RELATING TO TAXATION.

HB1498

HOUSE OF REPRESENTATIVES

H.B. NO.

1498

THIRTY-THIRD LEGISLATURE, 2025

STATE OF HAWAII

A BILL FOR AN ACT

relating
to taxation
.

BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF HAWAII:

PART I

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SECTION 1.
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The purpose of this Act is to enhance Hawaii's status as a premier
destination for film, television, and digital media production by modernizing
the State's film and media production tax credits.
�
This Act boosts the current incentives with
an additional five per cent in credits for productions that meet the minimum
filming requirements at a qualified production facility of the scale identified
in the city and county of Honolulu's Ordinance 25-1.

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This Act encourages workforce development
in film and media production, particularly on Oahu's west side and on the
neighbor islands, by fostering local talent pipelines, supporting educational
partnerships, and incentivizing the hiring of Hawaii residents in production
roles.

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Finally, this Act also recognizes the
critical role of privately financed investments in film production
infrastructure, such as the planned development of a state‑of‑the-art
production facility on University of Hawaii lands at West Oahu, in
strengthening Hawaii's capacity to support high-quality productions.
�
The adoption of Ordinance 25‑1 by
the city and county of Honolulu to incentivize film studio development
underscores the alignment of state and local efforts to build a robust and
sustainable media industry.
�
By enhancing
Hawaii's film, television, and digital media tax credits in partnership with
the city and county of Honolulu, this Act will create a favorable economic
climate for private investment, ensure long‑term industry growth, and
expand opportunities for local workers and communities across the islands.

PART II

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SECTION
2
.
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Section 235-17, Hawaii Revised Statutes, is
amended as follows:

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1.
�

By amending subsection (a) to read:

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"(a)
�

Any law to the contrary notwithstanding, there shall be allowed to each
taxpayer subject to the taxes imposed by this chapter, an income tax credit
that shall be deductible from the taxpayer's net income tax liability, if any,
imposed by this chapter for the taxable year in which the credit is properly
claimed.
�
The amount of the credit shall
be[
:
]
equal to the sum of the following:

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(1)
�
Either:

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(A)
�
Twenty-two per cent of the qualified
production costs incurred by a qualified production in any county of the State
with a population of over seven hundred thousand; or

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[
(2)
]

(B)

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Twenty-seven per cent of the qualified
production costs incurred by a qualified production in any county of the State
with a population of seven hundred thousand or less[
.
]
; and

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(2)
�
An
additional five per cent of the qualified production costs incurred by a
qualified production that utilizes qualified production facilities located within
the State of Hawaii.

A qualified
production occurring in more than one county may prorate its expenditures based
upon the amounts spent in each county, if the population bases differ enough to
change the percentage of tax credit.

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In
the case of a partnership, S corporation, estate, or trust, the tax credit
allowable is for qualified production costs incurred by the entity for the
taxable year.
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The cost upon which the
tax credit is computed shall be determined at the entity level.
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Distribution and share of credit shall be
determined by rule.

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If
a deduction is taken under section 179 (with respect to election to expense
depreciable business assets) of the Internal Revenue Code of 1986, as amended,
no tax credit shall be allowed for those costs for which the deduction is
taken.

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The
basis for eligible property for depreciation of accelerated cost recovery
system purposes for state income taxes shall be reduced by the amount of credit
allowable and claimed."

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2.
�
By amending subsection (l) to read:

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"
(l)
�
Total tax credits claimed per qualified
production shall not exceed [
$17,000,000.
]
$
���������
.
"

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3.
�
By amending subsections (n) and (o) to read:

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"(n)
�
The total amount of tax credits allowed under
this section in any particular year shall be [
$50,000,000;
]
$ ;

however, if the total amount of credits applied for in any particular year
exceeds the aggregate amount of credits allowed for that year under this
section, the excess shall be treated as having been applied for in the
subsequent year and shall be claimed in the subsequent year; provided that no
excess shall be allowed to be claimed after December 31, 2032.

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(o)
�
For the purposes of this section:

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"Commercial":

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(1)
�
Means an advertising message that is
filmed using film, videotape, or digital media, for dissemination via
television broadcast or theatrical distribution;

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(2)
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Includes a series of advertising
messages if all parts are produced at the same time over the course of six
consecutive weeks; and

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(3)
�
Does not include an advertising message
with Internet‑only distribution.

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"Digital
media" means production methods and platforms directly related to the
creation of cinematic imagery and content, specifically using digital means,
including but not limited to digital cameras, digital sound equipment, and
computers, to be delivered via film, videotape, interactive game platform, or
other digital distribution media.

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"Post-production"
means production activities and services conducted after principal photography
is completed, including but not limited to editing, film and video transfers,
duplication, transcoding, dubbing, subtitling, credits, closed captioning,
audio production, special effects (visual and sound), graphics, and animation.

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"Production"
means a series of activities that are directly related to the creation of
visual and cinematic imagery to be delivered via film, videotape, or digital
media and to be sold, distributed, or displayed as entertainment or the
advertisement of products for mass public consumption, including but not
limited to scripting, casting, set design and construction, transportation,
videography, photography, sound recording, interactive game design, and
post-production.

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"Production
facility" means a building or complex of buildings and associated backlot
facilities on real property situated within the State in which pre-production,
production, and post-production activities occur, that contain:

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(1)
�
At
least one sound stage;

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(2)
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Pre-production,
production, and post-production offices;

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(3)
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Catering
or dining facilities;

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(4)
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Parking;

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(5)
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Facades;
and

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(6)
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Mill
space,

and that is closed to the general
public and is within a footprint of the site plan that forms a secure compound
that is clearly delineated with a tall perimeter enclosure.
�
The term excludes buildings and facilities
that are not used for pre‑production, production, and post-production
activities, but are constructed or used in connection with the production
facility, including hotel and lodging facilities, or portions thereof.

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"Qualified
production":

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(1)
�
Means a production, with expenditures
in the State, for the total or partial production of a feature‑length
motion picture, short film, made‑for‑television movie, commercial,
music video, interactive game, television series pilot, single season (up to
twenty-two episodes) of a television series regularly filmed in the State (if
the number of episodes per single season exceeds twenty-two, additional
episodes for the same season shall constitute a separate qualified production),
television special, single television episode that is not part of a television
series regularly filmed or based in the State, national magazine show, or
national talk show.
�
For the purposes of
subsections (d) and (l), each of the aforementioned qualified production
categories shall constitute separate, individual qualified productions; and

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(2)
�
Does not include:

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(A)
�
News;

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(B)
�
Public affairs programs;

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(C)
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Non-national magazine or talk shows;

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(D)
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Televised sporting events or
activities;

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(E)
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Productions that solicit funds;

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(F)
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Productions produced primarily for
industrial, corporate, institutional, or other private purposes; and

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(G)
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Productions that include any material
or performance prohibited by chapter 712.

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"Qualified
production costs" means the costs incurred by a qualified production
within the State that are subject to the general excise tax under chapter 237
at the highest rate of tax or income tax under this chapter if the costs are
not subject to general excise tax and that have not been financed by any
investments for which a credit was or will be claimed pursuant to section
235-110.9.
�
Qualified production costs
include but are not limited to:

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(1)
�
Costs incurred during preproduction
such as location scouting and related services;

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(2)
�
Costs of set construction and
operations, purchases or rentals of wardrobe, props, accessories, food, office
supplies, transportation, equipment, and related services;

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(3)
�
Wages or salaries of cast, crew, and
musicians;

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(4)
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Costs of photography, sound
synchronization, lighting, and related services;

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(5)
�
Costs of editing, visual effects,
music, other post‑production, and related services;

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(6)
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Rentals and fees for use of local
facilities and locations, including rentals and fees for use of state and
county facilities and locations that are not subject to general excise tax
under chapter 237 or income tax under this chapter;

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(7)
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Rentals of vehicles and lodging for
cast and crew;

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(8)
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Airfare for flights to or from Hawaii,
and interisland flights;

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(9)
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Insurance and bonding;

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(10)
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Shipping of equipment and supplies to
or from Hawaii, and interisland shipments; and

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(11)
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Other direct production costs specified
by the department in consultation with the department of business, economic
development, and tourism;

provided
that any government-imposed fines, penalties, or interest that are incurred by
a qualified production within the State shall not be "qualified production
costs".
�
"
Qualified production costs
"
does not include any costs funded by any
grant, forgivable loan, or other amounts not included in gross income for
purposes of this chapter.

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"Qualified
production facility" means a production facility engaged in the production
of a qualified production; provided that the production facility:

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(1)
�
Is
located within the State;

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(2)
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Is
constructed after December 31, 2024;

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(3)
�
Is
located on real property that:

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(A)
�
Is a minimum of ten acres in size; and

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(B)
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Has been leased or purchased from the United States, the State,
or any political subdivision thereof; and

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(4)
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Cost
a minimum of $100,000,000 to design and construct.
"

PART III

����
SECTION 3.
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During the 1980s and 1990s, the legislature recognized the unfairness of
having the general excise tax apply to payroll reimbursements and enacted
exemptions specific to several discrete industries.
�
Act 175, Session Laws of Hawaii 1988, now
codified as section 237-23.5, Hawaii Revised Statutes, provides that the general
excise tax does not apply to common paymasters that are reimbursed by related
corporations that actually employ the workers paid.
�
Act 351, Session Laws of Hawaii 1989, now
codified as section 237-24.7(1), Hawaii Revised Statutes, provides that the general
excise tax does not apply to amounts received for employee wages, salaries,
payroll taxes, insurance premiums, and benefits, including retirement,
vacation, sick pay, and health benefits, by a hotel operator.
�
Act 252, Session Laws of Hawaii 1992, now
codified as section 237-24.7(4), Hawaii Revised Statutes, provides that
the general excise tax does not apply to similar amounts received by an orchard
operator.
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Act 214, Session Laws of
Hawaii 1998, now codified as section 237-24.7(8), Hawaii Revised Statutes,
provides that the general excise tax does not apply to similar amounts received
by a management company from related entities selling telecommunications
services.

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In the preamble to Act 214, Session Laws of
Hawaii 1998, the legislature discussed the exemptions for hotel and orchard
operators and then stated, "It is important that the same exemption be
extended to telecommunications businesses, because of the highly mobile nature
of telecommunications jobs.
�
Also, the
general excise tax was never intended to serve, in effect, as a tax on
payrolls."

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The legislature notes that, in Tax
Information Release No. 2024-04, the department of taxation has stated
that the general excise tax applies to all amounts that a payroll service
company receives from a film production company, unless there is a specific
statutory exemption for those amounts.

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Accordingly, the purpose of this part is to
exempt from the general excise tax reimbursement to a motion picture project
employer for employee wages, salaries, payroll taxes, insurance premiums, and
employment benefits.

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SECTION
4
.
�
Section 237-24.75, Hawaii Revised Statutes,
is amended to read as follows:

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"
�237-24.75
�
Additional exemptions.
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In addition to the amounts exempt under
section 237-24, this chapter shall not apply to:

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(1)
�
Amounts received as a beverage
container deposit collected under chapter 342G, part VIII;

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(2)
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Amounts received by the operator of the
Hawaii convention center for reimbursement of costs or advances made pursuant
to a contract with the Hawaii tourism authority under section 201B‑7; [
and
]

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(3)
�
Amounts
received by a professional employer organization that is registered with the
department of labor and industrial relations pursuant to chapter 373L, from a
client company equal to amounts that are disbursed by the professional employer
organization for employee wages, salaries, payroll taxes, insurance premiums,
and benefits, including retirement, vacation, sick leave, health benefits, and
similar employment benefits with respect to covered employees at a client
company; provided that this exemption shall not apply to amounts received by a
professional employer organization after:

���������
(A)
�
Notification from the department of
labor and industrial relations that the professional employer organization has
not fulfilled or maintained the registration requirements under this chapter;
or

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(B)
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A determination by the department that
the professional employer organization has failed to pay any tax withholding
for covered employees or any federal or state taxes for which the professional
employer organization is responsible.

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��
As used in this paragraph, "professional
employer organization", "client company", and "covered
employee" shall have the meanings provided in section 373L-1[
.
]
;
and

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(4)
�
Amounts
received by a motion picture project employer from a client equal to amounts
that are disbursed by the motion picture project employer for employee wages,
salaries, payroll taxes, insurance premiums, and benefits, including
retirement, vacation, sick leave, health benefits, and similar employment
benefits with respect to motion picture project workers at a client.

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As
used in this paragraph, "motion picture project employer",
"client", and "motion picture project worker" shall have
the same meaning as in section 3512 of the Internal Revenue Code of 1986, as
amended.
"

PART IV

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SECTION 5.
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Statutory material to be repealed is bracketed and stricken.
�
New statutory material is underscored.

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SECTION 6.
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This Act shall take effect upon its approval; provided that:

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(1)
�
Section
2 shall apply to taxable years beginning after December 31, 2024; and

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(2)
�
Section
4 shall take effect on July 1, 2025.

INTRODUCED
BY:

_____________________________

Report Title:

Income
Tax; Motion Picture, Digital Media, and Film Production Income Tax Credit; General
Excise Tax; Partial Exemption for Motion Picture Project Employers

Description:

Increases
the motion picture, digital media, and film production income tax credit for
qualified productions that utilize qualified production facilities located within
the State.
�
Changes the cap amount and
aggregate cap amount of the motion picture, digital media, and film production
income tax credit to unspecified amounts.
�

Exempts from the general excise tax reimbursement to a motion picture
project employer for employee wages, salaries, payroll taxes, insurance
premiums, and employment benefits.

The summary description
of legislation appearing on this page is for informational purposes only and is
not legislation or evidence of legislative intent.