Credits are rolling

Reselling film-tax credits is a fast-growing industry

By ALEXANDER SOULE

With movie productions having spent roughly $300 million in Connecticut since the enactment of a 2006 law establishing credits on taxes for up to 30 percent of movie expenses generated in the state, brokers are rapidly proliferating to resell those tax credits to corporations.

By selling rights to their tax credits at a discount, cash-strapped production companies and their investors generate immediate revenue up front. By buying them, deep-pocketed corporations are able to reduce their tax bill dollar for dollar ­ at a discount.

“I must admit ­ I didn’t think it would have this kind of an impact,” said Morris Banks, an attorney with Pullman & Comley L.L.C.’s Hartford office who focuses on tax credit programs. “You can get a tax credit on the front end … Add to that the excitement of being involved in a movie production, and it is an opportunity that a lot of people want to take advantage of.”

Publicly, Fairfield County commercial entities of all ilk have been touting themselves as “film friendly” locales for movie shoots, from idyllic Happy Acres Farm in Sherman to Greenwich’s posh Delamar Hotel.

Behind the scenes, Banks said, brokers are jostling to broker the exchange of those tax credits, though few have yet to follow the model of Tax Credits L.L.C. of Piscataway, N.J., by hanging out a shingle actively trumpeting such services.

Connecticut is not the only state to have enacted moviemaking incentives ­ some 35 states have movie-tax credits in place, according to the Motion Picture Association of America. New York officials blame tax credits in Connecticut, New Jersey, Massachusetts and Pennsylvania for siphoning off shooting that might otherwise have taken place there.

With movie productions having spent roughly $300 million in Connecticut since the enactment of a 2006 law establishing credits on taxes for up to 30 percent of movie expenses generated in the state, brokers are rapidly proliferating to resell those tax credits to corporations.

By selling rights to their tax credits at a discount, cash-strapped production companies and their investors generate immediate revenue up front. By buying them, deep-pocketed corporations are able to reduce their tax bill dollar for dollar ­ at a discount.

“I must admit ­ I didn’t think it would have this kind of an impact,” said Morris Banks, an attorney with Pullman & Comley L.L.C.’s Hartford office who focuses on tax credit programs. “You can get a tax credit on the front end … Add to that the excitement of being involved in a movie production, and it is an opportunity that a lot of people want to take advantage of.”

Publicly, Fairfield County commercial entities of all ilk have been touting themselves as “film friendly” locales for movie shoots, from idyllic Happy Acres Farm in Sherman to Greenwich’s posh Delamar Hotel.

Behind the scenes, Banks said, brokers are jostling to broker the exchange of those tax credits, though few have yet to follow the model of Tax Credits L.L.C. of Piscataway, N.J., by hanging out a shingle actively trumpeting such services.

Connecticut is not the only state to have enacted moviemaking incentives ­ some 35 states have movie-tax credits in place, according to the Motion Picture Association of America. New York officials blame tax credits in Connecticut, New Jersey, Massachusetts and Pennsylvania for siphoning off shooting that might otherwise have taken place there.

In 2002, Louisiana made a splash by enacting a 25 percent tax-credit for movie production costs, and credits it with luring big-budget productions to the Bayou.

But in September, the state’s former film commissioner pleaded guilty to federal charges that he took $60,000 in bribes to approve inflated budgets submitted by moviemakers looking to take additional money off the table. In a separate lawsuit, a movie production company claims the commissioner steered business to a rival, which the latter company disputes.

This year the Connecticut General Assembly stiffened the reporting requirements for film tax credits in the upcoming session by giving parties 30 days to report the transfer of tax credits, and limiting any one tax credit to three changes of ownership. The amended law also penalizes production companies for any fraudulent claims at an amount equal to the tax credit claimed, in addition to any sanctions under existing law that might apply. The more one prevaricates on a tax credit claim, the more one may have to pay.

And not all are sold on the economic promises of tax credits. A 2005 University of Connecticut study found that Connecticut’s cornucopia of tax credits established since the early 1990s has had little economic impact, by cutting into revenue the state might have spent on private-sector goods and services.

Still, in the case of the film tax credits Connecticut has created a nascent new industry virtually overnight, and one that could offer lasting impressions of the state via the film images exported to movie theaters and TV sets. Along with the new oversight on tax credits, the Connecticut General Assembly expanded the tax credits to include some sound recording and video-game production work as well, which typically is done by established studios with steady work forces.

“Connecticut really needed a shot in the arm in terms of this industry,” Banks said. “This was an opportunity for Connecticut to really set itself apart.”