Tax & Sports Update

Proposed Massachusetts Tax Changes: I'll Wait to See the Movie

Posted by Joseph B. Darby III on Feb 4, 2016 11:24:47 AM

ThinkstockPhotos-481905558.jpgGovernor Charlie Baker wants to give the Massachusetts corporate income tax a makeover of Lady Gaga-like proportions:  Baker wants to extend the “single sales factor" apportionment regime, which currently applies only to manufacturers and mutual fund service corporations, so that it applies to all Massachusetts corporations. This would be a major boost to a variety of local companies, notably big retailers such as TJX and Staples.

To pay for this change, the Governor has targeted the Massachusetts film tax credit, a controversial credit that has been around for ten years and that has resulted in Massachusetts (especially Boston) becoming one of the country’s most popular venues for making expensive Hollywood films. 

At the present time, Massachusetts has a transferable and refundable film tax credit (the Commonwealth will pay 90 cents to buy back one dollar of film credit), and does not have a cap on the credit per film. Baker’s proposal would 1) limit the refundability of the film tax credit (it will still apparently be fully transferable) and 2) also cap the credit at $7 million per picture.

That the MA film credit has been highly successful at bringing films to Massachusetts is almost undeniable:  Since 2011, 16 major films and six television pilots have been shot in in the Commonwealth, including files such as The Judge, American Hustle, Ted and The Equalizer.

On the other hand, asking whether the MA film credit represents public money well spent is a different and more complicated issue. Movie production credits are a fact of life, and if a state wants to play in that very glamorous Hollywood-dominated sandbox then it pretty much has to pony up production incentives to attract movies. Some argue that film tax credits may cost more than the incremental taxes collected as a result of the movie production in MA; others point out that making MA the setting and backdrop for popular movies is a form of favorable publicity that no amount of money can otherwise buy. For the full she said/he said debate on this issue, you can go to here.

I happen to have a dog in this hunt because I represent various film funds that engage in making movies – including, from time to time, movies here in Massachusetts. My involvement dates back to the early 2000s and the quasi-iconic movie Fever Pitch, which featured a young Jimmy Fallon as a diehard Red Sox fan (Drew Barrymore was his doubter-turns-diehard-Red-Sox-fan girlfriend). Fever Pitch was filmed in 2004 in TORONTO prior to the MA movie credit era because it was several million dollars cheaper to film in Toronto than in Boston.

I was involved, tangentially, in trying to get the MA legislature to pass a film credit back then so that Fever Pitch could be filmed locally, but the effort failed and so Fever Pitch was largely filmed in Toronto, with a famous Boston background scene occasionally spliced in. (By astounding good luck, the movie was made in the year that the Red Sox finally broke The Curse  the movie ends with a noticeably abrupt swivel to 2004 playoff footage, which was a case of history ad libbing the ending.)

The MA film credit change, if adopted, will probably mean that glamorous, big-budget Hollywood movies are made elsewhere. But I am not too worried just yet. The prevailing wind seems to be blowing in favor of retaining the current version of MA film tax credit, and so I am going to put off for the moment any urge to read and study the full details of the proposed legislation.  

I will just wait for the movie.

Topics: MA film credit, Tax, corporate income tax, state and local tax

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