PROVIDENCE – Not only is the state losing money on its motion picture tax credit program, but a majority of the companies that get tax breaks are not following state reporting requirements, according to Paul L. Dion, the state’s chief of the Office of Revenue Analysis.
Nine of the 11 companies that received tax breaks on in-state production costs between 2016 and 2018 – the most recent data available – did not submit at least one key form to the R.I. Division of Taxation, Dion told Providence Business News on Wednesday. These findings, part of an ongoing analysis of the tax credit program, echo a 2018 ORA report based on credits issued from 2013 to 2015 highlighting a multitude of shortcomings with the program, including the absence of certain details needed to fully evaluate its effectiveness.
The criticism comes amid a bump in state spending on the program. The recently approved state fiscal 2022 budget added $10 million for film tax credits for calendar year 2022, for a total allotment of $30 million.
Proponents of the program, which gives eligible companies tax breaks of up to 30% of production expenditures made within the state, said the increased funding will help lure major companies to the state, generating jobs and local spending, as well as indirect boosts to local tourism.
While Dion did not dispute that there may be some indirect, unquantifiable benefits to the program, he highlighted the department’s 2018 report that said the state gets back 27 cents for every dollar spent on the credit. The report also highlighted “significant non-compliance” in data reporting requirements for the companies that get tax breaks.
Among the missing pieces for many is state form 8201A, which includes details on the number of employees, their wages and home states. Without these details, evaluating whether and how the program boosted local employment is difficult, if not impossible, Dion said.
“How do you do an assessment of a credit that 11 production companies use when only two of them provided information?” he said.
House Speaker K. Joseph Shekarchi in an emailed statement said he would “look into” the department’s report but did not respond to a follow-up question about compliance issues. Steven Feinberg, executive director for the R.I. Film & Television Office, did not return multiple inquiries for comment.
Even with more accurate data, Dion remained convinced the program was a cost drain. A state analysis of the program shows that a majority of the jobs created by production companies are temporary, low-paying and often benefit the “above-the-line” talent like producers and actors who do not live in Rhode Island.
“You’re subsidizing the work of people who are already millionaires,” Dion said.
As for money spent on local businesses – hotels, hardware stores, transportation companies – companies only report how many dollars they spend in any given industry, not the specific businesses that receive it, Dion said. That means there is no way to ensure the money is actually being spent in Rhode Island versus another neighboring state, or that small businesses are benefiting over national chains or corporations.
The state report specifically says the credit should not be increased without “significant changes” to the structure of the program.
It also states, “if the credit were to be made more generous to encourage usage, the net impact of the credit would be even more negative.”
While Dion stressed it was up to lawmakers to decide how to spend the state revenue, he said he wished his office’s recommendations regarding compliance were taken into account before money was added to the program.
“We make that recommendation for a reason,” he said. “I wish [lawmakers] had addressed that before they provided that money.”
Alan Krinsky, a senior fiscal policy analyst for the Economic Progress Institute, echoed his sentiment.
“Legislators are making decisions on how to spend revenue,” he said. “It’s up to them to make wise decisions.”
While Krinsky stopped short of characterizing additional funding for the tax credits as an unwise move, he pointed to the number of other states also reporting revenue losses from similar programs as evidence that these credits simply do not work. Even Georgia, a state with among the most expansive support for the film industry, in 2016 reported it lost $602 million in net revenue from its tax credit program.
Between 2009 and 2018, 13 states ended their film incentive programs, according to the National Conference of State Legislatures. Others have significantly scaled theirs back or restructured their programs amid similar findings of revenue loss.
Correction: A 2018 report found that the state gets back 27 cents for every dollar spent on the motion picture tax credit.
Nancy Lavin is a PBN staff writer. You may reach her at Lavin@PBN.com.
Having personally invested in a few movies filmed in RI, none of this surprises me. I’ve always considered these tax credits totally unnecessary. Kudos to Paul Dion. Paul should probably run for State Treasurer, since Seth is clueless.