by Christian Wade
Connecticut’s film tax credit, which has doled out more than $1.5 billion to Hollywood movie studios since 2007, lost millions last year, according to a new report.
The report by the state Department of Economic and Community Development shows that Connecticut’s Film and Digital Media Production Tax Credit broke even last year, while the fiscal impact of the tax breaks amounted to a net loss of $11.5 million.
In the fiscal year 2022, Connecticut paid out more than $144 million in film tax credits on productions such as “Knock at the Cabin,” “Armageddon Time,” and “The Greatest Beer Run Ever,” the report noted.
The state agency noted that because the data doesn’t include details about jobs created by the tax credits, the report only presents a “partial picture” of the program’s benefits, which it says are likely “underestimated” in the report.
“Because we have no knowledge of the totality of net new economic activity the infrastructure projects facilitate, we cannot determine the entire net benefit of the infrastructure tax credit program,” the report’s authors wrote.
Despite the loss of revenue, the agency argues the film tax credits should be maintained, citing the “successful recruitment of various digital media companies, and the related investment in building a workforce” centered around the state’s film production industry.
“In particular, the production tax credit has encouraged the relocation of major networks, digital media companies and production operations,” the agency said. “The state’s strengthened production infrastructure supported and continues to support a range of projects, further encouraging companies to carry out long-term productions in Connecticut.”
Connecticut’s Film and Digital Media Production Tax Credit offers up to 30% off approved production expenses and costs for filming in the state. There’s no cap on the tax credits, which can be sold, transferred to another studio, or cashed in by production studios. To qualify, production costs for a film or commercial must exceed $100,000 within a year.
But the tax credits, among the most generous in the nation, have been criticized for costing the state more than $1 billion over the last decade with little return for the money.
Last year, Gov. Ned Lamont’s administration called on lawmakers to consider capping or reducing tax incentives for film, television and digital media production.
A 2019 state report found that over the last decade, the economic impact of the film tax credit amounted to a loss of $58 million in net revenue annually or more than $1 billion in total. Another report found that the state loses approximately 68 cents in revenue for every dollar of tax credit provided under the program.
Film producers can also sell the tax credits to other entities as part of financing deals. A recent study found that over the past decade, insurance companies claimed upwards of 60% of the film tax credits issued by Connecticut.
Supporters of the program, which include local producers, crew and actors, tout its economic benefit and argue that phasing it out would hurt the state’s small but thriving movie industry.
Lawmakers were considering expanding the tax program to offer up to 37% reimbursement for production costs, but that measure died in a legislative committee.
Another proposal gaining traction would allow companies to apply more credit toward sales and use taxes — from 78% to 92% of the value of the credit — but would require them to file annual reports to the state about the jobs they created.
Despite criticism that the subsidies are a giveaway to Hollywood film stars and billionaire studio bosses, supporters say the tax credit program is a worthy investment.
They say fostering a movie production industry helps attract investment, and a highly trained workforce, which has myriad benefits for the state’s economy.
“Productions will spend money for hotels, transportation, food, clothing, supplies, gear, and crew members will frequent local businesses,” Lauren Black, co-owner of 10 Productions, LLC, said in testimony supporting the legislation. “We believe that by making key improvements to the tax credit and making us competitive with other states like New Jersey, we will be able to attract more and bigger productions to the state and provide major opportunities for economic growth.”
But Jeffrey Beckham, secretary of the state Office of Policy and Management, says Connecticut’s film tax credit is one of the most generous in the country and should be scaled back to provide more funding for education, transportation and other needs.
“This is already one of the most expensive tax credit programs in the state,” Beckham said in testimony opposing the bill. “We have contributed quite a bit to this industry. Raising the credit percentage claimed against the sales tax as well is not advisable or desirable.”
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Christian Wade is a contributor to The Center Square.Â
Photo “Filming a Movie” by Lê Minh.
