By Mary E. Arata, from Nashoba Publishing, Harvard

Before cameras roll, a focus on film tax credit

By Mary E. Arata, Marata@nashobapub.com


DEVENS -- MJM Development, LLC, of Andover hopes to build a first-of-its-kind movie and television studio on Devens.

Led by Managing Director Michael J. Meyers (no relation to the former Saturday Night Live and Austin Powers actor), MJM says it will build a $104 million, 600,000-square-foot film and television studio on Jackson Road at Devens.

It's not the first time a sound stage has been contemplated for Devens, according to Devens Enterprise Commission Administrator Peter Lowitt. But this is the first proposal to see the light of day with a named entity and a pinpointed location, which will fall entirely within the historical bounds of Harvard.

The success of the launch rests in part with the Massachusetts film tax credit. It was considered a lynchpin in similar studio deals plotted for South Boston, Plymouth and even the former naval station in Weymouth. No other Massachusetts studio has made it to full theatrical release.

In order to turn the screenplay into reality, MJM Development will bank on its studio tenants -- movie and television producers -- being attracted to the tax credit.

State Department of Revenue spokesman Bob Bliss said the individual productions, and not the studio construction itself, can benefit from the tax relief.

"The production of movies qualifies, but the construction of the studio is not a qualified expense," Bliss said. "Who knows what other tax credits might be applicable here, but the film tax credit is
Advertisement
not one of them."

The law, in a nutshell

To roll out the red carpet to movie and television producers, former Gov. Mitt Romney signed the state's first film tax credit into law in 2005, and it was to sunset in 2013. Gov. Deval Patrick signed into law amended legislation that extended the sunset date to Jan. 1, 2023.

The goal is to depict Massachusetts in a positive light and spark spinoff jobs, hotel stays, tourism and retail sales.

To qualify, studios, producers and filmmakers must shoot at least half of their movie or spend at least half of their production budget in the state to be eligible for a tax credit of 25 cents for every new dollar of spending they bring to Massachusetts. There's a 100 percent sales-tax exemption on any in-state, production-related item purchased, starting with pre-production and stretching for the ensuing 12 months.

There's also a 25 percent payroll-tax credit applicable to the total payroll of a motion picture subject to Massachusetts personal income-tax withholdings but not for "high salary" stars earning more than $1 million.

The tax credit is credited to the company's personal income or corporate excise-tax liability. At their discretion, filmmakers may opt to receive a guaranteed direct payout of 90 percent of the face value of the tax credit. Otherwise, a filmmaker can sell the tax credit at market rate. Transferred tax credits can be carried forward for five years.

Unlike the former Romney-era, $7 million-per-motion-picture limit, there are no limits or cap on the tax credits possible. As the Massachusetts Film Office website proclaims, "No muss. No fuss."

The credit applies to feature-length films, video or digital media projects (narrated or documentary); TV series (with a season not to exceed 27 episodes); and commercials (a single commercial or series of commercials for one client with production expenses above $50,000 in a consecutive 12-month period).

Obscene productions cannot benefit; nor can fundraising and marketing productions cannot.

News programs are excluded, as are current-events programming, weather and financial market reports, talk shows, game shows, sporting events, awards shows and gala events.

Expenses qualifying for the tax relief include wages and salaries, set construction, operations, photography, lighting, sound, editing, wardrobe, makeup, film processing, transfer, sound mixing, special and visual effects, music, location fees, and the purchase or rental of facilities and equipment.

While the Massachusetts Film Office enthusiastically reports that the film tax credit is a boon to the state's economy, Department of Revenue figures sully that statement. The DOR is required to annually report on the figures. The DOR's report on calendar year 2009 was released in January and resulted in negative press -- particularly a critical Associated Press story, grilling the merits of the tax credit:

* For productions filmed in 2009 that had yet applied for the credits, a total of $82.4 million in film tax credits were generated by 86 individual productions, with commercial and advertising productions accounted for the largest number of tax credits awarded (48). There were also 13 feature films. Combined, they accounted for 93 percent of the total value of tax credits claimed to date for 2009.

* Massachusetts directly paid out $100 million in fiscal year 2010 for tax credits issued in 2009 and issued in prior years but that had not yet been used.

* In calendar 2009, the film tax incentive program generated $10.4 million in new state revenue that could help partially offset the cost of the tax credits.

* Taking into account payments to out of state residents and businesses, as well as state spending cuts required to fund the tax credits, in calendar 2009, the film tax credit program resulted in $32.6 million in new spending in the Massachusetts.

* In 2009, the cost to the state per Massachusetts resident job created was $324,838. The cost spread over all jobs created (in and out of state) was $123,130 per employee. For the period 2006 to 2009, the cost per Massachusetts resident job created was $133,055 and for all jobs created was $70,648.

* Tax credits for calendar year 2009 productions totaled $329.7 million. DOR estimates that $10.7 million were productions that would have proceeded regardless of the tax credits. Of the remaining $319 million in new 2009 spending attributable to the tax incentives; $103.8 million, or one-third, was paid to Massachusetts residents or businesses located in Massachusetts; and $215.2 million, or two-thirds was paid to nonresidents or businesses located outside of Massachusetts.

Taking it all into account, the film tax-credit program resulted in $32.6 million in new spending in the Massachusetts economy in 2009, according to the DOR report of January.