The CT movie tax credit has bolstered the state’s film and digital industry. An official calls for cuts.


Department of Economic and Community Development Commissioner David Lehman on Thursday called on state lawmakers to consider capping or reducing Connecticut’s tax incentives for film, television and digital production — programs that have been sparking for years. criticism from defenders who say the money would be better spent elsewhere.

Speaking at a joint hearing of three legislative committees to discuss his department’s 2021 annual report, Lehman highlighted the pros and cons of several state business incentive programs. But he drew particular attention to tax credits for films and digital media, saying they were among the incentives he said were ripe for an overhaul.

“If there was a reminder of some of the programs that we oversee, that would be one that I would suggest should be discussed,” Lehman said.

Lawmakers on the Appropriations, Commerce and Finance, Revenue and Bonds committees did not state their position on Lehman’s suggestion, but acknowledged the advice.

“There’s been a lot of conversation around the movie and entertainment industry,” D-West Haven Rep. Dorinda Borer said during Thursday’s hearing. “We don’t necessarily want to go back, but going back to your point, we should always evaluate a program to see if it works.”

Established in 2006, industry incentive programs have been instrumental in establishing a thriving production ecosystem in Connecticut that employs thousands of people, Lehman said, but it comes at a significant cost.

Under Connecticut’s Film and Digital Media Production Tax Credit, companies can receive, in the form of a tax credit, up to 30% off qualifying production expenses or on the costs incurred in the State. There is no cap on the amount they can claim per year.

In its 2019 annual report, the DECD found that over the previous decade, the average economic impact of the program amounted to a loss of $58,510,604 in net revenue per year, well over a half a billion dollars in total.

“When you think about the cost to taxpayers versus the benefit to taxpayers, I think there’s an open question,” he said. “Does the cost outweigh the benefit here?” I think this is something the General Assembly should explore.

He recommended either capping the credit at a certain dollar amount or reducing the percentage. Connecticut Voices for Children public policy researchers called for similar curriculum reforms as early as 2009.

Many states and countries offer similar incentives to film and media companies. That can create a competitive “race to the bottom,” analysts say, and taxpayers in many regions have pushed back.

Lehman noted that on a per capita basis, Connecticut’s film industry tax incentive cost was second only to another state: Georgia. A recent audit of Georgia’s film industry incentives revealed waste and mismanagement within the scheme. Georgia lawmakers considered capping credit, but the proposal fell through.

Connecticut state auditors have also raised concerns about that state’s film tax credit programs. Last year, auditors reported that Connecticut overpaid animation company Blue Sky Studios nearly $50 million in fiscal years 2016 to 2019. Disney acquired Blue Sky Studios for $70 million. million in 2019 and closed the company last year – announcing the closure just two weeks after receiving a $32 million tax credit from the state.

The DECD commissioned a study of the Film and Digital Media Production Tax Credit and its economic impact, reporting its findings earlier this year. Since 2012, the state’s three film industry incentive programs have resulted in job growth, personal income growth and increased economic output for the state, according to the study.

But the longer these productions stay and grow, the more they cost the state. According to the study, the annual number of projects applying for Connecticut’s tax credit program has hovered between 25 and 41 since 2012. But the average spend per project has risen from $8.7 million in 2012 to $12 million. in 2020.

Lehman said Thursday that’s why he’s encouraging lawmakers to review the terms of the incentive.

“We have one of the best film tax credit programs in its class, and we always focus on balance. What is the right balance? ” he said. “This program really created industry in the state of Connecticut, but at what cost to taxpayers? I think you always want to make sure there’s that balance.


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