Politics

Massachusetts lawmakers agree to deal to permanently extend somewhat controversial film tax credit

A state tax panel says the program doesn't justify its costs, but supporters say Massachusetts will lose jobs and the state's status as a filming destination without it.

Coco Roy, of Milford, was one of many demonstrators outside the Massachusetts State House to support the state's film tax credit this past May. David L. Ryan / The Boston Globe

The Massachusetts film tax credit may not be the “best use of the state’s money,” but it looks like it’s here to stay.

As part of a budget deal reached this week, state House and Senate negotiators reached a compromise to permanently extend the tax credit to film producers, following months of simmering debate about the program.

The film tax credit, which was created in 2006, is otherwise set to expire at the end of 2022.

The program offers a 25 percent tax credit on production expenses and a sales tax exemption to any TV and movie production that spends at least 50 percent of its budget or 50 percent of its shooting days in Massachusetts. Any project that spends more than $50,000 in the state also qualifies for a 25 percent payroll tax credit.

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The budget deal would increase the threshold to require that 75 percent of a production’s budgets or filming days be spent in Massachusetts.

The legislation, which still needs approval from Gov. Charlie Baker, was passed by both the House and Senate in a pair of unanimous votes Friday afternoon.

The agreement this week comes after the House voted unanimously, 160-0, in April to permanently extend the program as it is and, in Speaker Ron Mariano’s words, send “a clear message to the film industry that we are open for long-term commitments and the economic benefits they bring to Massachusetts.

However, the Senate had proposed a number of changes to the program in its budget bill, including raising the 50 percent spending/filming days threshold to 75 percent; postponing the program’s sunset date until Jan. 1, 2027; capping salaries eligible for the credit at $1 million; and eliminating the credit’s transferability, which allows companies to sell it to others to use.

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Film industry groups argued that those changes would result in the loss of thousands of jobs, and ultimately, only one of them — the increased 75 percent threshold — stuck in the compromise budget first released Thursday.

Advocates have been pushing to make the program permanent, arguing that it would provide producers long-term certainty and continue to bring jobs and other economic benefits (and Hollywood celebrities) to Massachusetts.

However, the credit is also estimated to cost the state between $56 million and $80 million a year. And a commission created to review the state’s tax credits said in a report in March that the program did not justify its costs. According to the state’s Tax Expenditure Review Commission, the credit generated just $503.2 million in net new spending from 2006 to 2016 and cost $100,000 for each new job created.

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“We conclude that this is not the best use of the state’s money,” the commission said.

Time will tell if increasing the threshold for the amount of money or time film productions spend in the state will make it a better deal.

In a statement Friday, the Massachusetts Production Coalition called the increased 75 percent threshold a “reasonable compromise” in exchange for making the credit permanent.

“Thanks to the legislature’s action today, Massachusetts will be poised and ready to capture the growing streaming TV industry that will bring even more good-paying jobs to Massachusetts for years to come, employ more local workers, and spend millions of dollars with more local businesses,” David Hartman, the coalition’s executive director, said in the statement.

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Hartman was joined by a number of local unions, film studios, and businesses that also praised state lawmakers. By their count, the tax credit has helped make Massachusetts the location for more than 270 productions in over 225 cities and towns since 2016.

“We urge Governor Baker to sign this budget to ensure that thousands of workers and small business owners can continue to live and work in Massachusetts,” Hartman said.

Baker’s office didn’t immediately respond to a request for comment Friday afternoon. The Republican governor had repeatedly tried to repeal the tax credit after he first took office in 2015, but dropped the effort in 2017 after his proposals failed to make it through the Legislature.

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