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Program gives tax breaks for TV commercials — and fuels debate

A film crew works in Times Square in

A film crew works in Times Square in August 2012. A report showed 17 of the 34 companies receiving tax breaks for commercials produced in 2015 already were based in New York. Credit: Alamy / Iconic New York

ALBANY — A little noticed state program has provided $31 million in tax breaks to more than 30 firms since 2010 for producing more than 2,000 TV commercials, according to the program’s first annual report.

The program provides a 5 percent tax credit for expenses incurred in shooting commercials in New York. It allows an additional 20 percent “growth” credit against expenses if a production company increases spending from year to year.

The tax breaks for commercials are separate from a better-known tax incentive that awards $420 million a year in tax credits to television and film productions to lure them to New York to showcase the state and create jobs. State Comptroller Thomas DiNapoli and the fiscally conservative think tank Empire Center have long criticized the cost of the film and TV series tax credit, saying its value to taxpayers is unproven.

The smaller state Commercial Production Tax Credit, created in 2010, is due for renewal in 2018.

The first annual report for the program was released in September, required in a measure passed by the State Legislature. The report provides details for commercials shot in 2015.

Critics of the tax credits in general were particularly harsh in their judgment of the tax break for making commercials.

“The commercial production tax credit provides subsidies to an industry that has strong ties to the state and is already well-established,” said David J. Friedfel, director of state studies at the independent Citizens Budget Commission. “It is clear that companies are not being enticed to film here because of the credit, but are simply using it to pad their bottom lines at the expense of taxpayers. It is time to end these subsidies.”

Gov. Andrew M. Cuomo and Hollywood producers, however, say the investment pays off for all of them. Cuomo and the legislature extended the TV and film credits in April as part of the state budget.

“This will ensure stability and predictability for television and motion picture producers that utilize one of the most successful incentive programs worldwide,” said Chris Dodd, CEO of the Motion Picture Association of America in an interview with the Hollywood Reporter. “New York will continue to create thousands of jobs and add billions of dollars to the New York state economy as even more television series and feature film productions will locate in the Empire State.”

The Empire State Development agency, which is controlled by Cuomo, said the credits help stave off competition for jobs from other states that have commercial production tax credits.

“In 2015, participants in the Commercial Production Tax Credit program hired more than 15,550 workers while spending nearly $100 million on productions across New York State,” agency spokesman Jason Conwall said.

“The commercial production industry is highly competitive and our program generates a positive return on investment,” Conwall said. “It also attracts companies from out-of-state while ensuring that jobs and revenue remain in New York, instead of leaving for one of the many other states — including bordering states like Massachusetts and Pennsylvania — that have similar programs.”

Eleven other states including Pennsylvania have tax credits for television commercials, although their incentives are much higher than New York’s, according to the National Conference of State Legislatures. Most of those states offer reimbursements of 20 percent to 35 percent of production costs.

Since 2009, 10 states have ended their film production programs, including those for feature films, often citing unclear benefits, according to the conference. Four states including New York expanded or extended their production tax credits during that time.

The report showed 17 of the 34 companies receiving tax breaks for commercials produced in 2015 already were based in New York. Manhattan is home the storied Madison Avenue advertising industry, which federal Bureau of Labor Statistics show is already the nation’s hub for TV commercial production with the nation’s highest median salary in the field. In Manhattan, the median salary for advertising and promotional managers is $166,910 per year. Another 16 of the production companies that received tax breaks are based in California.

John Kaehny of Reinvent Albany, a good-government group, called the tax breaks for TV commercials “an utter, complete waste of public funds. The program should be ended.” Kaehny noted the film tax credit started small, too, then grew to 17 times its original value.

In 2004, the TV and film program provided $25 million in credits and that grew to $420 million in 2010, which continues to be the total today. The credits then and now can be applied to production costs, not the salaries of actors and directors.

“Why we should be subsidizing the making of commercials is a question no one has ever bothered to answer,” said E.J. McMahon of Empire Center, the fiscally conservative think tank.

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