Studio report lauds tax credit

Industry study claims film tax credit benefits are greater than DOR estimate

The Hollywood movie studios that benefit financially from the Massachusetts film tax credit released a report on Wednesday indicating the economic gains for the state as a whole are greater than the estimates contained in earlier reports by the state Revenue Department.

For 2011, the report said the film tax credit supported 2,220 full-time equivalent jobs and $375.3 million in Massachusetts spending. The Revenue Department report for 2011 estimated the film tax credit supported 864 net new full-time equivalent jobs and $118 million in economic impact.

The sharp difference in numbers is attributed to differing methodologies and different economic models. For example, the state report assumes that film tax credits have to be paid for with theoretical spending reductions, represented by the layoff of state workers.  In its report on 2011, the Revenue Department lowered its film industry job number by 443 to reflect the theoretical layoffs. The Revenue Department also lowered its economic impact number to reflect state spending that would have to be cut to cover the cost of the tax credits.

 
 A scene from the Ben Affleck movie “The Town,” which was filmed in a number of Boston locations.
Both reports include estimates of non-film jobs that were created as a result of film spending in Massachusetts, but the studio report takes that approach a step further, including more than 500 jobs created at firms that did not receive tax credits but nevertheless benefitted from “the clustering effect of motion picture production engendered by the incentive program.”

The report from the Motion Picture Association of America, which represents such major Hollywood studios as Walt Disney, Paramount, Sony, Twentieth-Century Fox, Universal, and Warner Bros., comes at a time when the Massachusetts film tax credit is being viewed warily by the Patrick administration. The governor proposed capping the film tax credit at $40 million annually in the budget proposal he released in January, but both the House and Senate opted to leave the credit intact in their budget plans. In its report, the Motion Picture Association repeatedly blames an attempt in 2010 to cap the film tax credit for a sharp drop in film spending in the state.

The film tax credit offers movie, television, and commercial productions a credit equal to 25 percent of whatever they spend in Massachusetts. The credit can be converted into cash by selling it back to the state or to a third party interested in reducing its Massachusetts tax exposure.

HR&A Advisors, the consulting firm that authored the studio report, estimated Massachusetts accounted for 1 percent of the nation’s motion picture production employment in 2011, ranking it 11th in the nation.

The firm also calculated the economic impact of the $35 million movie studio currently being built in Devens. The study indicated studio construction is supporting 440 total jobs and $62.3 million in spending.

Meet the Author

Bruce Mohl

Editor, CommonWealth

About Bruce Mohl

Bruce Mohl is the editor of CommonWealth magazine. Bruce came to CommonWealth from the Boston Globe, where he spent nearly 30 years in a wide variety of positions covering business and politics. He covered the Massachusetts State House and served as the Globe’s State House bureau chief in the late 1980s. He also reported for the Globe’s Spotlight Team, winning a Loeb award in 1992 for coverage of conflicts of interest in the state’s pension system. He served as the Globe’s political editor in 1994 and went on to cover consumer issues for the newspaper. At CommonWealth, Bruce helped launch the magazine’s website and has written about a wide range of issues with a special focus on politics, tax policy, energy, and gambling. Bruce is a graduate of Ohio Wesleyan University and the Fletcher School of Law and Diplomacy at Tufts University. He lives in Dorchester.

About Bruce Mohl

Bruce Mohl is the editor of CommonWealth magazine. Bruce came to CommonWealth from the Boston Globe, where he spent nearly 30 years in a wide variety of positions covering business and politics. He covered the Massachusetts State House and served as the Globe’s State House bureau chief in the late 1980s. He also reported for the Globe’s Spotlight Team, winning a Loeb award in 1992 for coverage of conflicts of interest in the state’s pension system. He served as the Globe’s political editor in 1994 and went on to cover consumer issues for the newspaper. At CommonWealth, Bruce helped launch the magazine’s website and has written about a wide range of issues with a special focus on politics, tax policy, energy, and gambling. Bruce is a graduate of Ohio Wesleyan University and the Fletcher School of Law and Diplomacy at Tufts University. He lives in Dorchester.

Perhaps the most surprising finding in the report is the suggestion that films set in Massachusetts spur tourism visits to the state, something that supporters of the film tax credit have claimed but have not been able to substantiate. The Revenue Department, for example, said in its recent report that “while it is possible that there is some increase in tourism resulting from the film production activity, it is impossible to estimate the impact given the information currently available.”

In its report, HR&A selected five films that were shot in Massachusetts and tallied the number of scenes where a distinct Massachusetts location was featured. The films were The Fighter, Grown Ups, Moneyball, Ted, and The Town. HR&A then used total theater attendance for those films to calculate the number of audience impressions for the Massachusetts locations. The consulting firm then estimated that it would cost $70 million to achieve the same number of audience impressions using 30-second TV commercials.