Studios’ credits let others cut taxes. Reselling waivers is big business

[Ian David]

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At least 96 percent of the $265 million in tax credits used to attract movie and television productions to Massachusetts were sold by the film companies between 2006 and 2010, according to the state Department of Revenue.

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“The public assumes that the film tax credits are going to the film industry to bring jobs - not to Walmart,’’ said Deirdre Cummings, legislative director for the Massachusetts Public Interest Research Group, an advocacy organization based in Boston. “I think the general public would have a problem with that.’’

Companies and individuals use tax credits to reduce tax bills. For example, a $1 million credit reduces a company’s tax payment by that amount.

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A production company that is awarded $10 million in tax credits might sell them to a broker for $8.7 million. The broker then sells the credits to a financial company that owes state incomes taxes for a bit more - say for $9 million, earning the broker a $300,000 profit. The financial firm can then claim the full $10 million in credits on its tax return, saving $1 million.

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Prosecutors said Walmart Stores Inc. and Bank of America Corp. bought the credits through a broker to reduce their taxes.

More:
http://www.boston.com/business/taxes/articles/2012/01/03/studios_credits_let_others_cut_taxes/?p1=Local_Links

[Angry Dragon]

1. Sounds very illegal