Debating R.I.’s film tax credits

George T. Marshall, founder of the Rhode Island International Film Festival and a New England Emmy winner, knows a lot about films and filmmaking. He’s been in the business for 30 years.
He thinks that Rhode Island, like Massachusetts, should allow filmmakers with production budgets as low as $50,000 to benefit from tax credits. Now, you must spend at least $300,000 to be eligible for the credits.
“We have film departments now in almost every college and university in Rhode Island and where do these graduates go? They leave the state,” he told Providence Business News recently. “I can’t tell you how many letters of recommendation I’ve done for young Rhode Island filmmakers heading to Los Angeles.”
Allowing local filmmakers with smaller budgets to receive tax credits “would keep the Rhode Island talent here,” said Marshall, an adjunct professor of communications at Roger Williams University. “They’d be living here, they’d be working here, they’d be paying taxes here. And how long would it be before that small budget becomes bigger? In this business, the more you do, the better you become.”
It need not cost the state a lot of money, he said. With today’s digital equipment and the latest advances in technology, a “decent high-definition production that has big names on it” can be made for as little as $100,000 to $150,000, according to Marshall. The filmmaker would receive a one-time, 25 percent off personal or corporate income taxes in transferable credits, $25,000 to $37,500.
And, the state would develop a work force to staff the growing number of film-related endeavors taking place in Rhode Island, such as the major movie-making studio proposed in Hopkinton. “Who’s going to work there?” Marshall asked. “It will be the people who have the skills and are here on a constant basis.”
The Rhode Island International Film Festival, which Marshall founded in 1997, is the largest in New England and the only festival in the region that can qualify films for the Academy Awards. Some 237 filmmakers from all over the world attended the 2007 festival last August, when 320 films were shown. Marshall won an Emmy for the public service announcements he produced to promote the film festival.
The powers-that-be in the Rhode Island film world, however, have not embraced his idea as they consider a number of key changes to the Motion Picture Tax Credits program, including a $10 million annual cap on tax credits and tighter controls over the kinds of expenses that qualify.
“I honestly don’t believe we need to lower the threshold,” said Steven Feinberg, executive director of the Rhode Island Film & Television Office and a filmmaker himself. He said the $300,000 minimum is not an arbitrary figure, but chosen to protect the filmmaker and the investor, as well as the integrity of the tax credit program.
By requiring a film budget of at least $300,000, “it limits the liability of the investor early on,” Feinberg said, because the investor would know the filmmaker has the means to mount a successful production. “You need to let filmmakers make mistakes [with small budgets],” he said.
He sees no evidence that the state’s film industry needs the impetus a lower threshold may provide. The Rhode Island Film Collaborative, a nonprofit that helps local filmmakers, has grown from 57 members in 2005 to 1,700 currently, according to Feinberg. His records show that small filmmakers in the state spent almost $2.5 million on 94 separate productions since 2005, each below the $300,000 threshold. And creativity, he argued, is not tied to money, noting Steven Spielberg’s hit thriller “Jaws” did not have a huge budget.
“You can’t even blow your nose for $50,000,” said Tony Demings of Providence, who formed Rhodywood as a clearinghouse for independent filmmakers. “You couldn’t get a crew in or rent a camera for that.” If the threshold is lowered, he suggested a $100,000 figure to maintain the quality of films made in the state.
Meanwhile, changes that Feinberg and his office proposed in the rules and regulations governing the tax credit program would directly benefit the Rhode Island economy and its filmmaking industry, he said. The changes come after some have questioned the amount of money Hollywood filmmakers actually spent in the state, versus the amount they claimed for tax credits.
Under Feinberg’s revisions, only those expenses incurred and paid for within Rhode Island would be eligible for tax credits. For instance, the cost of leasing vehicles, of food and lodging, even of music composed for a film, would qualify only if procured from or produced by Rhode Island entities. Feinberg noted that movie-makers have been working in the state largely without support services and have had no choice but to go out of state.
“Now, we’re hoping that a [filmmaker’s] payroll company, for example, would have to register in Rhode Island to do business here,” he said. Feinberg said small businesses specializing in post-production work and catering for movie crews have been or are in the process of being formed in Rhode Island. The revisions should spark the creation of more businesses to support the state’s fledgling film industry, he suggested.
David M. Sullivan, tax administrator with the state division of taxation, reported that his department intends to implement the changes Feinberg proposed on May 1, to take effect 20 days later. The division held a hearing on the changes April 11, but testimony is now closed, Sullivan said.
The Senate Finance Committee in March held a hearing on a proposal to place a $10 million cap on annual tax credits. No further action has been taken. •