The Massachusetts film tax credit program is in jeopardy, and is threatening a burgeoning industry in Berkshire County.
Effective since January 2006, the credits grant production companies making films, television series, videos, digital media and streaming projects, and commercials with in-state spending budgets over $50,000 a 25 percent tax credit on payroll and production, as well as a sales tax exemption.
The program effectively jumpstarted the film and media industry in the state. Over 1,500 individual productions took advantage of tax credits and exemptions from 2006 to 2018, according to the 2016 Impact of Massachusetts Film Industry Tax Incentives report issued by the Massachusetts Department of Revenue (DOR) last February.
The Massachusetts Production Coalition (MPC) estimates that film and television productions have spent more than $2.8 billion in Massachusetts since 2006. But opponents argue that the incentives are too costly, with the state paying about $80 million in tax expenditures annually and over $660 million cumulatively through fiscal year 2017 according to a March 2021 report by the Massachusetts Tax Expenditure Review Commission (TERC).
With the program’s expiration date of January 2023 looming, state representatives voted unanimously this spring both to maintain the tax credit as well as to remove the sunset provision. State senators, however, countered with their own amendments to the bill.
The Senate’s budget, which would take effect January 2022, sunsets the program in 2027, raises the required in-state spending budget and shooting schedule from 50 percent to 75 percent of the total production, eliminates tax credit transferability, and caps payroll credit salaries at $1 million.
These amendments, which were defended by Senate Ways and Means Committee chair Michael Rodrigues (D-First Bristol and Plymouth) in a CommonWealth Magazine article as ensuring that “that return on investment is maximized for those paying the bills,” seem to echo the TERC report which claims the tax credit program does not provide enough revenue to the state.
“We are between ‘somewhat’ and ‘strongly’ disagreeing that it justifies its fiscal cost,” the report authors summarize. “While film activity does generate new state tax collections (particularly income tax on wages), that revenue only equaled 14 cents for each dollar of tax incentives issued over the 2006 to 2016 period.”
“The problem is that, for a long time, the DOR looked at certain revenue from film productions, not the trickle-down effect,” said Diane Pearlman, executive director of the Berkshire Film and Media Collaborative (BFMC). “The economic impact of the film industry has been huge. So many businesses—prop houses, costume shops, I could go on—have come from [increased production activity here]. Studios come back over and over to Massachusetts.”
While the TERC report does acknowledge that film spending has a positive multiplier effect, it claims that this is “offset by the necessary cuts in state spending to pay for the film credits, a negative multiplier impact,” and that the program “has had no discernible impact beyond its one-time spending.”
The report also claims that “DOR is not aware of any published and peer-reviewed study measuring the direct and indirect impact of the film credit,” although several economic impact studies have provided a more complete picture of the industry’s value on Massachusetts communities in recent years.
When Movie Making Comes to Town, a report commissioned by BFMC following the 2013 production of the feature film The Judge starring Robert Downey Jr. and Robert Duvall, found that “the industry purchases $26 million of goods and services from other businesses in the region” and, for every dollar spent on production in Franklin County, 63 cents were retained by local businesses.
A more recent MPC report analyzing season one production of Hulu’s Castle Rock, which was filmed in 19 cities and towns across the state in 2017 and 2018, found that $4.73 in economic output was generated per tax credit dollar received. In total, the production company, Warner Brothers, spent $42 million on direct local expenses—from payroll and lodging to location fees and set construction—which generated $69 million in economic activity over that 12-month period.
“Feature films and episodic television are the engines of growth for the industry,” said Chris O’Donnell, business manager at IATSE Local 481, a union representing New England motion picture crew members. “Pre-pandemic, we were ready to go to the next level because there’s so much content happening.”
Dexter, a revived Showtime series that will air this fall, filmed elements of its new 10-episode season in western Massachusetts this spring. These types of television and streaming shows take longer to shoot, which elevates the local budget.
“Dexter used 4,200 hotel room nights in Shelburne Falls and spent over $1 million [there],” O’Donnell said about the production, which is currently filming in Middlesex County. “This is the absolute wrong time [to change or eliminate the tax credit].”
Industry advocates are worried that the amendments will affect the size of the productions that shoot in Massachusetts. The payroll credit salary cap may cause big-budget productions that cast major stars to look elsewhere for locations, even though actors pay payroll taxes in the state where they worked.
For Rob Goodrich, founder of Walk Like a Duck Entertainment and member of FILMA, an industry group that works closely with lobbyists and state legislators to support the tax credit, transferability is a particularly important aspect of the program. Currently, credits can either be applied against the producer’s tax liability, refunded by the state at 90 cents on the dollar, or sold to brokers or other third parties. While selling tax credits is controversial, it leaves production companies with more cash to spend in the state in which they are filming.
“We are very much in the business of selecting locations both domestically and internationally that speak to a financial model, a key piece of which is a tax incentive program, particularly a transferable tax credit,” said Goodrich, who produced Skelly, a feature film starring Brian Cox and Chicago Med’s Torrey DeVitto that filmed in the Berkshires this year. “We have two more feature films scouting Massachusetts with several locations slotted for the Berkshires. Sadly, if the tax credit were not available and transferable, we would likely be scouting different states.”
“Any time the tax credit is debated, film productions scatter,” said Pearlman, referring to other states with competitive tax credit programs including Georgia, Louisiana, and New Mexico. “This could have an adverse effect on the momentum of the industry” particularly in Berkshire County, where film and media productions have been increasing over time.
While Skelly might not have had the budget of Knives Out, which was filmed in and around Boston in 2018, smaller independent productions bring revenue as well as attract talent to local communities, creating a critical mass of cast and crew members for this burgeoning industry to lean on.
Matt Greene-DeLanghe, Skelly‘s writer and director, was raised in Great Barrington and studied filmmaking at New York University. Last fall, he moved back to the Berkshires from Minnesota where he had spent six years teaching. He pointed to the tax credit program, which he used to film Skelly, as well as to the connections he has from growing up in the area for wanting to live and work here.
“The landscape is beautiful, and it’s easy to find great locations and extras,” he said. “It works really well for those reasons.”
The area, home to a once-slow-growing contingent of actors and production talent who relocated here years ago thanks to performing arts anchors and technology companies including Trumbull Studios, is seeing a rise in residents who work in film and media. Changing trends in programming, marketing, and content/sales delivery are increasing local demand for video services, and improved broadband access is allowing more creatives—from sound engineers to animators—to work from home.
Alexa Green, who also grew up in the Berkshires and studied film and television at New York University but floated between New York City and California after graduation, bought a house in nearby Stephentown, New York, this January. She has held an array of industry positions including production manager and editor, and worked remotely as second assistant director on Skelly.
She is completing rewrites on her first feature film, Syrup, and plans to shoot and direct in Massachusetts to take advantage of the tax credit. “It’s a nice spot to make movies,” she said, although she will reevaluate her plans if the Senate’s budget passes.
“Since the tax credit, the local film world has grown so much,” Green said. “It’s an easy convince to get crew to work here.”
MPC’s Castle Rock report estimates that 1,026 full-time equivalent jobs were created from that production alone, while the film and media industry in Massachusetts has produced more than 17,500 new jobs, with an average salary of over $68,000, from 2006 to 2016.
“This is a jobs program,” said David Hartman, executive director of MPC. “If the Senate’s proposal goes through, we’ll lose those jobs—in January no less.”
Hartman also argued that the proposed four-year sunset extension of 2027 does not provide studios and businesses with enough time to generate investment in infrastructure, equipment, and training programs.
New England Studios, a $36 million, 126,000-square-foot production facility in Devens, is the first purpose-built sound stage in the state, he said. The studios have been used by a multitude of productions since opening in 2013, including Dexter and Castle Rock. “The project responds to the demand for Massachusetts-based production facilities following the introduction of the Massachusetts Film Tax Credit,” wrote funding partner MassDevelopment in a June 2012 press release.
“We could have more of those,” said Hartman. “But you can’t start laying out that kind of money if you only have four years.”
Indeed, Berkshire County is poised to get a similar facility.
Kemble Street Studios (KSS) is a proposed $15 million film production and education center slated to occupy 20,000 square feet of space at Shakespeare & Company in Lenox. Pearlman, who developed the project with support from the theater company’s founder Tina Packer, will undertake a feasibility study this summer and has already started raising funds for phase two’s architectural and permitting plans.
The facility will feature state-of-the-art virtual and augmented reality technologies such as motion capture and real-time graphics rendering, something that KSS advisory board member Paul Lacombe said is gaining in use but lacking in the area.
“Virtual production has exponentially taken off this past year because of COVID,” said Lacombe, a Great Barrington-based virtual production supervisor and founder of DisruptAR. “I’d love to see it happen here. The Berkshires is the perfect place—we have the talent, beauty, proximity to Boston and New York. The market is ripe for the educational side of things.”
In a 2019 letter supporting the tax credit’s sunset removal co-signed by administrators and faculty members of 15 colleges across the state, authors wrote that the 4,000 students enrolled in their film and media programs “have a broad range of career options that would be unthinkable” without the film tax credit.
“We need to find a way to keep young people here working in an industry, and I think this is it,” Pearlman said. “It would increase production in western Massachusetts. Virtual is where [the industry is] going. So if you kill the tax credit, [KSS] is not going to come.”