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Game makers may get a break

State considers tax incentives for video industry

Email|Print|Single Page| Text size + By Todd Wallack
Globe Staff / July 5, 2008

Many state leaders credit Massachusetts' two-year-old film production subsidies with luring more than a dozen major movies here, featuring stars like Leonardo DiCaprio and Kevin Spacey. Now the Legislature is considering using film tax incentives to boost the state's growing video game industry.

An early version of a bill to help subsidize the cost of building film studios in the state included help for computer game developers.

Specifically, the bill would have allowed companies to claim a tax credit for up to 20 percent of the cost of building, converting, or equipping a facility related to "video gaming," as the company invests at least $500,000.

The proposal underscores politicians' interest in supporting Massachusetts' so-called creative economy, including the production of Hollywood movies and theater. Last month, Governor Deval L. Patrick appointed a "creative economy industry director" to coordinate the state's economic development programs for the sector.

Massachusetts already has more than 1,000 employees in the video game industry, ranking it fifth in the nation, behind California, Washington, Texas, and New York, according to a study last year by the Entertainment Software Association.

Several prominent companies are based in the Boston area, including Turbine Inc. in Westwood, which has developed online games such as Lord of the Rings; Blue Fang Games LLC in Waltham, which developed the Zoo Tycoon series for Microsoft Corp.; and Harmonix Music Systems Inc. in Cambridge, which created the popular Guitar Hero music games.

Peter Faubert, Turbine's chief financial officer, said film-style tax credits could be a boon for video game companies. He said Turbine, which has been growing rapidly and recently raised $40 million in venture capital, is searching for a larger headquarters in the Boston area. The company has 300 employees, but plans to hire as many as 100 more by the end of 2009 and requires additional space.

Faubert said some towns have already mentioned the possibility of offering Turbine property tax incentives, though they probably won't be large enough to affect the company's decision on where to site its headquarters.

"We're trying to make our plans based on our business today, rather than a tax incentive," he said. But Faubert said tax credits could help the business expand further.

It is unclear, though, whether the film studio construction bill will be approved, or whether the video game industry incentives will remain part of it. The bill, sponsored by Representative Ronald Mariano, Democrat of Quincy, was approved by the Legislature's Joint Committee on Revenue last month on a 5-to-4 vote.

But some legislators say they are concerned about the cost of the tax incentives. The state already reimburses companies for up to one-quarter of their film production costs in the form of tax credits, something a Department of Revenue study suggested could cost the state $100 million a year. Proponents contend the subsidies are worthwhile, however, because they create thousands of jobs and inject hundreds of millions of dollars a year into the economy.

And even if the bill is approved, the video game provision could be missing from the final version. A House staffer said he struck the language from the latest version of the bill, because of concern it could be applied to slot machines.

"It was an unknown quantity," said Anthony DeGregorio, research director for the Joint Committee on Revenue. However, he said lawmakers will have many opportunities to add the provision back. "There are so many pit stops."

House Speaker Salvatore DiMasi said the Legislature was still considering the idea, but DiMasi hasn't taken a public position on it. Mariano and the software association did not return calls seeking comment. A spokesman for Senate President Therese Murray said she wasn't aware of the proposal. And Patrick's spokeswoman declined to comment.

Regardless, Noah Berger, executive director of the Massachusetts Budget and Policy Center, recommended the state do a careful analysis before expanding the tax breaks - including figuring out how much the program would cost, how many jobs it would create, and whether the money could have a greater impact if it were spent on other tax incentives or government programs instead.

"The state has not done a good job of carefully enacting tax incentives," Berger said.

Todd Wallack can be reached at twallack@globe.com.

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