The Department of Revenue released this week its third report on the Massachusetts film tax credit.
In summary, the report notes that the credit, which cost the Commonwealth $82.4 million for productions filmed in calendar 2009, generated $319 million in spending, of which $103.8 million was actually spent in Massachusetts.
The balance of the $319 million, or $215.2 million, was spent outside of Massachusetts, with $82 million of that paid in salaries of $1 million or more to Hollywood actors.
Of the film production money spent in MA, $42.3 million was in wages paid to residents, while $152.3 million was paid to non-residents.
Over the four years in which the tax credit program has been on the books, the total credit-eligible spending for 449 productions claiming the tax credit has been $1.047 billion, with 32 percent or $335.5 million paid to MA residents (either in wages or goods/services purchased in state) and 68 percent or $712.3 million paid to non-residents or out-of-state businesses.
Over that same period of time, the state has approved or is in the process of approving $259.8 million in tax credits. Every dollar of credit paid out has generated 14-cents in new tax revenue.
The film tax credit is refundable and transferable. Typically, film companies have little or no tax obligation, which means they do not need the credit to pay their taxes. As a result, some film companies sell their credits to businesses or individuals who might benefit from having a tax credit on their tax return.
In fact, the bulk of the $259.8 million in tax credits have been sold/transferred to insurance companies, financial institutions, corporations and individuals, who together paid $194.9 million from 2006-2009 for credits worth $216.1 million.
Why would a film company sell a credit for less than it is worth? Because film companies use the credits as a way to generate cash quickly, and don't mind getting less than a full dollar's worth of credit returned to them.