Friday, January 31, 2014

Selling Tax Credits

LA Times scribe Richard Verrier reports on a popular way our fine conglomerates maximize their use of the prevalent tax credits. They SELL them:
Moss Adams, one of the nation's largest accounting firms, has launched an online exchange for trading film and other tax credits.

“We’re proud to bring the exchange to our clients and future members and expect it to transform the way tax credits are purchased and sold,” said Rob O’Neill, state and local tax partner at Moss Adams. “Through this new digital marketplace, exchange members will gain transparency and real-time access to buyers and sellers across the nation and reduce the time it takes to complete a tax credit transaction.”

The venture underscores the growing secondary market for film tax credits. About $1.5 billion in film-related tax breaks, rebates and grants were paid out or approved by nearly 40 states last year, according to Times research. That's up from $2 million a decade ago.
Tax incentives vary by state and since the overall tax liability of the studios isn't high in some of the filming locations, it becomes more lucrative for them to sell their incentives to existing in-state businesses with higher tax burdens. The Times put together this interactive graphic page to better describe the process.

While the talk of "leveling the playing field" and "getting in the game" become louder, its important to understand how the entire mechanism of tax incentives has distorted entertainment revenues and driven the direction of the industry.


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