With Massachusetts issuing more and more tax credits to companies, Gov. Deval Patrick is calling for greater public disclosure of who is receiving these benefits and how much good they are doing for the state’s economy.
Patrick’s budget for next year contains an outside section that would require agencies to disclose the recipients of tax credits that can be sold or converted into cash, including the film tax credit, the historic rehabilitation tax credit, the life sciences investment tax credit, the low-income housing tax credit, and the medical device tax credit. Currently, the names of tax credit recipients are either not disclosed or hard to uncover.
The governor’s budget proposal would also require state agencies to disclose how many tax credits each recipient received and require each recipient to disclose the number and pay of jobs generated by the tax credits.
The proposal is surfacing at a time when the state is raising taxes and fees while issuing hundreds of millions of dollars in lucrative tax credits to companies without any coherent system for evaluating how well they work in generating jobs and economic activity.
The film tax credit, for example, appears to be exploding in popularity. According to new Revenue Department numbers released this week, a total of $130 million in film tax credits will be issued in fiscal 2009, nearly the same amount that was issued in 2006, 2007, and 2008 combined. Projections for fiscal 2010 indicate only $100 million in film tax credits will be issued, but industry officials say the downturn is not an indication that movie producers are less interested in Massachusetts but that claims for credits are being filed more slowly. “It’s a timing issue,” said one official, who asked not to be identified.
The film tax credit offers a 25 percent credit on all payroll and production expenditures in Massachusetts and exempts most of a film company’s purchases from the state’s sales tax. In essence, for every dollar a production company spends in Massachusetts, it receives a credit worth 25 cents that can be converted into cash by either selling it to a third party or back to the state. (For more information, see this story in CommonWealth Magazine.)
A lot of movies are being filmed now in Massachusetts, but there has been little information about their economic impact. The Revenue Department occasionally releases some aggregate tax credit figures, but little or not information on who is receiving the credits, how many jobs they are generating, or what those jobs pay.
The state’s historic rehabilitation tax credit program is currently capped at $50 million a year, but a number of bills have been filed this year that would raise the cap to $100 million and eliminate it entirely in certain depressed areas of the state.
The historic rehabilitation tax credit is used by developers to help finance the repair of historic buildings. The tax credit is widely viewed as an economic development tool for historic yet depressed areas of the state, but two of the biggest recipients of the tax credits have been the Boston Red Sox, for their renovation of Fenway Park, and Richard Friedman, the developer of the upscale Liberty Hotel in Boston. As CommonWealth Magazine reported last summer, the historic rehab tax credits are doled out by Secretary of State William Galvin, who runs the program like a personal fiefdom and has resisted efforts by lawmakers and developers to find out who is receiving the tax credits.
