(Updated 6:47 p.m.) A child advocacy group issued a report Monday which shows the state’s film tax credits are subsidizing out-of-state personnel and businesses.
The Connecticut Voices for Children report, which relies on data from the Commission on Culture and Tourism, found that only $41.5 million of the $113.2 million in film tax credits awarded to productions were “actual Connecticut expenditures.”
Of the 60 productions completed before the end of May, eight productions, which received a total of $9.3 million in these tax credits reported no “actual Connecticut expenditure” at all, evidently transporting all production-related personnel, equipment and supplies from other states, the report says.
“Connecticut has been hoodwinked by the entertainment industry into paying for 30 percent of their production costs,” Shelley Geballe, a senior fellow at Connecticut Voices for Children and author of the report said. “But the glitz and glamour of this industry shouldn’t blind us to the fact that these tax credits are big money losers for the state.”
On average, only one in every ten dollars spent on production expenses that qualified for film production tax credits was an “actual” Connecticut expenditure, the report says.
Further, a Connecticut Commission on Culture and Tourism report indicates that the majority of the production companies awarded or seeking the credits are Limited Liability Companies. These companies are not required to pay Connecticut’s corporation business tax but just a $250 per year Business Entity Tax.
Although their film production tax credits therefore are useless to them in reducing their own corporate tax liability, they still have great value since state law specifies that the tax credits are transferable. The report says that these LLCs can – and do – sell the tax credits to other Connecticut corporations and insurance companies that have Connecticut tax liability, allowing these other companies to reduce the taxes they owe Connecticut.
Notably, the companies that buy these credits to reduce their Connecticut business taxes can be -and have been – wholly unrelated to the entertainment industry whose growth the credits seek to encourage, the report says.
Earlier this year, Republican Gov. M. Jodi Rell proposed capping the total number of credits issued annually at $30 million, but some lawmakers were concerned that a cap may discourage the industry.
Connecticut Voices for Children would like to see the tax credits eliminated or limited as the state seeks to close an estimated $8.7 billion budget gap.
“At a time when the health and well-being of our families and communities is threatened by severe state budget cuts and Connecticut must create new, permanent, full-time jobs, investing our scarce resources into schools, health care, and home-grown businesses in emerging fields like renewable energy makes far more sense than subsidizing the next horror movie or thriller,” Geballe said.
Not everybody agrees with Geballe
While one group criticized the state’s film tax credit program, others, including the Connecticut Production Coalition and former Speaker of the House James Amann, jumped to its defense Monday afternoon.
“The Connecticut Production Coalition is extremely disappointed that opponents of Connecticut’s film, television and digital media industry have resorted to mischaracterizing draft, incomplete data to serve their own ends,” said Kevin Segalla, President of the Connecticut Film Center, said in a press release.
Segalla and Amann said Connecticut Voices for Children relied on incomplete data to draw their conclusions and criticism of the film tax credit program.
“Even the Connecticut Film Office, who compiled these preliminary numbers made it clear that this is a draft document that doesn’t account for millions and millions of dollars spent right here in Connecticut,” Segalla said.
Amann, who held a press conference at the Legislative Office Building Monday afternoon, said the film tax credit program has created 2,000 jobs in the state since it was created in 2006.
Amann said he’s confident when the report is completed it will show the state is making money by creating a digital media industry here in Connecticut.
“You gotta look at the whole picture in order to get your results,” Amann said. “We are reaping a benefit not a negative one, but a positive one.”
He said if the opponents think this program isn’t working then “they’re dead wrong.”
“Voices for Children has fried the goose that laid the golden egg of opportunity for our state,” Amann said.