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.
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.
“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.”