In commenting on a recent post about Gov. Deval Patrick’s efforts to cap how much of a movie star’s salary would qualify for the state’s film tax credit, reader Donald McGlaughlin said I had my facts wrong. My facts were correct, but it is a confusing issue.
I had reported that all of a movie star’s salary qualifies for the film tax credit and that the governor tried to place a $2 million cap on how much would qualify before changing his mind and returning to the status quo. McGlaughlin said I had it wrong because the film tax credit law specifically excludes any salary greater than $1 million from qualifying for the tax credit.
The state’s 25 percent film tax credit has two parts, one that applies to payroll and one that applies to production expenses. In the Revenue Department’s technical information release on the law, the agency notes that all payroll expenditures qualify for the 25 percent tax credit except those of high salary employees, those making $1 million or more. “Such high salary employee’s entire salary, not merely the amount of his or her salary equal to or greater than $1 million, is excluded from the payroll credit,” the release says.
But the technical information release goes on to say that the high salary employee’s entire salary could qualify for the 25 percent tax credit for production expenses. The release says: “The entire salary paid to a high salary employee that is equal to or greater than $1 million may be used to calculate the production expense credit including the portion of such salary that is less than $1 million (provided that such entire salary is excluded from the payroll credit, for which it does not qualify).”
In essence, the folks at the Revenue Department concluded that anyone making $1 million or more on a movie wouldn’t qualify for the payroll tax credit but would qualify for the production expense tax credit. The bottom line is the same: The movie star’s entire salary qualifies for the film tax credit and taxpayers effectively subsidize a quarter of his pay.
I hope this clears up any confusion. Thanks for the comment and keep them coming.
