Movie Studios: Boston is the new Hollywood.

hahaha.
i have wondered though - if an established little outlet of the hollywood industry does set up on the south shore - what of all its accessories eg gimmicky expensive restaurants and bars, etc ... the social side of the business should not be underestimated in importance! Will this be provided by the Lynn Bryant outlet on Route 3, or whatever is there?
 
tobyjug said:
The H/H Center East will have Dress Barn, R.I. Job Lot, and Max August Woman. With a "peek-a-boo" view of the Boston Motel sign on Rte 3.
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I thought the BoMo sign came down? I haven't noticed it in a while.
Toby good looks earlier.
 
Speaking of signs is there a sign thread on here? I thought I once saw one and would like to post some, well sign pixs I've taken in my travels, some I've already posted in my New England thread
 
What is the background of the fancy signs when entering a town? Is it a state program? Because no other state comes close to our nice welcome signs :D
 
Okay, I have a simple question and an all-day sucker to the person who can give an accurate answer.

How much did the film tax-incentive program cost the Commonwealth of Massachusetts, last year?

In dollars and cents, how much did the Commonwealth have to pay out to film and TV companies, last year?

Forget all the talk of increased sales tax and payroll tax estimates, give me a simple answer. How much did the state have to pay out?

These aren't tax "credits"; they are payments by the state to private companies, from what I can tell. If a Hollywood production company pays a movie star $1 million, the production company can request a reimbursement from the state of $250,000 (1/4th).

So, how much did the state pay out?

I don't see a line item on the state's 2010 budget.
 
Are you seriously suggesting that the state has to make up the difference with salaries? I don't think so. I think you're way off the mark here.
 
Yes, I am seriously suggesting that the state makes up the difference in salaries.

Wait, is that news to most people?

From State Representative Steve D'Amico's website:

Movie producers are eligible for a 25% tax credit. Don?t confuse this with a tax break. Movie people don?t pay any sales tax ? that?s one of the minor perks of doing business here.

A tax credit is like an IOU from the taxpayers. For every dollar Disney or Fox spends, they get an IOU for twenty-five cents. When they spend $20 million on a big-name star, you shell out $5 million. That actor doesn't spend his money here; he takes it home to California. While he is here, the studios put him up in fancy hotels and the taxpayers pick up 25% of that tab too. The same deal applies to TV shows and commercials shot here.
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The film production companies receive their money in one of two ways: they spend their money on salaries and production expenses (say, $10 million) and then file the necessary paperwork with the state and then 1) sell their tax credits (25%, or $2.5 million) to another company, and pocket the cash; or, 2) sell their tax credits back to the state for 90 cents on the dollar ($2.25 million), and pocket the cash.

Either way, the state misses out on the revenue it would otherwise receive.

Again, this is not rebates of sales or income taxes paid by stars and crews. The money is returned, dollar for dollar based on expenses, not on taxes paid.
 
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No one seems to really care about this, but that won't stop me from rambling on!

Here's another example of how the film tax credit program works.

EXAMPLE:

Company A is a Hollywood film production company looking to spend $10 million on a film ($10 million includes production budget and star salaries)
Company B is a Massachusetts-based company with a $2.5 million income tax liability

Here's what happens:

* Company A spends $10 million on a film, at least 60% of which must be spent within the state

* Company A files paperwork with the Massachusetts Department of Revenue saying it spent $10 million on a film, at least 60% of which must be spent within the state

* Massachusetts Department of Revenue okays the expenditures and gives Company A a tax credit for 25% of expenditures, equal to $2.5 million

* Company A talks to Company B, letting it know that Company A has a $2.5 million tax credit

* Company B, wishing to lower its $2.5 million income tax liability, buys Company A's film tax credit, at a discount, say, in this example, for 86 cents on the dollar, or $2.15 million

* Company A ends up with an extra $2.15 million in its pocket, which it can use toward salaries, expenses, etc. (inside or outside of state)

* Company B submits paperwork with MA Dept of Revenue saying it has a tax credit for $2.5 million, so it won't be paying any income tax this year

(There is an alternative: Company A can choose to sell its tax credit back to the Commonwealth of Massachusetts for 90 cents on the dollar which, in this case, would equal $2.25 million. If Company A does this, the Commonwealth of Massachusetts ends up with $2.25 million less in its bank account than it would, if there was no film tax credit program)

The only way this scheme could be be seen as "economical" is if the Commonwealth of Massachusetts receives more in tax revenues than it loses out on due to the film tax credit program.

But, the state does not receive more in tax revenues. An analysis done by a third-party has shown that the tax revenue generated does not come anywhere close to making up for the tax revenue lost due to the film tax credit program.

The analysis by the Massachusetts Department of Revenue shows that, for every $100 in film tax credits, $18 is returned to the state in tax revenues; again, each dollar granted in film tax credits costs the Commonwealth 82 cents. Put another way, each job created by the film tax credit program costs the state anywhere from $22,000 to $34,000, according to the Mass DOR.

RESULT:

MA Dept of Revenue (Commonwealth of Massachusetts) loses out on $2.5 million in tax revenue

Company A gets $2.15 million in cash, to be used toward star salaries, production costs, bonuses, airline tickets back to California

Company B reduces its tax liability by $2.5 million
 
Company B, wishing to lower its $2.5 million income tax liability, buys Company A's film tax credit, at a discount, say, in this example, for 86 cents on the dollar, or $2.15 million
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Please explain how one company can buy another company's tax credit. I didn't know such a thing was possible.
 
http://www.mafilm.org/tax-credits/

http://www.mass.gov/?pageID=dorterm...alcontent&f=dor_business_filmcredit&csid=Ador

Film Credit and Sales Tax Exemption

--------------------------------------------------------------------------------
On July 20, 2007, Massachusetts enacted an Act Providing Incentives to the Motion Picture Industry (?the new Act?). See St. 2007, c. 63. This Act made revisions to statutory provisions enacted by a prior Act with the same title that was signed into law on November 23, 2005 (the ?prior Act?). See St. 2005, c. 158; amended by St. 2005, c. 167. The new act is effective on applications received on or after January 1, 2007.

For taxable years beginning on or after January 1, 2006 and before January 1, 2023, Massachusetts allows two credits for motion picture production companies who meet certain qualifications requirements. Production companies who incur at least $50,000 of production costs in the Commonwealth are eligible for income and corporate excise tax credits equal to 25 percent of the total Massachusetts payroll for the production, excluding salaries of $ 1 million and higher. In addition, production companies whose Massachusetts production expenses exceed 50 percent of the total production cost receive an income and corporate excise tax credit of 25 percent of the total Massachusetts production expense.

Production companies who expend over $50,000 in Massachusetts production costs during a consecutive twelve-month period are eligible for a sales tax exemption.

A detailed explanation of the Film Credit Incentive, including a definition of a qualified motion picture production company can be found in Technical Information Release 06-1 as well as Chapter 158 of the Acts of 2005. Further information can also be found in DOR Directive 07-1 and Letter Ruling 06-1. Additionally, the Department has a Technical Information Release TIR 07-15, that further explains the updated law and is available for review.

Please Note: Technical Information Release 06-01, Letter Ruling 06-01 and DOR Directive 07-01 were issued under the prior film credit Act. The discussion of law section of these public written statements is modified, in part, by the new law as outlined in Technical Information Release 07-15. For example, under the new law a production company must incur a least $50,000 in qualified expenses, not the higher threshold of $250,000 which was effective in 2006.

Agreed Upon Procedures

Independent Accountant's Report on Applying Agreed Apon Procedures

Effective December 8, 2008 film credit applications that are submitted with at least $250,000 of qualified film credit expenses must contain an Independent Accountant?s Report on Applying Agreed Upon Procedures (?AUPs?) or an Audit (See TIR 07-15, footnote 14). The AUPs must be performed by a Massachusetts CPA. Productions with less than $250,000 of qualified film credit expenses may choose to include the AUPs or an Audit with their film credit applications, but it is not required. The Department will not assert transferee liability if the original film credit application is submitted with the AUPs or Audit (See Directive 07-01 for a description of transferee liability).

Transition Rules:

Productions with at least $250,000 of qualified film credit expenses filing film credit applications in December, 2008 may satisfy the requirement of an Audit or AUPs at a later date. The credit issued will still be a ?2008? credit, however, the credit will not be issued until the Audit or AUPs requirement is satisfied. Productions with less than $250,000 of qualified film credit expenses choosing to include the AUPs or an Audit with their film credit applications, may also file in December, 2008 with the option to supplement the application with the AUPs or an Audit. Productions wishing to avail themselves of this transition rule should attach a statement to the application making this election. The general rules for the completeness of a film credit application remain unchanged, e.g., that expenses must be paid, not just incurred. (See Directive 07-01, issues 10, 11 & 12).

Applications and Forms:
Application for Payroll/Production Credit - Motion Picture Production
Film Credit Transfer or Sale Application
Application for Sales Tax Exemption - Film Production
Form ST?12, Exempt Use Certificate

Contact Information:
Massachusetts Department of Revenue
Film Credit Unit
200 Arlington Street, Room 4300
Chelsea, MA 02150

John Lordan, Supervisor
Phone: 617-887-6725
Fax: 617-887-6792
E-mail: lordan@dor.state.ma.us
For further information, visit the the Massachusetts Film Office at www.mafilm.org.
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There are further links to continue reading (I have not). I was always pretty sure this was done in an effort to entice the production companies that Massachusetts had made it so tough for in previous years. The additional costs to film in Massachusetts used to be prohibitive. Licensure, permits, road closings, and required Mass. union help all made the cost of shooting in Massachusetts too much for producers who would rather used stock photos and aerials while producing everything else on a sound stage.

There was potetnial money being lost plus the advertising mentioned above.

I could be wrong, but a corporate income/excise tax credit doesn't sound the same as "tax payers are paying 25 cents on the dollar to out of state evil producers." I wish it did, but I don't see it that way. It is "potential" revenue lost to the state, but it is not actual money in hand that is lost. If they did not come to make the movies, there would be no money, if they do at least there is some money.
 
First, I believe the cap on salaries ($1 million) was waived in the revised film tax credit legislation. "Star" salaries are not capped, now; they are considered "production expenses". Stars' multi-million dollar salaries are subsidized through the film tax credit program.

Here are details from the DOR's analysis of the program, published in mid-2008:

Transfer of Tax Credits. As many film production companies have little or no tax liability in Massachusetts, most of the film credits generated so far have been sold to third parties. (That may change in the future as the 90% refundability option is utilized by more production companies.) Based on transfer applications received by DOR through the third week of February 2008, of the $17.5 million in credits claimed thus far, approximately $14.2 million, or 81% of the total, have been transferred to third parties, with the initial sale price of the credit (the amount that the production company receives from the sale -- some credits have been sold more than once) equal to 84% of the value of the credits.

Approximately $12.1 million of the $14.7 million in transferred credits have been purchased by financial institutions, with the remainder having been purchased by various corporations, non-corporate businesses, individuals, and tax credit investment funds.

... ased on tax credit and sales tax applications received to date, DOR estimates that total tax credits for film productions from calendar years 2006 to 2008 will be $135.7 million, and tax benefits from sales tax exemptions will be between $1.9 million and $2.9 million, for total tax revenue forgone of $137.7 million to $138.7 million.
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I don't agree with you about the lost tax revenues.

Example of how it works:

Kate Hudson, Dane Cook, and Jason Biggs come to Boston to film "My Best Friend's Girl". The production spends $10 million in the state.

They file the paperwork with the state and get $2.5 million in film tax credits. NOT CREDITS ON TAXES PAID, THIS IS A CREDIT FOR MONEY SPENT, NOT TAXES PAID BY THE PRODUCTION COMPANY.

The production company gets credits for salaries, hotel rooms, construction costs, etc.

The production company has little, if any, tax liability in the state. It wants to get as much money back as possible, so it decides to sell its tax credits.

I owe $20,000 in income taxes, this year (go me!). I meet up with a guy from the production company and say, hey, I'll give you $16,800 for $20,000 in credits. He says, sure, I get $16,800 for nothing more than "just showing up".

I pay the guy $16,800.

I submit a form with the state saying I have a tax credit for $20,000 courtesy of the production company.

Production company goes out and does this with a bunch of other people, until they've sold off all $2.5 million in credits (netting, at 84%, $2.1 million).

End result:

* Production company raises $2.1 million in cash, which reduces their production expenses to $7.9 million (or, more likely, allows them to spend $12.1 million instead of $10 million);

* I only have to spend $16,000 to pay off my $20,000 tax liability with the Commonwealth of Massachusetts;

* The Commonwealth of Massachusetts ends up with $0 of my money, instead of $20,000, a loss of $20,000 to the state.

What you're assuming, above, is that the production company is simply getting back taxes it paid. If this was true, yes, what you say would be accurate - they are getting back a portion of tax revenue and without the movie, the state would have no revenue to rebate.

But that's not what is happening. The film tax credit program is COSTING the state money.

The money I would have paid to the state is going to the production company, instead.

This problem will only get worse once the film production studios are built. First, they are pushing for a 20% credit on construction - again, the state will pick up the tab. Second, once built, there is NO WAY the state will "sunset" the film credit program because if it does, the golden spigot will be turned off and film production companies will stop coming to Massachusetts.

The questions you should be asking are, what is so special about the film business that it gets sweetheart deals that no other industry gets?*

If the state's budget is based on a certain level of revenue, and that level of revenue is reduced because the film companies are taking the money, instead, then how does the state make up for that lost revenue.

And, how much money is lost??

* Fidelity got this sweatheart deal; in exchange for a promise to keep a certain level of employees in the state it got tax credits. Guess what, when the tax credits ended, it pulled employees out of the state.
 
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Money, smoney.

The real tragedy here is that Dane Cook is coming back to Massachusetts.
 
Heh heh... yeah that's one guy LA can keep.

JAK - Did they also revise the maximum of only up to $7 Mil in total MA spending that may be subject to tax credits?

http://www.mass.gov/?pageID=dorterm...lcontent&f=dor_rul_reg_dir_dir_07_1&csid=Ador

I won't paste the whole thing, but read it. If we're getting screwed I would like to know the whole deal.

I am all for this, because as a company we (at my office) are waiting for Plymouth Rock to break so that we can start designing, and keep some people employed and busy.

I did hear on the construction side that Plymouth Rock Studios would not qualify for the credit as the cost was too high.
 
Am I missing something? WHERE does it say they are entitled to credits for all expenses paid while filming in Massachusetts. As far as I can tell, it amounts to 25% CREDIT for all TAXES owed to the state, i.e. salaries, room taxes, sales taxes, etc. It does not look to me as though The Commonwealth is underwriting all costs of film production to the tume of 25% of it's total production costs.
 
Yes, the Commonwealth is, in effect, underwriting the cost of the production to the tune of 25%. This is the part that most people would freak out over if they only knew about it.

There are two parts to the program, which is why it can be confusing. The film production company gets a payroll tax credit and is exempt from paying any sales tax.

That's part one.

The second part is the part most people would be surprised to hear about. (To answer the question, above, the $7 million limit was eliminated in the revised legislation.)

If a production company spends $10 million (for example) in Massachusetts, on salaries or production costs, it gets a $2.5 million credit. The company can use the credit to reduce its own tax liability (which, because of the credits mentioned in part 1, it probably won't have) and then do one of two things: 1) sell the credits back to the Commonwealth, for 90 cents on the dollar; or, 2) sell the credits to other company or companies for as much as it can get (typically, 84-86%).

The advantage to the buyer of the credits is that it doesn't have to pay its tax liability 100%, it gets a discount.

The advantage to the film company is that it gets 25% more money to spend on its production (and star salaries).

The advantage to the state is ... well, nothing.

Here's one section of the law:

Effective January 1, 2007, a taxpayer may claim the payroll credit for any in-state employment of persons in connection with the filming and production of a motion picture so long as the total production costs incurred in Massachusetts equal or exceed $50,000.

Notice what it says, because it's the important difference. It says "payroll credit" not "payroll tax credit". You get the credit for salaries paid, not taxes on salaries paid.

Details, here: http://www.mass.gov/?pageID=dorterm...content&f=dor_rul_reg_tir_tir_07_15&csid=Ador
 
The wholesale ripoff of the Massachusetts' taxpayer continues.

Here's the deal: Currently, the state's film credit program allows a production company to get a rebate of 25 cents for every dollar spent in the state, including on production costs and movie star salaries.

So, if Kate Hudson comes to town and she's paid $1 million to star in a movie, the production company can request the state give it a rebate of $250,000. Which she did, which it did, which it did.

Back when the film credit program was first passed, there was a limit on movie star salaries, but the limit was dropped in 2007.

Several weeks ago, Governor Deval Patrick, looking to find ways to cut the state's budget, proposed limiting the film credit program by capping the amount a movie star could be paid, at $2 million.

This would save the Commonwealth money because, as I've pointed out, for every $1 million a production company spends on anything in the state, the Commonwealth gives the company $250,000 back. So, if a production company wanted to pay a star a big salary, the most it would get credit for would be 25% of $2 million, or $500,000.

The state legislature went along with his cut in the budget it passed, last week.

Whoops! Now the Governor has removed the limit.

Meaning Tom Cruise, coming here to film a "major film blockbuster" will be able to get a quarter of his salary paid courtesy of Massachusetts taxpayers.

Why doesn't this piss anyone else off??

Tom Cruise stars in Beacon Hill budget thriller

Talk about star power: The fear that a Tom Cruise movie might decamp Massachusetts for Georgia prompted Beacon Hill lawmakers and Gov. Deval Patrick to flip-flop on a proposal to reduce the cost of the state's film tax credit by $20 million.

The flip-flop was particularly embarrassing for Patrick, who included the $20 million change in the revised budget he filed in early June. The House and Senate both went along with the proposal, and it became law on Monday when Patrick signed the state budget legislation But moments later Patrick restored the film tax credit to its original form by signing a separate spending bill that repealed the $20 million savings initiative.

A spokeswoman for Leslie Kirwan, the governor's secretary of administration and finance, who crafted the tax credit change, said she needed to look into the issue further before commenting.

"I'm glad that we fixed this," said Rep. Ronald Mariano of Quincy, the assistant House majority leader. "The film tax credit has worked here in Massachusetts." He added: "It would be really foolish of us to put anything into the legislation that would hurt that effort."

The state's film tax credit is one of the most generous in the nation. (See "Subsidizing the Stars") It offers producers a 25 percent tax credit on all payroll and production expenditures in Massachusetts and also exempts most of a film company's purchases from the state's sales tax, which was raised on Monday from 5 to 6.5 percent. In essence, for every dollar a film company spends in Massachusetts, it receives a credit worth 25 cents that can be converted into cash, either through a direct payment from the state or by selling the credit to anyone who owes taxes in Massachusetts.

The Patrick administration in early June filed a revised budget that proposed capping at $2 million the amount of any star salary that would qualify for the tax credit. With big budget movies lining up to shoot in Massachusetts, including an action comedy called Wichita starring Tom Cruise and Cameron Diaz that the Boston Globe has reported would be the biggest movie to ever film here, administration officials estimated the change would save the state $20 million in the coming year.

With Beacon Hill budget officials scrambling for revenues to ease the pain of steep cuts in local aid and state services, the change in the film tax credit was swiftly adopted by both the House and Senate.

But Mariano says lawmakers then began hearing from members of the Screen Actors Guild that the producers of the Cruise movie weren't happy with the tax credit change and were thinking about taking the film to Georgia. It's unclear what the status of the movie is currently.

Efforts to reach the producers and Nicholas Paleologos, who heads the Massachusetts Film Office, were unsuccessful. In a previous interview, Paleologos said capping how much of a star's salary would qualify for the tax credit would hurt the state's ability to attract big budget films because big budget films are usually headlined by big budget stars.

At any rate, the House last Thursday came out with a new draft of a supplemental spending bill for fiscal 2009 that effectively repealed the tax credit change contained in the state budget. Several House members said they had no idea the change was included in the legislation because the bill merely said House No. 4129 -- the number of the state budget legislation -- "is hereby amended by striking out sections 28, 46 and 158." Those sections contained the $2 million cap on star salary tax credits.

Mariano said the $2 million cap was a mistake. He said the state sometimes needs to spend money to make money and noted that if the Cruise movie ends up going to another state, Massachusetts will end up with no jobs and no film spending here. "How much are we recouping then?" he asked.

Repealing the $2 million cap had nothing to do with proposals to build movie studios in Weymouth, which is part of Mariano's legislative district, and Plymouth, which is part of Senate President Therese Murray's district, Mariano said. "One has nothing to do with the other," he said, although he conceded a successful tax credit is needed to attract film producers to the proposed Massachusetts studios.

Sen. Richard Tisei, the Senate minority leader, said Patrick did the right thing when he capped at $2 million the amount of star salaries that would qualify for the tax credit. He said he didn't know why Patrick flip-flopped on the issue, but said it's all about money. "Probably some big shot Hollywood executives called up and threatened to stop making movies here," he said.

The Patrick administration for weeks has been sitting on a Revenue Department report laying out the cost of the state's film tax credit.
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subsidizing tom cruises salary at the cost of social services and higher taxes when the film industry has proven no real benefit to the state economy.

i don't see the film industry as one worth pursing. The MA taxpayer will be subsidizing a $500m film studio with $100m (only a rumor and heard from John Kieth at universalhub), meanwhile, Apple just selected NC to build a $1B east coast data center at a cost of $46m in tax breaks over 10 years.
 
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