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As Introduced
136th
General Assembly
Regular
Session
S. B. No. 187
2025-2026
Senators Smith, Schaffer
To
amend sections 107.036 and 5747.98 and to enact sections
122.853
and
5747.68
of the Revised Code
to
temporarily authorize a refundable income tax credit for investing in
a sound recording production company.
BE
IT ENACTED BY THE GENERAL ASSEMBLY OF THE STATE OF OHIO:
Section
1.
That
sections 107.036 and 5747.98 be amended and sections
122.853
and
5747.68
of the Revised Code be enacted to read as follows:
Sec.
107.036.
(A)
For each business incentive tax credit, the main operating
appropriations act shall contain a detailed estimate of the total
amount of credits that may be authorized in each year, an estimate of
the amount of credits expected to be claimed in each year, and an
estimate of the amount of credits expected to remain outstanding at
the end of the biennium. The governor shall include such estimates in
the state budget submitted to the general assembly pursuant to
section 107.03 of the Revised Code.
(B)
As used in this section, "business incentive tax credit"
means all of the following:
(1)
The job creation tax credit under section 122.17 of the Revised Code;
(2)
The job retention tax credit under section 122.171 of the Revised
Code;
(3)
The historic preservation tax credit under section 149.311 of the
Revised Code;
(4)
The motion picture and broadway theatrical production tax credit
under section 122.85 of the Revised Code;
(5)
The new markets tax credit under section 5725.33 of the Revised Code;
(6)
The research and development credit under section 166.21 of the
Revised Code;
(7)
The small business investment credit under section 122.86 of the
Revised Code;
(8)
The rural growth investment credit under section 122.152 of the
Revised Code;
(9)
The opportunity zone investment credit under section 122.84 of the
Revised Code;
(10)
The transformational mixed use development credit under section
122.09 of the Revised Code
;
(11)
The sound recording production credit under section 122.853 of the
Revised Code
.
Sec.
122.853.
(A)
As used in this section:
(1)
"Eligible expenditures" means actual production-related
costs in this state by a sound recording company for a tax
credit-eligible production or actual capital costs in this state by a
sound recording company for a tax credit-eligible project.
(2)
"Expenditure in this state" means the cost of either of the
following:
(a)
Acquiring tangible personal property or services in this state that
are subject to tax levied under section 5739.02 or 5741.02 of the
Revised Code;
(b)
Compensation for services performed within the state subject to the
tax levied under section 5747.02 of the Revised Code.
(3)
"Sound recording" means a recording of a music, poetry, or
spoken performance recorded, in whole or in part, in this state.
"Sound recording" does not include the audio portions of
dialogue or words spoken and recorded as part of television news
coverage or athletic events.
(4)
"Sound recording production company" means a sole
proprietorship or a pass-through entity engaged in the production of
sound recordings.
(5)
"Tax credit-eligible production" means the production of a
sound recording, or a series of such productions occurring over a
twelve-month period, certified by the director of development under
division (B) of this section as eligible for the tax credit
authorized under section 5747.68 of the Revised Code.
(6)
"Tax credit-eligible project" means a capital project to
construct or improve infrastructure for creating sound recording
productions certified by the director of development under division
(B) of this section as eligible for the tax credit authorized under
section 5747.68 of the Revised Code.
(7)
"Investor" means an individual who owns a sound production
company that is a sole proprietorship or an individual who owns a
proportionate or distributive share of a sound recording production
company that is a pass-through entity.
(8)
"Pass-through entity" has the same meaning as in section
5733.04 of the Revised Code, but does not include a sole
proprietorship.
(9)
"Capital costs of a tax credit-eligible project" means
expenditures directly related to a tax credit-eligible project,
including land and land acquisition costs, construction costs, design
fees, furniture, fixtures, and equipment purchased subject to a sale
agreement or capital lease, but does not include general
administrative costs or insurance.
(10)
"Production-related costs" means expenditures directly
related to a tax credit-eligible production.
(B)(1)
The director of development may certify a sound recording production
or sound recording infrastructure project as a tax credit-eligible
production or tax credit-eligible project, respectively. A sound
recording production company shall apply for certification of a sound
recording production or a sound recording capital infrastructure
project as a tax credit-eligible production or tax credit-eligible
project, respectively, in the form and manner prescribed by the
director.
(a)
An application to certify a tax credit-eligible production shall
include all of the following:
(i)
The production's distribution plan;
(ii)
The production's preliminary budget, including estimated eligible
expenditures;
(iii)
A description of the type of sound to be recorded;
(iv)
A list of the production's principal creative elements, including
performing artists and producers;
(v)
The location, including street address, of the recording studio or
other location where production will occur;
(vi)
A statement that the production will qualify as a tax credit-eligible
production;
(vii)
The production's estimated start and completion dates;
(viii)
Any other information required by the director.
(b)
An application to certify a tax credit-eligible project shall include
all of the following:
(i)
A detailed description of the project, including the project's
location;
(ii)
The project's preliminary budget, including eligible expenditures;
(iii)
A statement that the project will qualify as a tax credit-eligible
sound recording infrastructure project;
(iv)
The project's estimated start and completion dates;
(v)
Any other information required by the director.
(2)
Upon receipt of a complete application, the director of development
may certify the sound recording production or sound recording
infrastructure project as a tax credit-eligible production or tax
credit-eligible project, respectively. If the director receives an
application that is incomplete, the director may request that the
applicant provide any omitted information or reject the application.
Within one hundred eighty days after receiving a complete
application, the director shall approve or reject the application,
and notify the applicant of the director's decision. The director
also shall notify the tax commissioner and investor of each
production or project the director certifies as a tax credit-eligible
production or tax credit-eligible sound recording infrastructure
project.
The
director shall reject an application if the applicant is a person, or
any person owned, affiliated, or controlled, in whole or in part, by
any person that either owes debt that has been certified to the
attorney general under section 131.02 of the Revised Code or has
declared bankruptcy under which an obligation of the person to pay or
repay public funds or moneys was discharged as a part of such
bankruptcy. The rejection of an application under this division does
not prohibit an applicant from filing another application under this
section for the same production or project.
(3)
In making the director's determination under division (B)(2) of this
section, the director shall consider each of the following factors:
(a)
The impact of the production or project on the encouragement and
development in this state of a strong capital and infrastructure base
in order to achieve a more independent, self-supporting music and
sound recording industry;
(b)
The impact of the production or project on the employment of
residents of this state;
(c)
The impact of the production or project on the overall economy of
this state;
(d)
If the application is for a tax credit-eligible project, the
availability of similar infrastructure facilities located within
fifty miles of the proposed project.
(C)
A sound recording production company whose sound recording production
or sound recording capital infrastructure project is certified under
division (B) of this section as a tax credit-eligible production or
tax credit-eligible project, after such production or project is
completed, may apply to the director of development to receive a
refundable credit against the tax imposed under section 5747.02 of
the Revised Code, which may be claimed by the company's investor or
investors. The director, in consultation with the commissioner, shall
prescribe the form and manner of the application under this division
and the information or documentation required to be submitted with
the application.
In
addition to the application, the company shall report the eligible
expenditures related to that production or project, which the
director may require to be prepared by a certified public accountant.
Before awarding a certificate under this division, the director may
inspect the books, accounts, records, and memoranda of a sound
recording production company to audit the accuracy of that report.
The amount of credit awarded to investors shall be proportionately
reduced by the cost to the director of any such audit. Upon receiving
and examining the report, the director may disallow any reported
eligible expenditure the director determines is not an eligible
expenditure. If the director disallows an expenditure, the director
shall issue a written notice to the sound recording production
company stating that the expenditure is disallowed and the reason for
the disallowance. Upon examination of the report and disallowance of
any expenditure, the director shall determine eligible expenditures
for the purpose of calculating the amount of the credit.
Subject
to the aggregate credit limit in division (D) of this section, upon
receipt of an application under this division, the director shall
issue a certificate to each applicable investor showing the amount of
the credit the investor may claim under section 5747.68 of the
Revised Code. The director shall calculate that credit as follows:
(1)
The amount of the credit equals twenty-five per cent of eligible
expenditures in excess of ten thousand dollars, multiplied by the
investor's proportionate or distributive share of the sound
production company if that company is a pass-through entity.
(2)
The amount of credit awarded to all investors for a production or
project shall not exceed seventy-five thousand dollars. If the amount
of the credit, as calculated under division (C)(1) of this section,
would exceed seventy-five thousand dollars, the director shall reduce
the amount of credit awarded to each investor proportionately so that
the total amount so awarded to all such investors equals seventy-five
thousand dollars.
(3)
No credit shall be awarded on the basis of any portion of an eligible
expenditure that is also an eligible production expenditure that
forms the basis of a credit awarded under section 122.85 of the
Revised Code.
(4)
No credit shall be awarded for taxable years beginning on or after
January 1, 2029.
(D)
The aggregate amount of credits certified for all investors under
division (C) of this section for any fiscal year shall not exceed one
million dollars. The director shall award credit certificates for tax
credit-eligible productions or tax credit-eligible projects on a
first-come, first-served basis.
(E)
The director of development shall transmit a copy of each certificate
to the tax commissioner. The director in consultation with the
commissioner shall adopt rules in accordance with Chapter 119. of the
Revised Code necessary for the administration of the credit
authorized in this section. Notwithstanding any provision of section
121.95 of the Revised Code to the contrary, a regulatory restriction
contained in a rule adopted under this section is not subject to
sections 121.95 to 121.953 of the Revised Code.
(F)
On or before the thirty-first day of October each even-numbered year,
beginning with 2026 and ending with 2030, the director of development
shall prepare a report evaluating the effect of the credit authorized
under this section and submit that report to the chair and ranking
minority member of the house of representatives and senate standing
committees dealing primarily with issues of taxation. The report
shall include the overall effect of such credits, the amount of such
credit certificates issued, the number of new jobs created and
payroll subject to the tax under section 5747.02 of the Revised Code
created as a result of the credits, the economic effect of the
credits on the sound recording industry, the amount of new sounds
recording infrastructure that has been developed in the state, and
any other factors that describe the effect of the credits.
(G)
The tax commissioner may assess an investor under section 5747.13 of
the Revised Code for any amount of credit claimed by the investor but
later determined by the commissioner or the director of development
to be disallowed under this section, subject to the time limitations
in that section.
(H)
As a condition for a sound recording production company's investors
being awarded a credit certificate, the director of development may
require a tax credit-eligible production to display the state's name
or logo, as prescribed by the director.
Sec.
5747.68.
(A)
Any term used in this section has the same meaning as in section
122.853 of the Revised Code.
(B)
There is allowed a refundable credit against the tax imposed by
section 5747.02 of the Revised Code for any individual who, on the
last day of the individual's taxable year, holds a tax credit
certificate issued under section 122.853 of the Revised Code. The
credit shall be claimed for the taxable year that includes the date
the certificate was issued. The credit amount equals the amount
stated in the certificate. The credit shall be claimed in the order
required under section 5747.98 of the Revised Code. If the credit
amount exceeds the tax otherwise due under section 5747.02 of the
Revised Code after deducting all other credits in that order, the
excess shall be refunded.
Sec.
5747.98.
(A)
To provide a uniform procedure for calculating a taxpayer's aggregate
tax liability under section 5747.02 of the Revised Code, a taxpayer
shall claim any credits to which the taxpayer is entitled in the
following order:
Either
the retirement income credit under division (B) of section 5747.055
of the Revised Code or the lump sum retirement income credits under
divisions (C), (D), and (E) of that section;
Either
the senior citizen credit under division (F) of section 5747.055 of
the Revised Code or the lump sum distribution credit under division
(G) of that section;
The
dependent care credit under section 5747.054 of the Revised Code;
The
credit for displaced workers who pay for job training under section
5747.27 of the Revised Code;
The
campaign contribution credit under section 5747.29 of the Revised
Code;
The
twenty-dollar personal exemption credit under section 5747.022 of the
Revised Code;
The
joint filing credit under division (G) of section 5747.05 of the
Revised Code;
The
earned income credit under section 5747.71 of the Revised Code;
The
nonrefundable credit for education expenses under section 5747.72 of
the Revised Code;
The
nonrefundable credit for donations to scholarship granting
organizations under section 5747.73 of the Revised Code;
The
nonrefundable credit for tuition paid to a nonchartered nonpublic
school under section 5747.75 of the Revised Code;
The
nonrefundable vocational job credit under section 5747.057 of the
Revised Code;
The
nonrefundable job retention credit under division (B) of section
5747.058 of the Revised Code;
The
enterprise zone credit under section 5709.66 of the Revised Code;
The
credit for beginning farmers who participate in a financial
management program under division (B) of section 5747.77 of the
Revised Code;
The
credit for commercial vehicle operator training expenses under
section 5747.82 of the Revised Code;
The
nonrefundable welcome home Ohio (WHO) program credit under section
122.633 of the Revised Code;
The
credit for selling or renting agricultural assets to beginning
farmers under division (A) of section 5747.77 of the Revised Code;
The
credit for purchases of qualifying grape production property under
section 5747.28 of the Revised Code;
The
small business investment credit under section 5747.81 of the Revised
Code;
The
nonrefundable lead abatement credit under section 5747.26 of the
Revised Code;
The
opportunity zone investment credit under section 5747.86 of the
Revised Code;
The
enterprise zone credits under section 5709.65 of the Revised Code;
The
research and development credit under section 5747.331 of the Revised
Code;
The
credit for rehabilitating a historic building under section 5747.76
of the Revised Code;
The
nonrefundable Ohio low-income housing tax credit under section
5747.83 of the Revised Code;
The
nonrefundable affordable single-family home credit under section
5747.84 of the Revised Code;
The
nonresident credit under division (A) of section 5747.05 of the
Revised Code;
The
credit for a resident's out-of-state income under division (B) of
section 5747.05 of the Revised Code;
The
refundable motion picture and broadway theatrical production credit
under section 5747.66 of the Revised Code;
The
refundable credit for film and theater capital improvement projects
under section 5747.67 of the Revised Code;
The
refundable jobs creation credit or job retention credit under
division (A) of section 5747.058 of the Revised Code;
The
refundable credit for taxes paid by a qualifying entity granted under
section 5747.059 of the Revised Code;
The
refundable credits for taxes paid by a qualifying pass-through entity
granted under division (I) of section 5747.08 of the Revised Code;
The
refundable credit under section 5747.80 of the Revised Code for
losses on loans made to the Ohio venture capital program under
sections 150.01 to 150.10 of the Revised Code;
The
refundable credit for rehabilitating a historic building under
section 5747.76 of the Revised Code;
The
refundable credit for sound recording production under section
5747.68 of the Revised Code;
The
refundable credit under section 5747.39 of the Revised Code for taxes
levied under section 5747.38 of the Revised Code paid by an electing
pass-through entity.
(B)
For any credit, except the refundable credits enumerated in this
section and the credit granted under division (H) of section 5747.08
of the Revised Code, the amount of the credit for a taxable year
shall not exceed the taxpayer's aggregate amount of tax due under
section 5747.02 of the Revised Code, after allowing for any other
credit that precedes it in the order required under this section. Any
excess amount of a particular credit may be carried forward if
authorized under the section creating that credit. Nothing in this
chapter shall be construed to allow a taxpayer to claim, directly or
indirectly, a credit more than once for a taxable year.
Section
2.
That
existing sections 107.036 and 5747.98 of the Revised Code are hereby
repealed.