NewEnglandFilm.com

When Rhode Island Governor Carcieri proposed axing the film tax credit earlier this year, industry members came out in droves to defend it. At a public hearing to the House Finance Committee in February, dozens of crew members, actors, and industry leaders spoke out in favor of the credit.

The problem was that proponents of eliminating the tax credit quoted a 2008 report done by the R.I. Department of Revenue which stated that the state returned an average of 28 to 32 cents for each dollar given in film and television tax credits from 2005 to 2007.

And the numbers don’t lie. Or do they?

This past week, a new more comprehensive study sponsored in part by the Rhode Island Film Collaborative shows exactly the opposite. The report “The Economic Impact of the Motion Picture Production Tax Credit on the Rhode Island Economy for the Years 2005-2009” created by Dr. Edward M. Mazze, Professor of Business Administration at the University of Rhode Island demonstrates that rather than returning a few cents on the dollar, the tax credits brought back an average of $8 for every dollar spent.

Based on similar respected studies, Mazze suspected that the tax credits would amount to a worthwhile return on investment, but he nonetheless approached the numbers impartially. Mazze measured economic impact in the amount of “new money” that it brought to the state in the form of taxes and revenue collected, but also through “indirect and induced effects,” such as wages, salaries, local taxes, and economic activity that would not have been possible without the credit. For example, it measured the impact of an employee of a company that supplies goods and services to production companies who earns wages that are then spent on other consumer goods and services. Mazze measured the total economic impact in terms of four components: employment, income, revenue, and tax.

Although they could not be quantified, the study recognized additional benefits such as increased tourism to the state, improved local university internship opportunities, fundraising of local charities through auctioning walk-on roles, and numerous other known benefits.

‘The Motion Picture Tax Credit was, and is, critical to the film and television production industry in Rhode Island, and vital to the state’s economy… The economic benefits of the tax credit far outweigh the state’s investment in the program,’ said Mazze.

Of the earlier report, the new study concludes, “The [earlier] report did not take into account the revenue generated and taxes paid by individuals and businesses who benefited from film and television production activities in the state.” It continues to list the numerous omitted benefits in the former report such as state income taxes for employees on location, sales and use taxes, meals/beverage taxes and hotel taxes.

“For years, we have received an overwhelming amount of correspondence with anecdotal evidence supporting the Motion Picture Incentive Program… Dr. Mazze’s study now mathematically proves it,” said Steven Feinberg, Executive Director of the Rhode Island Film & TV Office. “We have a unique state due to our small size and diversity of locations as well as a strong talent pool and crew base. Filmmaking is a rapid growing industry. It has tremendous positive benefits – both artistic and economic – and it must be recognized as one of the most promising, vital lanes to Rhode Island’s road for future economic success.”

The current RI Motion Picture Production Tax Credit provides a tax credit to film and television companies of 25% for certified production costs including dollars spent in the state on food, lodging, equipment rental and salaries with a minimum budget of $300,000. Fifty-one percent of the film production must take place at a state location. The tax credit can be used or transferred for personal or corporate income taxes and can be carried forward for up to three years.

Over 45 states in the United States have some form of film tax credit program.