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Connecticut | Film Funding | Massachusetts | Reports

Questioning Film Tax Credits

1 Apr , 2008  

Written by David Pierotti | Posted by:

Rhode Island threatens to cap film production tax credits.  Questions about the benefits arise in MA and CT.

Budget difficulties have affected states across the
country.  State legislatures have struggled to find new revenue or cut
spending.  One area under increased scrutiny in three New England states is tax
credits for film production.  Rhode Island is in the midst of just such a
controversy.  On March 13th, the Rhode Island Senate Finance Committee heard
testimony regarding proposed legislation that would put a $10 million cap on
film credits per year. 
It was just 2005 when Rhode Island passed its generous tax
credits (CT and MA followed suit in 2006).  Local businesses, lawmakers, and
Hollywood leaders have hailed the incentives as the beginning of a lucrative era
of East Coast film production.  But three years later, the overall economic
situation has deteriorated significantly and left lawmakers scratching their
heads, uncertain of the cost vs. benefit end result. 
According to the

Providence Journal
,
Rhode Island projects a $379-million deficit for the fiscal year starting July
1, 2008 — a deficit that could result in cuts to health and education
programs.  Senator Stephen Alves’s bill would cap the tax credit at $10
million.   
But supporters of the
industry, such as Steven Feinberg, director of the Rhode Island Film &
Television Office, believe conflating film production with social service is
unfair.  He and his supporters contend the multiplier effect of indirect
economic activity more than compensates for the lost revenue. Actors, truck
drivers, and many types of local business owners attended the hearing to voice
their concern and testify about how they benefited from the surge in film
production in Rhode Island after the passage of the tax credit legislation.  
"Information from
other states show that imposed caps drive away productions by creating
uncertainty.  The studios and networks shy away from "cap" locations and
choose other states for their film and television productions," warned Feinberg
in an email blast to potential supporters.  
The Providence
Journal


reported

that part of the problem is a loophole in the current system that allows
production companies to claim the credit even if the expense was out-of-state. 
If the production is in Rhode Island but the costumes were purchased in Iowa for
example, the credit has still been used.  Michael Janusonis

wrote

that the Rhode Island Division of Taxation has proposed that an expense
only counts toward the credit if it is performed, purchased, provided or rented
by a Rhode Island resident or vendor.
The proposed
regulations to the Rhode Island tax credit program will be aired at a public
hearing April 11 at 2 pm at the Department of Administration building.  If the regulations remain
intact, they will take effect approximately 20 days later. 
But Rhode Island is not the only state
struggling with this issue. Steve Bailey of The Boston Globe

called the benefits into question
by referring to a
study that Louisiana lost almost $60 million for a similar credit program in
2004 alone.  The Boston Globe
also
reported
on March 27th that the Massachusetts Department of Revenue indicated the
state has lost close to $120 million in tax revenue since 2005.  The data
was issued as the MA Legislature considers a bill that would extend tax
incentives to the construction of a film studio. 

Connecticut also held a
forum on this issue in March.  Yet after hearing conflicting economic data
on the efficacy of the tax credits, a proposal to expand them to live theatre
and music was gaining support, as reported by

The Stamford Advocate
.