole, has as its dominant theme or purpose an appeal to the prurient interest in sex, that is, a shameful or morbid interest in nudity, sexual conduct, sexual excitement, excretory functions or products thereof or sadomasochistic abuse, and which goes substantially beyond customary limits of candor in description or representation of such matters and which, taken as a whole, does not have serious literary, artistic, political or scientific value.

“Personal Service Company” means a business that is a qualified personal services corporation under § 448(d)(2) of the Internal Revenue Code.

“Political Advertising” means advertising whose central focus is the marketing of ideas, attitudes, and concerns about public issues, including political concepts and political candidates.

“Post Production” means the period of physical production that occurs at the completion of production (principal photography), including, but not limited to, editing, sound editing and mixing, music, visual effects and animation.

“Pre-Production” means the period of physical production that occurs before the start of principal photography, but after the project has received a Credit Allocation Letter of Intent. This includes, but is not limited to, activities such as location scouting, hiring of crew members, and establishment of a dedicated production office.

“Principal Photography” means the phase of production during which the motion picture production is actually being filmed or created.

“Production” means the period encompassing preproduction, principal photography, and post production.

“Qualified Motion Picture Production” means a production that has been certified by the VFO as fully meeting the initial requirements for the credit and had received a Credit Allocation Letter of Intent.

“Qualified Vendor” means any individual, partnership, corporation, limited liability company or other business entity that 1) provides goods and services that they provide in their ordinary course of business to a qualified motion picture during production; 2) maintains a physical place of business in Virginia; 3) is subject to Virginia taxation; and 4) is qualified to do business in Virginia.

“Qualifying Expenses” means the sum of actual amounts spent in the Commonwealth by a production company in connection with the production of a motion picture filmed in the Commonwealth for certain goods and services leased or purchased and certain compensation and wages as approved by the VFO. Examples of qualifying expenses include:

• resident and non-resident cast and crew wages (less than $1 million per individual);
• accommodations;
• costs of set construction and operations;
• editing and related services;
• photography;
• sound synchronization;
• lighting;
• wardrobe; makeup and accessories;
• film processing;
• sound mixing;
• special and visual effects;
• music;
• location fees;
• purchase and rental of facilities and equipment;
• costs associated with the independent certified public accountant’s report ; and
• any other production expense for which taxes are assessed or imposed by the state and is approved by the VFO.

Examples of non-qualifying expenses include:

• wages or compensation in excess of $1 million paid to individuals for personal services with respect to a single production (In such cases, only the first $1 million of salary is considered a qualifying expense.);
• development costs, marketing and promotion expenses, distribution expenses, or any expenses incurred prior to preproduction or after post production of a feature film, television production or video game; and
• any expenditures made or incurred outside the Commonwealth of Virginia.

“Reality Television Production” means a television production depicting real events and non-actors through actual footage which presents persons engaged in seemingly unscripted situations; no fictional characters are created.

“TAX” means the Virginia Department of Taxation.

“VFO” means the Virginia Film Office.

“Virginia Resident” means an individual domiciled in Virginia at any time during the taxable year and every other individual who, for an aggregate of more than 183 days of the taxable year, maintained his place of abode within Virginia, whether domiciled in Virginia or not.