House to consider another $10M expansion of R.I.’s film tax credit program

Updated 3:23 p.m.

THE HOUSE is set to vote on the fiscal 2023 budget on June 16 that includes a $10 million increase in the annual motion picture tax credit cap. / PBN FILE PHOTO/ARTISTIC IMAGES

PROVIDENCE – The House this week will consider another $10 million increase in the annual motion picture tax credit cap, as part of a $13.6 billion state budget for fiscal 2023. 

The increase, introduced by Gov. Dan J. McKee, would bring the annual cap to $40 million for tax years 2023 and 2024 from the $30 million of tax year 2022. This comes after a similar increase last year from $20 million to $30 million. 

The motion picture production tax credit gives eligible production companies an incentive to film in Rhode Island by offering tax breaks of up to 30% on their production costs.

“The higher motion picture tax credit annual cap makes Rhode Island more competitive with neighboring states, including Connecticut and Massachusetts, [which] do not have any annual cap on their motion picture production tax credit program,” McKee spokesperson Alana O’Hare said on Tuesday in an email. “The tax credit program incentivizes productions to film in Rhode Island, leading to job creation, tourism and economic activity in the state.”

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The current annual cap of $30 million actually deters production companies away from Rhode Island, says Steven Feinberg, executive director of the Rhode Island Film & Television Office.

“Each year our office has to turn away projects that want to film in Rhode Island,” Feinberg said. “Increasing the cap allows us for more production. And hopefully, we’ll be able to turn less productions away.”

With neighboring states such as Massachusetts and Connecticut that do not have an annual cap, Feinberg said it is often easier for production companies to move their projects elsewhere. Seeing Rhode Island removing its annual cap altogether, Feinberg said, would be the dream. But increasing the cap is already a great step to incentivize production companies to move their production to the state.

“Not having a cap also stimulates infrastructure, because investors want a quicker return on their investment,” Feinberg said. 

Massachusetts has been expanding its program, issuing more than $90 million in tax credit in 2019, as reported earlier this month by The Boston Globe. However, Gov. Charlie Baker has been trying to scale back on the tax credit for years.

Similar questions about the effectiveness of the film tax credit exist in Rhode Island. Not everyone agrees that the program is worth it and different studies have resulted in contradicting takes on its financial benefits.

A February 2022 report by the Office of Revenue analyzed the financial impact of the tax credit program for tax years 2016 through 2018, highlighting several shortcomings of the program. 

The ORA report found that 80% of the recipients failed to meet the state’s data reporting requirements and that the program failed to “break-even” and generate enough revenue for the state. This was the second evaluation conducted on the program by the ORA, with an earlier 2018 report finding that for every dollar spent on the program, the state generated only 27 cents.

Feinberg said in a statement the report conducted by the Office of Revenue was “narrow in scope” and omitted several important factors, including the impact of tourism and advertising value.

A March 2022 study conducted by The Greater Newport Chamber of Commerce and Connect Greater Newport with Industrial Economics Incorporated analyzed the regional financial impact of the local production of television series “NOS4A2,” and the potential tourism benefits of HBO’ s “The Gilded Age,” partly filmed in Rhode Island. 

“NOS4A2,” which received $17 million in tax credit, generated approximately $93 million in economic activity between 2018 and 2020, according to the study. This means that for every dollar of tax credit invested in the production of “NOS4AS2it generated $5.44 in revenue.

With advocates on both sides, the exact financial impact of the tax program remains hard to identify. 

The full House is set to vote on the budget June 16. 

(ADDS 4TH paragraph with McKee comment, minor edits.)

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