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Digital Animation Tax Credit

Conn. Gen. Stat. §12-217ll


Description and Applicable Taxes

A Digital Animation tax credit is available to state-certified digital animation production companies that engage in digital animation production activities on an on-going basis. This tax credit is administered by the Connecticut Department of Economic and Community Development (DECD). Any digital animation production company interested in obtaining this tax credit must apply to DECD.

This tax credit may be applied to the taxes imposed under Chapter 207 (Insurance Companies and Health Care Centers Taxes) and Chapter 208 (Corporation Business Tax) of the Connecticut General Statutes. Any digital animation production company receiving a digital animation tax credit shall not be eligible for or receive the film production tax credit.

Definitions

Digital animation production company means a corporation, partnership, limited liability company, or other business entity that is engaged exclusively in digital animation production activity on an ongoing basis, and that is qualified by the Secretary of the State to engage in business in the state.

State-certified digital animation production company means a digital animation production company that: 1) maintains studio facilities located within the state at which digital animation production activities are conducted; 2) employs at least two hundred full-time employees within the state; 3) is in compliance with regulations adopted; and 4) has been certified by DECD.

Digital animation production activity means the creation, development, and production of computer-generated animation content for distribution or exhibition to the general public.

Full-time employee means an employee required to work at least 35 hours or more per week, and who is not a temporary or seasonal employee.

Production expenses or costs means all expenditures clearly and demonstrably incurred in the state in the development, preproduction, production or postproduction costs of a digital animation production activity. The statute enumerates those types of expenses that qualify and certain types of expenses that are specifically excluded.



Tax Credit Amount

The tax credit is equal to:

  • 10% for production expenses or costs of $100,000 to $500,000;
  • 15% for production expenses or costs of more than $500,000 to $1 million; and
  • 30% for production expenses or costs of more than $1 million.

Carryforward and Carryback Limitations

A taxpayer claiming this tax credit may claim all or part of the tax credit in the income year the costs giving rise to the tax credit were incurred or in any part of the three succeeding income years. The amount of the tax credit earned but not claimed in an income year shall be available during the three succeeding income years after the production expenses or costs giving rise to the tax credit were incurred.

How to Apply

A digital animation production company must apply to DECD for state certification. Visit DECD’s website at www.ctfilm.com for information regarding the application process.

DECD will enter the amount of the digital animation production company’s tax credit on a tax credit voucher. Any state-certified digital animation production company may apply to DECD not more frequently than twice during the income year for such voucher. There shall be independent certification by a licensed Connecticut Certified Public Accountant (CPA) approved by DECD of the production expenses or costs incurred during the period for which such voucher is issued.

Assignment and Transfer

After the initial issuance of a tax credit, such tax credit may be sold, assigned, or otherwise transferred, in whole or in part, to one or more taxpayers provided no tax credit, after issuance, may be sold, assigned or otherwise transferred, in whole or in part, more than three times. In the event of an assignment, the transferor and the transferee shall jointly submit written notice of such transfer to DECD not later than 30 days after such transfer. The notification that is provided to DECD after each transfer shall include the tax credit voucher number, date of transfer, the amount of such credit transferred, the tax credit balance before and after the transfer, the tax identification numbers for both the transferor and transferee, and such other information as DECD may require.

Insurance Companies and Health Care Centers: In addition to the assignments that are permitted under the specific provisions of this tax credit statute, this credit may also be assigned by an insurance company or health care center to an affiliate provided that the affiliate may only apply the assigned credit against its tax liability under Chapter 207 (Insurance Companies and Health Care Centers Taxes).


An assignee who receives the tax credit by assignment must claim the credit only for an income year in which the digital animation production company would have been eligible to claim the credit.



How to Claim the Tax Credit

Complete Form CT-1120 DA, Digital Animation Tax Credit, and attach it to Form CT-1120K, Business Tax Credit Summary, and/or Form CT-207K, Insurance/Health Care Tax Credit Schedule. The tax credit amount that may be claimed is the amount listed on the tax credit voucher.

Where to Get Additional Information

Direct inquiries to:

Connecticut Department of Economic and Community Development

Office of Film, Television, and Digital Media

450 Columbus Boulevard

Hartford CT 06103

860-270-8211

www.ctfilm.com

Statutory and Regulatory References

Conn. Gen. Stat. §12-217ll; Conn. Agencies Regs. §§ 12-217ll-1 through 12-217ll-12

Last updated January 25, 2017