Baker: Tax credits should help local firms

Says film credit geared too much to Hollywood

GOV. CHARLIE BAKER said on Wednesday that he is filing legislation to pare back the cost of the state’s film tax credit and increase the reach of another tax break to better focus state resources on helping local companies instead of big productions out of Hollywood.

Baker, who last year led an unsuccessful bid to eliminate the state’s film tax credit, is this year proposing what he calls a “modest change.” He wants to cap at $7 million the amount of film tax credits any one production can receive and also eliminate the ability to sell the tax credits back to the state.

The state’s film tax credit offers the producers of movies, TV shows, and commercials a tax credit equal roughly to 25 percent of whatever they spend in the state. Producers can turn the credits into cash by selling them at a slight discount to Massachusetts taxpayers who then use them to reduce their tax liability.

The Judge, starring Robert Duvall and Robert Downie Jr, was shot in Massachusetts.

The Judge, starring Robert Duvall and Robert Downie Jr, was shot in Massachusetts.

Joseph Darby III, an attorney who specializes in tax matters at Sullivan & Worcester and advises many Los Angeles-based film funds, said the cap, if it is enacted, would probably cause most Hollywood movie and TV productions to film in states without caps.  “They’re going to get a better deal elsewhere,” he said.

Baker expects his proposed change in the film tax credit would save the state $43 million, which is more than half the $80 million estimated annual cost of the credit.

With the savings from scaling back the film tax credit, Baker said he wants to use a portion of the money to build more affordable housing and the rest to extend a tax break currently available only to manufacturers, mutual funds, and defense firms to the rest of the state’s businesses.

The tax break favored by Baker is called single sales factor. It deals with how companies that operate in more than one state should be taxed on their income. Currently, the portion of the firm’s overall income taxable in Massachusetts is based on the percentage of company property, payroll, and sales in Massachusetts. Under single sales factor, the percentage of taxable income would be derived using just the share of the company’s sales in Massachusetts.

Baker said his reasoning for scaling back the film tax credit to the way it was originally structured while expanding single sales factor is to help local businesses.

“The current film tax credit, from our point of view, provides pretty significant benefits to individuals and organizations that don’t have much of a footprint here in the Commonwealth,” Baker said at a State House press conference. “By going back to the original, we really are supporting and targeting more what I would describe as small, locally operated productions.”

The governor said the same motivation was behind expanding the reach of the single sales factor tax break to all of the state’s companies. “We’ve heard from a lot of Massachusetts-based businesses that compete in other markets that other states have moved in this direction and that’s a competitive disadvantage for Massachusetts firms,” Baker said.

Baker said the expansion of single sales factor was not requested by General Electric, which recently announced it intends to relocates its headquarters from Connecticut to Boston.

The liberal-leaning Massachusetts Budget and Policy Center issued a report on single sales factor that said the tax break has had “no discernable positive effect on the economy,” particularly for manufacturers who produce goods here and sell them elsewhere.

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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.

Chris O’Donnell, business manager for IATSE Local 481, a union representing many film workers, said 16 major films and six television pilots have been shot in Massachusetts since 2011, and all of them would have gone elsewhere if the proposed cap had been in place. The films include The Judge, American Hustle, Ted, and The Equalizer.

“Calling this a modest adjustment of the film tax credit is simply not true,” he said. “The governor’s proposal would cripple the Massachusetts film and television industry.”