Senate proposal pares back film tax credit

THE SENATE BUDGET committee is proposing major changes to the film tax credit, setting the stage for a major clash with the House over the lucrative incentives the state offers to film and television production companies to shoot in Massachusetts.

The House voted 160-0 in April to keep the existing film tax credit in place and do away with a sunset provision that would have caused the tax credit to expire on January 1, 2023.

The Senate Ways and Means Committee, in its budget filing on Tuesday, extended the sunset provision by four years to January 1, 2027, but also modified the tax credit to encourage more spending in Massachusetts and lower subsidies for high-priced actors and directors from out of state.

“Too much of the money, the tax credits and the benefits of the tax credits, goes to out-of–state individuals and out-of-state companies.,” said Sen. Michael Rodrigues of Westport, the chair of the Senate Ways and Means Committee. “We want to see more of the benefits be realized by Massachusetts residents and Massachusetts companies.”

The Massachusetts film tax credit offers producers of films, TV shows, and commercials a tax credit equal to 25 percent of whatever they spend in Massachusetts. The tax credit is one of the most generous in the United States, costing the state between $56 million and $80 million a year. The tax credit has attracted a large number of productions to the state, generated a significant number of jobs, and prompted private investors to build a film studio in Devens.

But a Tax Expenditure Review Commission issued a report in March raising concerns about the value of the film tax credit. “We are between ‘somewhat’ and ‘strongly’ disagreeing that it justifies its fiscal cost,” said the commission’s report. “While the film credit provides some immediate stimulus, it does not contribute to the long run growth of the state’s economy. Even though we are able to measure in detail all of the economic benefits of this credit, it still results in a cost of $100,000 per job created. We conclude that this is not the best use of the state’s money.”

The Senate budget proposal would leave the key elements of the tax credit in place, but it would require film and TV productions to either spend 75 percent of their budget or 75 percent of their filming days in Massachusetts – an increase from 50 percent in the existing law. The Senate proposal would also cap at $1 million how much of an individual’s salary would qualify for the tax credit, a provision aimed at big-name actors and directors from out of state.

The current film tax credit law allows recipients of the credits to convert them into cash by selling them back to the state at 90 percent of their value or selling them to companies with a large tax liability in Massachusetts at a negotiated price, presumably above 90 percent of the value. Rodrigues said the Senate proposal would discontinue the ability of film tax credit recipients to sell them to other taxpayers.

“We’ve heard loud and clear from the Department of Revenue that transferable tax credits are an administrative nightmare, because sometimes they’re transferred more than once,” Rodrigues said.

The Massachusetts Taxpayers Foundation estimated the changes proposed by Rodrigues would reduce the tab for the film tax credit by $10 to $15 million a year.

The Massachusetts Production Coalition, which represents unions, businesses, and artists who support the film tax credit, issued a statement saying the Senate’s approach would effectively kill the film and television industry in Massachusetts.

“This would lead to the elimination of thousands of local jobs and drive tens of millions of dollars of economic benefit out of Massachusetts,” the statement said. “Extending the sunset date by just four years does not provide the long-term certainty that local businesses need to invest now in infrastructure and equipment. A four-year extension would merely leave the industry in an extended period of limbo with limited opportunities for growth that creates more jobs.”

House Speaker Ron Mariano, who has emerged as the film tax credit’s biggest champion on Beacon Hill, had no comment on the Senate bill. The speaker’s vocal support for the tax credit means it will likely be a central focus of budget negotiations between the House and Senate, as both branches bargain for what’s important to their chambers.

Rodrigues has long been skeptical of the film tax credit’s bang for the buck, and has previously pushed some of the measures he included in the budget on Tuesday. His proposal, however, scales back but does not eliminate the film tax credit.

“We recognize that there is a benefit to the Commonwealth of Massachusetts by having a robust film and movie industry in Massachusetts,” Rodrigues said.  “We have to make sure that that return on investment is maximized for those paying the bills, the taxpayers of the Commonwealth.”