By Rebecca Lessner
As popular shows like “VEEP” and “House of Cards” continue to receive tax-credit aid from Maryland, legislators debate whether the return is really worth the $25 million output.
Currently, SB 905 sets up the House and Senate for a debate on the continuance of the film tax credit scheduled to end in July 2016. House of Cards has threatened to pull out of the state if this credit is not continued.
“The tax credit was never to make money for the state of Maryland, it was to help our economy and I think that’s where it’s going,” argued Sen. Edward Kasemeyer, D-Baltimore and Howard, on the Senate floor Wednesday morning.
In a report on the effectiveness of the tax credit, Maryland’s Department of Legislative Services (DLS), opined that the General Assembly should “allow the film production activity tax credit to sunset” as scheduled.
“States are fiercely competing with one another to draw productions into their state,” stated DLS. “This type of competition is not only expensive, but promotes unhealthy competition among states.”
With the increased competition, DLS has found that Maryland’s return on investment for film production incentives has decreased over time. It also found that employment as a result of the credit was short-term and that state and local governments only recouped a fraction of the credit amount.
Kasemeyer said on the floor that he totally disagreed with that assessment.
Credit amount left to DBED, governor
In an effort to appease legislators who believe the $25 million tax-credit isn’t worth the return, the Senate Budget and Taxation committee amended the tax-credit extension bill Wednesday morning.
Striking the definite $25 million provision for fiscal years 2017, 2018 and 2019; the amount credited to film productions will now be decided on an annual basis by the Department of Business and Economic Development (DBED), then approved by the governor.
“We support this program, we think it should be continued, but we’re not going to pick a specific dollar amount for 2017,” said Sen. Guy Guzzone on behalf of the committee.
This could potentially upset the film industry. In a hearing earlier this session the Motion Picture Association of America appeared in favor of the bill, asking for a reliable number.
“Obviously the higher this program can be funded the better, but a critical thing we are looking for here is some consistency and stability in how the program is funded,” said lobbyist John Favazza.
The bill’s original annual allotment of $25 million was good, according to Favazza, because House of Cards and VEEP together both required a “$20 million plus” credit.
Towson University study finds state profited
The argument for the continuation of the tax credit is job creation.
“This is a great program that employs a broad range of individuals in this state,” Daraius Irani, chief economist at Towson University, testified at a hearing. “It’s the electricians, the drivers, the security guard, the caterer. It’s all those individuals, all those small businesses, it’s Main Street Maryland.”
“Having a sustainable, predictable credit, will keep those jobs here,” said Favazza.
In a study, Irani found that up through year 2016, $55 million worth of tax credits was given by Maryland.
With that money, “11,000 businesses have been touched and 15,000-plus people have been hired various times,” said Irani.
However, senators are skeptical after hearing from the legislature’s own analysts.
“All we’ve heard is that it doesn’t deliver the return on the investment,” said Sen. Roger Manno, D-Montgomery, at the hearing. “Would you all agree that this is a good return?”
“Every dollar the state spent on the tax credit, the state received back $1.03,” said Irani at the committee hearing.
In the four years leading up to fiscal 2016, DLS has found $62.5 million in film production activity tax credits have been awarded. $60.3 million, or 96.5% of that total, has been awarded to House of Cards and VEEP.
DBED believes small businesses are benefiting from the tax credit as the large productions use Maryland services.
The Maryland Film Office reported to DLS that other production firms are considering relocating to Maryland.
“If this is sustained, it will surely lead to the creation of a cluster of related industries, which has a ripple effect in job creation, larger consumer base, and revenue collection,” said the Maryland Film Office in the bill’s fiscal note.