A bill seeking to expand Connecticut’s film tax credit program was subject to public testimony in front of the Finance Committee Friday afternoon.
House Bill 6929 would not make major changes to the credits themselves. Productions would still be eligible for the same percentages based on the production costs spent in the state. Productions between $100-500K would receive a 10% credit; those between $500K and $1M would receive a 20% credit; and those spending over $1 million would receive a 30% credit.
These numbers are competitive within the industry, though, as some of those giving testimony pointed out, they are not the most generous available. New Jersey, for example, provides a 35% credit.
Instead of expanding the credits, the bill expands the amount of the credit which can be claimed when those credits are used against the production’s Connecticut sales tax costs. Often, tax credits made available to a production are actually larger than the production’s liability. Under current state law, production companies could apply those remaining credits to their sales tax liability, but can only claim 78% of the credit’s value. The new bill would increase that amount to 92%.
Arguing in favor of the bill, NBC Universal Tax Counsel Matthew Sica stated the increase would incentivize companies to claim more tax credits against sales tax rather than selling them to other companies in the state. Under that arrangement, those companies are able to use the full value of the credit against their own liability.
Sica’s written testimony argues that the bill could save the state 8%, though it would only save 8% on any credit that is actually claimed by the production company and does not account for any credits that continue to be claimed by the secondary market. In Connecticut, the state’s large insurance industry has benefitted most from these credit transfers, claiming more than $580 million in credits over a 10-year period.
The bill would also require production companies to provide documentation of the type and how many jobs they provide for each production.
Local film professionals, from actors to producers to talent agents to those who provide food and locations to productions have spoken in favor of this expansion. Tax credits exist to entice larger productions into a state and states are in competition with each other to provide the best deal possible. Film industry professionals believe that expanding those credits will bring more productions to the state, providing more job opportunities in the sector.
A report from February of last year found that only an estimated 27% of the productions from the previous eight years would have happened if the credits did not exist.
Opponents, meanwhile, point to evidence that film tax credit programs, including here in Connecticut, don’t provide sufficient industry growth to offset their cost. Ultimately, they cost the state money. In a 2022 report, the Connecticut Department of Economic and Community Development found that the program costs taxpayers around $60 million annually.
Those who oppose these programs in Connecticut and other states have suggested a compromise that would limit the credits while still maintaining some version. They argue for caps on eligible expenditures, limiting the types of expenditures that qualify – removing things like cast salaries and other above-the-line items – or bringing down the percentages altogether.
HB 6929 is still subject to a vote in the committee before it can be brought to the General Assembly for debate and passage.