Hartford Business Journal

16 HARTFORDBUSINESS.COM | APRIL 15, 2024 "Christmas on Honeysuckle Lane," produced by Rocky Hill-based Synthetic Cinema, was filmed in Old Wethersfield and aired on the Hallmark Channel. Synthetic Cinema CEO Andrew Gernhard recently testified against a bill that would repeal the state's film production tax credit. PHOTO | CONTRIBUTED Liability Offset Here's why insurers like CT's film production tax credit companies claimed 34 film production tax credits worth $55.4 million to offset their corporate business tax obligations, according to DRS data. On an annual basis, companies can use film tax credits to offset up to 50% of their total corporate tax liability, and up to 55% of their insur- ance premiums tax liability. "Like all businesses and taxpayers, insurance carriers are keenly aware of the financial burden that state tax liability can have on the business operations of their organization and their affiliates," the insurance associations wrote in joint testimony supporting the film production tax credit. "State tax liability is not an insignificant factor in the cost of doing business, and insurance carriers, like many taxpayers, seek methods to manage their state tax liability," including by purchasing tax credits. They added that eliminating the film tax credit would be "detrimental and harmful for these insurance carriers." Hartford, of course, is still known as a dominant center of the global insurance industry, and is home to major insurers including The Hartford, Travelers Cos. and Aetna. Over 1,300 insurers paid $254.3 million in premium taxes in fiscal 2023, which ended June 30, DRS data shows. Transferring credits Connecticut has three separate film tax credits. Insurers have also purchased film infrastructure tax credits, which incentivize the construc- tion of facilities used by digital media and motion picture companies. However, the film production tax credit is much more widely used. It offers credits to production companies that spend at least $100,000 on motion pictures, documentaries, TV series, music videos, commercials, miniseries, video games or other forms of media. Eligible companies must conduct at least 50% of principal photography days within the state, and expend at least 50% of post-production costs within Connecticut. Productions that have between $100,000 and $500,000 in expenses qualify for an up to 10% tax credit; $500,000 to $1 million in expenses qualify for a 15% tax credit; and $1 million or more in expenses qualify for a 30% tax credit. Connecticut awarded 36 film production tax credits worth more than $103.9 million in fiscal year 2023, according to the state Department of Economic and Community Devel- opment (DECD), which administers the program. Companies that were granted the credits spent more than $335.3 million on qualified projects. A key part of the incentive program is the ability of film production compa- nies to sell or transfer the tax credits. John Lanza is a partner at Cohn- Reznick, who leads the accounting and consulting firm's business tax credits and incentives group in Stamford. He said that since film By Skyler Frazer sfrazer@hartfordbusiness.com I n addition to major pushback from sports media giant ESPN and other film industry repre- sentatives, a proposal to eliminate Connecticut's film production tax credit has also drawn opposition from one of the incentive's main benefi- ciaries: insurance companies that purchase the credits to offset their own state tax liabilities. House Bill 5110, which was intro- duced by the Finance, Revenue and Bonding Committee, proposes to repeal the state's digital media and motion picture tax credit, which offers tax credits to production companies that spend at least $100,000 in Connecticut. The proposal didn't move out of committee before deadline, but could still be included in another bill being considered by lawmakers. The tax credit has been repeatedly targeted by advocacy groups and some legislators who say its economic benefits aren't worth the cost. Connecticut's film production tax credit has awarded over $1.5 billion to production companies since its 2007 inception. According to one estimate from House Majority Leader Jason Rojas (D-East Hartford), the tax credit has had a negative net impact of more than $500 million on the state budget since it began, including an $11.5 million loss in fiscal 2023. Rojas is among the lawmakers pushing for the tax credit's repeal. But the incentive has many supporters, including insurers that do business in the state. Both the Insurance Association of Connecticut and National Association of Mutual Insurance Companies voiced opposition to the repeal, noting that the film production tax credit is one of the most popular tax credits insurers purchase to offset their state tax liability. In 2022, for example, insurers claimed 40 film production tax credits worth $40.4 million to offset their insurance premiums tax, which is assessed on insurance policies sold in Connecticut, according to recent data from the state Department of Revenue Services (DRS). Over a 10-year period ending in 2022, insurers claimed 454 film production tax credits worth $396.4 million to offset their insurance premiums taxes, DRS data shows. Film production tax credits can also be used against the state's corpo- ration business tax. In fiscal 2021, John Lanza Top film production tax credit recipients in 2023 RANK PRODUCTION COMPANY AMOUNT OF TAX CREDIT ISSUED 1 NBC Sports Network, LP $26.7M 2 ESPN Enterprises, Inc. $15.4M 3 World Wrestling Entertainment Inc. $12.7M 4 Good Nurse Productions, LLC $8.9M 5 ITV America, Inc. $8.9M 6 Newsub 120 Productions, Inc. $5.2M 7 NBC Sports Ventures LLC $4.2M 8 Ralph Edwards/Stu Billett Productions $3.6M 9 Peacock TV, LLC $3.3M 10 Stephen David Entertainment, LLC $3.1M Source: Dept. of Economic and Community Development

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