Industry sets stage for film tax credit fight
Sunset for program looms on horizon
THE STATE’S CONTROVERSIAL film tax credit is due to expire on December 31, 2022, and that would mean curtains for several job-creating local businesses that have sprung up around the celluloid gravy train.
The film tax credit debate should be interesting. It’s a maxim on Beacon Hill that it’s easier to block legislation from passing than it is to win passage of a new law. Defenders of the tax credit have so far been successful in warding off attempts by the Senate and Gov. Charlie Baker to rein in its cost, but eliminating the sunset means having to go on the offensive and get new legislation passed.
The campaign to eliminate the sunset provision has some backers who are big figures in the Bay State film business but whose names and faces never grace a marquee or movie poster.
Gary Crossen sketched out a couple possible scenarios for his New England Studios company, the only movie studio built for that purpose in the six-state region. The company only employs eight people directly but usually brings in about 400 workers per project.
On the other hand, Crossen, who has pumped about $35 million into the studio complex located at Fort Devens, a former US Army base roughly 30 miles northwest of Boston, said he owns land nearby that would be “ideal for another couple of studios,” costing between $20 and $25 million. To make that investment, Crossen would need to know how the story ends with the tax credit. If no action is taken, the credit will fade to black in about three-a-half years, but state lawmakers could push back that sunset date or even extend the tax credit indefinitely.
Last week’s event in a State House meeting room seemed far from the glitz and glamor of a movie or television production. The panel was moderated by C. Logan Robertson, a certified public accountant and the senior audit manager of Kevin P. Martin & Associates, a local firm.
Begun in 2006, the program offers qualifying producers of films 25 percent of whatever they spend in Massachusetts. The tax credits can be converted to cash by selling them back to the state at 90 percent of the face value or selling them to a company with a big tax liability in Massachusetts that wants to reduce its tax bill.
Robertson, the accountant who moderated last Thursday’s discussion, said this was a necessary feature to get the program off the ground.
“Not all tax credits are transferable,” Robertson said. “When the film industry started in Massachusetts, in order to lure in outside production companies, we had to make it transferable because Universal or Paramount, they don’t have income that’s taxable in Massachusetts. So if you didn’t make it a transferable credit, what are they going to do with this credit?”
The film tax credit has been controversial from the get-go, seen by many as rewarding well-off, out-of-state producers and actors at the expense of other state taxpayers. But the Massachusetts Production Coalition has pushed back against that narrative, touting how the law has helped all sorts of local businesses and union members.
The Massachusetts Production Coalition touts a total of 114 co-sponsors, a majority of the 200-seat Legislature, for bills filed by Rep. Tackey Chan and Sen. Michael Moore that would do away with the end-date. But majority support only goes so far on Beacon Hill. There was a public hearing on the bills in June, but decisions about whether and when, and in what form to pass the bills are made within the cloistered power structures of the House and Senate.
The Massachusetts Taxpayers Foundation is among the groups that hopes the film tax credit is in its final seasons, believing the funding could be better spent on “other priorities.”
“We are opposed to the film tax credit. We’ve had long-standing opposition,” said Eileen McAnneny, president of the business-backed group. “Most of the money goes to firms outside of Massachusetts.”
The battle over the future of the tax credit that the local film industry sees as its lifeblood is taking place way off-set, and like many big debates in state government, mostly out of view of the public.
Historically, the Senate has been more skeptical of the film tax credit and more eager to rein it in, while the program has enjoyed more robust support in the House, where it is championed by Majority Leader Ron Mariano.
“During every budget cycle, the House has fought to retain the Mass. film tax credit, and so it’s something that we’re definitely interested in taking a look at,” said Rep. Ann-Margaret Ferrante, a Gloucester Democrat and the House chairwoman of the economic development committee. “Hopefully our Senate counterparts will come to see that this is really an economic-development program that has provided substantial opportunities for blue-collar workers, for white-collar workers, for students.”
Similar to the proponents of other industries favored by the state, such as biotech, the film tax credit’s backers focus on the benefits of the program, rather than the cost. Six business people on the State House panel explained how the tax credit has been integral to their success, and described how uncertainty about its future is leading to troubling jitters.
“I get phone calls from our loan officers every time there’s discussion in the newspapers about adjustment to the tax credit,” said Andrew Boles, owner of Above the Line, a North Reading company that rents out equipment for films.
Craig Murphy, who owns Cambridge Repro-Graphics in Somerville, which produces pieces of scenery, is thinking of buying a building in Malden or Everett for an expansion. He said the film industry accounts for about a third of his business and referred to the sunset of the tax credit as “doomsday.”
Alison Guercio Tocci, owner of the Bull Run Restaurant, a Shirley establishment that predates the founding of the United States by about 50 years, likened the possibility of the tax credit sunsetting to the investment-sapping concerns that preceded the closure of the Army base at Devens. The old tavern doesn’t just make money catering for the production companies; it is also booked for wrap parties and is patronized by crew members, Tocci said.
In addition to the raw dollars created by the film tax credit, there’s the less quantifiable luster that towns and cities can gain by having a popular movie or series filmed there.
Before Castle Rock in 2017, the last major scripted series filmed in Massachusetts was Against the Law, filmed in the early 1990s, according to Chris O’Donnell, business manager for the International Alliance of Theatrical Stage Employees Local 481, who said there are now even more major series being filmed in the state. Series productions – which are hardly confined to cable and broadcast television with the advent of streaming services – provide a steadier supply of work for local crew members than movies, O’Donnell said.
It’s been widely acknowledged that the US is enjoying a golden-age revival of television, with more quality programs to watch than ever. There is less agreement about the dollar value of the tax credit program fueling the Massachusetts role in it.
A 2013 report from the Department of Revenue found that $44 million in film tax credits in 2011 netted the state $38.7 million in economic activity. Parsing the data, the Pioneer Institute argued in April that the film tax credit is “a very ineffective way to generate economic growth or create jobs.” According to the think tank, the average net cost to the state for each of the 3,000 Massachusetts jobs produced in the first six years of the program was $109,000.
Tax credit boosters look askance at the reports. “I’m very critical of DOR’s numbers to begin with,” said Ferrante, who contended that the reports don’t account for permitting fees to local government, renovations to parks and buildings, and the total spending created by film productions.
Preliminary figures provided by the Department of Revenue for 2018 indicate a total of $16.2 million awarded for that year, a steep drop-off from earlier years. But industry players said the film industry in Massachusetts has grown in recent years, and suggested that initial number is likely more an indication of accounting vagaries than of the actual popularity of the program. The preliminary numbers for 2016 indicated $61.7 million in tax credits had been issued, but later that figure was revised upward to $88.9 million.
The preliminary 2018 numbers indicated 140 projects received tax credits, most of them for shooting commercials for such corporations as Liberty Mutual, Men’s Warehouse, New Balance, Adidas, Pepsi, and Dunkin’ Donuts.
WGBH received $2.5 million, or 15 percent of the state’s total outlay, for its TV productions in Massachusetts, including Nova season 44 (a $462,545 tax credit), American Experience season 29 ($312,701), and Antiques Roadshow season 21 ($225,942).
The biggest recipients were movies and TV series, including Proud Mary, starring Taraji Henson ($3.2 million); My Dad Can Beat Up Your Dad ($2.4 million); Ghost Light ($714.759) ; and Wicked Tuna Season 4 ($503,819).With hundreds of decent-paying jobs created, the film tax credit has been a family-friendly hit, as far as boosters are concerned. Its future falls more in the category of a suspense thriller.