Fringe benefits such as those described are eligible for the Film Production Credit, but whether they qualify as "direct production expenditures" or "qualified personnel expenditures" depends upon whether the crew members are above or below the line, and whether they are residents of Michigan.

Section 455 of the MBT, the Film Production Credit, contemplates two types of expenditures by production companies that are eligible for the credit: "direct production expenditures" and "qualified personnel expenditures." Direct production expenditures are eligible for a 40% - 42% credit while qualified personnel expenditures are eligible for a 30% credit. MCL 208.1455(2). Both types of expenditures include a compensation component.

A "qualified personnel expenditure" is defined under the statute as:

an expenditure made in this state directly attributable to the production or distribution of a qualified production that is a transaction subject to taxation in this state and is a payment or compensation payable to below the line crew for below the line crew members who were not residents of this state for at least 60 days before approval of the agreement ? not to exceed $2,000,000 for any 1 employee or contractual or salaried employee who performs services in this state for the production of a qualified production, including...:

(i) Payment of wages, benefits, or fees.

MCL 208.1455(12)(j).

A "direct production expenditure" is defined under the statute as:

[an] expenditure made in this state that is not a qualified personnel expenditure directly attributable to the production or distribution of a qualified production that is a transaction subject to taxation in this state, including...:

(ii) Payments and compensation, not to exceed $2,000,000 for any 1 employee or contractual or salaried employee who performs services in this state for the production or distribution of a qualified production, including...:

(A) Payment of wages, benefits, or fees for talent, management, or labor.

MCL 208.1455(12)(c).

"Below the line crew" is defined in section 459 of the MBT, and generally refers to technical crew members such as camera operators, best boys, lighting technicians, set dressers, sound editors, and similar personnel. Below the line crew does not include producers, directors, writers, or actors. MCL 208.1455(10)(a).

Accordingly, reading the various definitions together, fringe benefits paid by a production company to below the line crew members who were not residents of Michigan for at least 60 days before approval of the agreement between the production company and the Michigan Film Office (described in subsection 3 of the Film Production Credit) will be qualified personnel expenditures eligible for a 30% credit. Fringe benefits paid to above the line crew members, such as producers, directors, writers, and actors, as well as fringe benefits paid to below the line crew members who were residents of Michigan for 60 days or more before approval of the agreement between the production company and the Film Office will be direct production expenditures eligible for a 40% - 42% credit. In both cases, total payments to any one employee are capped for purposes of the credit at $2,000,000. MCL 208.1455(12)(c)(ii); 208.1455(12)(j). The differences between the compensation components of the two types of expenditures were designed, in part, to encourage production companies to employ Michigan residents when hiring below the line crew members.