Patrick seeks cap on film tax credit
JANUARY 28 UPDATE: A top House leader says the $50 million cap on film tax credits proposed by Gov. Deval Patrick would be a disaster for the movie business in Massachusetts.
“I think it kills it,” said assistant House Majority Leader Ron Mariano.
Mariano says the cap would make it nearly impossible for entrepreneurs to raise the capital to build movie studios in Massachusetts.
The Quincy representative helped lead the effort to block Patrick’s bid to scale back the film tax credit last year, but said he doesn’t know how much opposition there will be in the House this year. He said the administration’s proposal caught him off guard and he hasn’t talked to colleagues yet.
Gov. Deval Patrick today proposed capping at $50 million a year the amount of tax credits that could be awarded to movie producers filming in Massachusetts. The administration had been expecting to hand out $125 million in film tax credits next year.
Patrick called the state’s 25 percent film tax credit “wildly successful but very expensive.” His proposal, which is a sharp reversal from his stance a year ago, called for the cap to be lifted after two years.
Many other states are cutting or eliminating their tax credits in the face of plunging tax revenues, but Patrick chose to leave the Massachusetts program intact while limiting how many tax credits the state can hand out each year.
Previously, movie producers shooting films in Massachusetts would submit their expenses at the end of the production and receive a tax credit equal to 25 percent of their total expenditures. The tax credit could be converted into cash by selling it to another taxpayer or back to the state.
Under the governor’s proposal, filmmakers could still receive the 25 percent tax credit but they would have to apply for it in advance and the total number of awards could not exceed $50 million in a year. Theoretically, a handful of big budget movies could gobble up the entire $50 million.
The proposed cap represents a dramatic reversal for Patrick. A year ago his administration succeeded in passing a measure that would have reduced how much of a movie star’s salary would qualify for the tax credit, but Patrick, under pressure from lawmakers and producers, subsequently vetoed the measure. At the time, there was sharp division within his administration over what to do, with Patrick ultimately siding with those who favored the tax credit as an economic development incentive.
Nicholas Paleologos, head of the state’s Film Office, was optimistic about the cap. He said the $50 million cap should be good enough to attract $200 million in production spending. That’s less than half as much as was spent in previous years, but Paleologos said it’s “still an awful lot of money.”
The reduction in film and life science tax credits was just one of more than a dozen initiatives Patrick proposed yesterday to help bring his $28.2 billion budget plan for fiscal 2011 into balance. The budget preserves spending for education and local aid, but covers a yawning deficit with expected federal aid, spending cuts, money from the state’s stabilization fund, savings from a debt refinancing, a tax on candy and soft drinks, and an expansion of the bottle deposit law.
As he did during his State of the State speech, Patrick stressed his careful fiscal management of the state during the economic downturn. He said services will suffer and people and communities will feel pressure this election year, but he expressed optimism that the state economy was starting to turn the corner.
Patrick’s budget contained several other high-profile public policy initiatives, including:
— A proposal to set aside capital gains tax revenues above a certain level in a rainy day fund. As MassINC research has shown, capital gains tax revenues are highly volatile. To level out the ups and downs, Patrick is proposing to divert a portion of any capital gains tax revenues above a certain level to a rainy day fund that could be tapped during tough times. A similar measure passed last year but fell victim to last-minute squabbling between the governor and the Legislature.— A proposal to introduce greater transparency in the awarding of tax credits, requiring state agencies to identify recipients of tax credits and how much they are receiving. A similar measure passed the Legislature last year with an amendment shielding the names of tax credit recipients. Patrick vetoed the amendment, and the measure ultimately died in the Legislature.
— A proposal to move the state’s probation department out of the court system and into the executive branch of government. Patrick said the initiative may lead to savings by consolidating parole and probation centers, but he also indicated the move was in part motivated by the agency’s image as a patronage haven for the Legislature. Asked if he had a concern about that, Patrick said: “Yes, I have a concern. I have a concern about the accountability and the transparency of that agency.”