Massachusetts’ film tax credits lure productions

By Priyanka Dayal McCluskey
Worcester Telegram & Gazette
July 15, 2012

A television production crew works to make Worcester's Union Station look like the façade of an 1895 hotel for the filming of a pilot episode for an ABC television drama, “Gilded Lilys." (T&G File Photo/CHRISTINE PETERSON)

When Tom Cruise first appears in the film “Knight and Day,” the sunny terminal of Worcester Regional Airport is on full display.

According to the plot of the explosion-filled spy flick, Mr. Cruise and co-star Cameron Diaz are supposed to be in Wichita, Kan., not Worcester. But that doesn’t matter. For filming in Worcester, Boston and other Massachusetts locations, the movie became eligible for hefty state tax credits.

Film crews and A-list actors have been coming to Massachusetts in big numbers since lawmakers approved the tax incentives seven years ago. And while productions have added dollars to the local economy, studies show the spending boost comes at a huge cost to the state.

Now, developer Michael J. Meyers of Andover is building a complex of production studios in Devens — a project that he said would not be viable if it wasn’t for the film tax credits.

If successful, the New England Studios project could bring more production companies and actors to Massachusetts, which means the state would lose even more money in tax breaks but gain in economic activity.

Lisa W. Strout, director of the government-run Massachusetts Film Office, said film and television producers already consider Massachusetts to be among the top five states for filming in the country. The Devens project could earn Massachusetts an even higher spot in the unofficial rankings.

“Having formal infrastructure is definitely something that’s needed in Massachusetts,” she said. “There isn’t anything of this sort in New England.”

Massachusetts is in the top five already largely because of its tax incentives. Though about 40 states offer some kind of incentives to the movie industry, Massachusetts’ tax credits are among the most generous.

A production company can earn a tax credit equal to 25 percent of its production costs, provided it spends at least half its budget or half its filming time in Massachusetts. A project that spends more than $50,000 in the state can also receive a sales tax exemption and a 25 percent payroll credit. There are no caps.

Credits for the film industry in Massachusetts are more generous than credits for other industries, but unlike some other credits, production companies can’t claim the credits until after they complete projects.

The state lost more than $276 million on film tax credits between 2006 and 2010, according to the state Department of Revenue. Credits issued in 2011 amounted to $37.9 million, including $9.1 million for the talking-teddy bear movie “Ted” and $11.6 million for the yet-to-be released “Here Comes the Boom.”

Those totals were made public in the Massachusetts Tax Credit Transparency Report, released last month. The DOR declined to list the projects that received tax credits in previous years, citing a confidentiality rule.

For the current fiscal year, the state has budgeted more than $80 million for film tax credits.

For all that spending, DOR reports show the state earns just 13 cents in revenue for every $1 it loses on the credits.

“It’s a very expensive incentive,” said Michael J. Widmer, president of the Massachusetts Taxpayers Foundation. “There’s a gain in jobs and some economic activity, though it’s small. The problem is the cost in order to achieve those gains.”

Adrian McDonald, who authored a paper about film tax credits for the University of Pennsylvania Journal of Business Law, said the incentive programs in most states, including Massachusetts, lose more revenue than they earn.

New tax revenue is different from new spending in the economy. From 2006 to 2010, spending from the film industry in Massachusetts totaled more than $1.1 billion, but more than half of it flowed out of state.

Some of the spending comes in one-time windfalls for small businesses. When “Knight and Day” was shot in Worcester in 2009, for example, filmmakers spent a huge (though undisclosed) sum at a local card and gift shop to buy props. When “The Invention of Lying” was being filmed in Lowell, one local hardware store received $20,000 in business, according to Deborah A. Belanger, executive director of the Greater Merrimack Valley Convention & Visitors Bureau.

Hotels and restaurants often receive a boost in business when film shoots are in town. Hollywood stars tend to spend their nights in Boston’s top hotels, but sometimes Worcester’s Beechwood Hotel also hosts actors, said general manager Mark Waxler.

“We feel that we give the same service as any four-diamond hotel in Boston for a lot less money,” he said. “The big stars want to be pampered, and we can do that.”

Camera crews descended on downtown Worcester in March to film the pilot of “Gilded Lilys,” a period TV show that was being developed for ABC but, according to published reports, was not picked up. About 20 local people worked on the shoot at Union Station, said Richard Trifero, property manager for the Worcester Redevelopment Authority. The local workers included electricians who controlled the station’s lights, landscapers who concealed the pavement outside the station with a 19th-century-looking covering of mulch, and security guards who managed foot traffic in and around the station.

Worcester officials don’t measure the economic benefit of TV and film shoots that take place in the city, but Timothy J. McGourthy, chief development officer, said there is economic spinoff.

“It definitely brings in revenue for the duration of the filming,” he said.

The number of jobs generated by the film tax credits has fluctuated widely over the years. The credits resulted in a loss of two Massachusetts jobs in 2010, according to a DOR analysis. Two years earlier, the credits generated 795 jobs.

Makers of the movie “R.I.P.D.,” which was filmed recently in Boston and Raynham, hired more than 900 local workers, said Ms. Strout from the state’s film office. As with most big productions, almost all the workers were affiliated with unions.

Advocates of film tax credits cite these jobs figures as evidence that the tax credits are working. Opponents point out that the local jobs are temporary, and that production companies also rely on hundreds of out-of-state workers.

Every Massachusetts job generated by the film tax credits cost the state $142,000, according to the DOR.

Lt. Gov. Timothy P. Murray said that cost will come down. “This is an investment that’s going to pay off with increasing dividends over time,” he said, “and we’re seeing that with the development of New England Studios now in Devens.”

Advocates say a healthy film industry in Massachusetts is good for another big industry: tourism.

“The Fighter,” a film about a welterweight boxer from Lowell, did great things for that city, said Ms. Belanger of the Greater Merrimack Valley Convention & Visitors Bureau. The movie was nominated for several awards and won two Oscars.

“When they’re mentioning Lowell, Mass., in front of millions of people, that’s huge,” Ms. Belanger said. “It’s great PR for us. … That has a lasting impact.”

Nicholas Paleologos, former director of the Massachusetts Film Office, said the film industry is “a massive marketing machine” for the state.

“Why do you suppose that people are still snapping pictures of themselves outside the ‘Cheers’ bar?” he said by email. “That show has been off the air for more than two decades — and it wasn’t even shot in Boston!”

States have been competing aggressively to host film and television productions for more than a decade, which has Mr. McDonald, the film industry expert, thinking it’s not just residents and tourists who are star-struck.

“It is about the glamour,” he said. “It’s exciting for them.”

Priyanka Dayal McCluskey can reached at

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