[Congressional Record Volume 154, Number 122 (Thursday, July 24, 2008)]
[Senate]
[Pages S7299-S7300]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]

      By Mrs. FEINSTEIN (for herself and Mr. Smith):
  S. 3330. A bill to amend the Internal Revenue Code of 1986 to modify 
the deduction for domestic production activities for film and 
television productions, and for other purposes; to the Committee on 
Finance.
  Mrs. FEINSTEIN. Mr. President, I rise today to introduce legislation 
to stimulate domestic film production and create jobs. I am pleased to 
be joined by my colleague from Oregon, Senator Gordon Smith.
  Our bill, the Domestic Film Production Equity Act of 2008, would 
expand a tax deduction, known as the section 199 domestic production 
incentive, for qualifying U.S. film producers.
  In 2008, this deduction will be worth 6 percent of a domestic 
manufacturer's qualifying production activities. It will increase to 
nine percent in 2010.
  Specifically, our bill would expand the production incentive to allow 
studios to include wages paid to full-time short-term employees, 
including U.S. actors, writers, directors, and production personnel in 
determining the limit on the deduction amount.
  The bill will treat films produced by partnerships between several 
studios as qualified property, each partner must have at least 20 
percent interest in a project to qualify.
  The bill will deduct income from the licensing of copyrights and 
trademarks relating to films; and lastly, the bill will deduct income 
from films and TV programs broadcast over the Internet.
  Most film production companies receive only a limited benefit from 
the production incentive because the industry relies heavily on short-
term contract work, and because many films are produced by multiple 
studios through partnerships.
  As a matter of fairness, these domestic production incentives should 
be extended to fully benefit an industry that employs over 1.3 million 
Americans.
  Filming a movie is different than traditional domestic manufacturing 
because short-term contract workers, including actors, writers, 
directors, and production personnel often work full-time on projects; 
multiple studios often produce one project; studios generate 
significant licensing fees associated with copyrights and trademarks 
related to films; and a number of media, including the Internet may be 
used to view each film or production.
  Our bill takes these circumstances into account to modernize this 
section of the tax code.
  The film industry is an important asset to the American economy.
  More than 1.3 million Americans work in motion picture and television 
production.
  In 2005, these jobs provided $30.24 billion in wages, with employees 
earning an average salary of $73,000.
  Of these employees, 231,000 were short-term contractors, often 
working multiple projects each year.
  California was the primary location for 365 film productions in 2005. 
This generated $42.2 billion in economic activity for my State.
  Our bill would help studios continue to provide opportunities to 
these talented actors, writers, directors, and production personnel in 
America.
  Expanding the Section 199 deduction to include these four categories 
is also a response to the competitive business of captivating an 
increasingly technology-adept viewing audience.
  The film industry, like the music industry, is increasingly seeing 
their sales move to digital formats via the internet. On iTunes--an 
online digital music store operated by Apple--around 50,000 movies are 
rented or sold each day.
  Moreover, by not allowing film studios to take advantage of domestic 
production tax incentives, we risk losing more operations abroad.
  For example, Canada currently provides domestic film producers with a 
tax credit worth 15 percent of qualifying production costs. Foreign 
studios with operations in Canada may also receive a tax credit worth 
up to 16 percent of wages paid to Canadian residents.
  The film industry plays a unique role in our society.
  The world recognizes Hollywood as the center of the entertainment 
industry. Millions of tourists annually travel from across the globe to 
visit the sites that embody the golden age of film.
  Hollywood film studios are American institutions that continue to 
produce some of the finest films in the world.
  Needless to say, it is critical that studios continue to film in my 
State and across the country. If not, the golden age of Hollywood and 
the economic activity it brings may be a part of the past.
  We are fortunate to have a vibrant domestic film industry.
  This legislation will help ensure that the U.S. entertainment 
industry continues to be the world leader.
  American workers and our economy stand to benefit.
  Efforts to expand the production incentive for domestic films have 
enjoyed broad bi-partisan support. Our bill is similar to a provision 
included in the tax extenders package which passed the House 
overwhelmingly by a vote of 263-160 in May.
  I am hopeful that the Senate will move quickly to enact this much-
needed modernization of the tax code.
  Mr. President, I ask unanimous consent that the text of the bill be 
printed in the Record.
  There being no objection, the text of the bill was ordered to be 
printed in the Record, as follows:

[[Page S7300]]

                                S. 3330

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

     SECTION 1. SHORT TITLE.

       This Act may be cited as the ``Domestic Film Production 
     Equity Act of 2008''.

     SEC. 2. PROVISIONS RELATED TO FILM AND TELEVISION 
                   PRODUCTIONS.

       (a) Modifications to Deduction for Domestic Activities.--
       (1) Determination of w-2 wages.--Paragraph (2) of section 
     199(b) of the Internal Revenue Code of 1986 (relating to W-2 
     wages) is amended by adding at the end the following new 
     subparagraph:
       ``(D) Special rule for qualified film.--In the case of a 
     qualified film, such term shall include compensation for 
     services performed in the United States by actors, production 
     personnel, directors, and producers.''.
       (2) Definition of qualified film.--Paragraph (6) of section 
     199(c) of such Code (relating to qualified film) is amended 
     by adding at the end the following: ``A qualified film shall 
     include any copyrights, trademarks, or other intangibles with 
     respect to such film. The methods and means of distributing a 
     qualified film shall not affect the availability of the 
     deduction under this section.''.
       (3) Partnerships.--Subparagraph (A) of section 199(d)(1) of 
     such Code (relating to partnerships and S corporations) is 
     amended by striking ``and'' at the end of clause (ii), by 
     striking the period at the end of clause (iii) and inserting 
     ``, and'', and by adding at the end the following new clause:
       ``(iv) in the case of each partner of a partnership, or 
     shareholder of an S corporation, who owns (directly or 
     indirectly) at least 20 percent of the capital interests in 
     such partnership or of the stock of such S corporation--

       ``(I) such partner or shareholder shall be treated as 
     having engaged directly in any film produced by such 
     partnership or S corporation, and
       ``(II) such partnership or S corporation shall be treated 
     as having engaged directly in any film produced by such 
     partner or shareholder.''.

       (b) Effective Date.--The amendments made by this section 
     shall apply to taxable years beginning after December 31, 
     2007.
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