State lawmakers must decide fate of film tax credit

Lawmakers are weighing competing proposals to change Connecticut’s tax credit program for the film and media industry as local producers, crew and actors say they’re concerned about losing work to states with more aggressive incentives.

Connecticut’s program has come under criticism for costing the state over half a billion dollars in lost revenue over the last decade, and Gov. Ned Lamont’s previous commissioner of the Department of Economic and Community Development called on lawmakers last summer to consider capping or reducing the incentive program.

A group of House Democrats has put forth a bill this session that would phase out the credit entirely.

“I can think of so many other worthy places to invest that money, particularly with entities and in areas that are committing and recommitting to furthering Connecticut’s economy,” said Rep. Melissa Osborne, D-Simsbury, one of five legislators who introduced the legislation, House Bill 5423.

But industry advocates — and a recent study commissioned by DECD — assert that film, television and digital media production provides economic value to the state that more than makes up for the cost to taxpayers.

Industry representatives have pushed lawmakers to expand the program, and on Tuesday members of the Finance, Revenue and Bonding Committee indicated their intent to raise the concept, “An Act Concerning the Film and Digital Media Production Tax Credits,” in an initial vote, though a bill has not yet been drafted.

“The credit is good, but right now it’s not going to entice bigger players to come in,” said Jonathan Black, coowner of Chair 10 Productions in Newtown. Black, who recently moved to Connecticut from Los Angeles with his wife (and Chair 10 co-owner) Lauren and their two daughters, said he believes a larger credit would attract longer-term investments from companies looking to shoot multi-season television shows or a steady stream of feature films.

“That’s what I’m trying to build,” he said.

Connecticut’s Film and Digital Media Production Tax Credit currently offers up to 30% off qualified production expenses and costs incurred in the state. The proposed expansion, once drafted, could seek to raise the credit to as much as 37% in regions of the state where the industry has less of a presence. Established companies like ESPN, NBCUniversal and WWE would be eligible only for the current 30% discount for production occurring in their existing facilities.

“They’re OK with the credit as is, great. So we’re going to look at areas that need the boost and carve it out,” Black said. At a press conference with producers, actors, crew and industry advocates last week, Black suggested further tweaks to the current incentive such as additional credit for hiring from underrepresented groups or for companies that retrain local workers who want to switch careers.

Those ideas mirror initiatives other states have passed, most notably New Jersey, which expanded its tax credit last year from 30% to 35% in certain counties and now offers a 2% to 4% “diversity bonus” for hiring from underrepresented groups. Producers in the Northeast said they immediately experienced fallout from New Jersey’s film tax credit expansion as productions chased lower costs.

Along with Connecticut, New York is now considering expanding its tax incentive program — from 25% to 30% — and raising a cap on the credit. Connecticut’s program has no cap.

Critics have denounced state incentives aimed at attracting film production as a “race to the bottom,” and several studies have found the economic benefit of state programs often pale in comparison to their cost.

Production activity may build up somewhere for a period of years as long as tax incentives are available, but as soon as a better credit comes along, there’s little to keep new projects from going elsewhere. And many local projects call in crew and actors from outside the state — a feature of filmmaking that those in the economic development business find difficult to square.

Production companies can also sell their tax credits to other companies, which they often do at a discount in order to obtain the cash more quickly. One study found that over a decade, as much as 60% of the film tax credits Connecticut issued were claimed by insurance companies.

Still, Connecticut’s film tax credit achieved a greater return than many other states’ programs targeting the industry, according to researchers with Olsberg-SPI, who recently conducted a statewide study. That’s partly due to a second component of the program, the state’s Film Infrastructure Tax Credit, which incentivizes construction of production facilities like soundstages by covering 20% of any infrastructure costs over $3 million.

Last year, then-DECD Commissioner David Lehman suggested that lawmakers “explore” the costs and benefits of the state’s film tax credit programs, recommending they consider either capping the credit at a certain dollar amount or reducing the percentage.

Incoming DECD Commissioner Alexandra Daum hasn’t commented publicly on the tax credit. In an email this week, a spokesman for the department said DECD had no immediate plans to change it, adding that “the department regularly evaluates the efficiency of its programs.”

The state’s tax credit for film, television and digital media have provided the greatest benefit to ESPN, NBCUniversal and WWE, returning tens of millions of dollars in tax credits back to their operations since 2009. There’s no limit on the number of years companies can apply for the credits.

“It’s like a bigger and bigger hole in your pocket,” said Shelley Geballe, who has researched the program and published reports on its economic impact for advocacy group Connecticut Voices for Children. Film and television tax credits are less effective than incentives the state offers to other industries, Geballe said, “but they bring in Hollywood people and the committees get star-struck.” [Geballe is a member of the CT Mirror’s board of directors.]

Osborne said the proposal to phase out the tax credit is meant to start a conversation about how to make the incentive more effective. “There are people in real need,” she said. “I would love to see the film industry partner with us here in Connecticut to become a long-term vibrant partner, to sustain its industry and to become a real part of our economic fabric.”

Ahead of last week’s press conference, Danielle Conti, a Connecticut-based actor and production assistant, was greeting people in the Legislative Office Building atrium and directing them to the event location. Conti grew up in Stonington and participated in theater until the pandemic, when she began volunteering as an extra in film productions.

“Just being around the moving pieces, watching the crews, made me feel at home,” Conti said. But the industry life, particularly in Connecticut, isn’t easy, she said. That’s why she turned out to support the effort to expand the tax credit.

“There’s not enough film work here to pay my bills,” she said.

If Connecticut were to raise the tax credit, Black said later, “my phone would be ringing off the hook.”