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Senate again to consider transparency for tax credits

By Todd Wallack
Globe Staff / May 26, 2010

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Massachusetts lawmakers are edging closer to lifting the veil of secrecy over hundreds of millions of dollars in tax subsidies to film companies, dairy farmers, medical device makers, and other businesses.

While information on some subsidies is already public, the state Senate is scheduled this week to consider measures that would require the state to disclose the recipients for all so-called refundable tax credits.

Unlike traditional tax credits that simply reduce a company’s state income tax bill, refundable tax credits can be used by companies that owe little or no taxes, because they can be sold to others or traded back to the state for cash.

“At a time when we are cutting services and local aid, we want to measure the effectiveness of these tax credits,’’ said Senator James Eldridge, a Democrat from Acton who wrote one of the proposals and cosponsored another. “I’m deeply concerned that they are so secret, and neither the Legislature nor the general public has access to this information so we know if we are spending public taxpayer money wisely.’’

The largest refundable tax incentive is for the movie industry. Designed to lure filmmakers to Massachusetts, the credit is worth up to 25 percent of the cost of making a movie, television show, or commercial in the state. The state estimates that film tax credits alone will amount to $125 million this year. Other refundable credits include $3.5 million for medical device makers and $50 million for firms renovating historic buildings.

The film tax credit in particular has garnered controversy because of its impact on the state budget. A state Department of Revenue study estimated that the measure generated just 16 cents in new tax revenue for every $1 given up in tax credits. But supporters argue it has spurred filmmakers to spend hundreds of millions of additional dollars in the state and has created many new jobs.

Altogether, the refundable credits amount to about $245 million a year in lost tax collections, according to the Department of Revenue.

Some of the refundable tax credits are a matter of public record, because they must be approved by a separate state board or agency. But most of the tax credits are handled solely by the Department of Revenue, which contends it is obligated to keep all tax information confidential.

The Massachusetts Life Sciences Center, for instance, announces its awards to life sciences companies, including the value of tax credits given to each firm.

Eldridge’s proposal, offered as an amendment to the new state budget, would require the state to publish reports on each tax credit program, including the identity of each taxpayer, the amount of tax credits received, the date of the award, and additional data.

Last month, a broader version of Eldridge’s measure was rejected by the Senate. Senator Karen Spilka of Framingham, who helped lead the opposition to the proposal, said it would have required municipalities to do too much work to track the credits. But Spilka has since agreed to support a more narrowly defined measure from another legislator, Senator Benjamin Downing of Pittsfield. Similar to Eldridge’s latest proposal, the Downing amendment would require additional public disclosure, such as the number of jobs created by the credits.

“I think it is important that we achieve transparency,’’ Spilka said.

If the Senate approves one of the measures, it is likely to become law in some form. The House approved a similar proposal last month.

And Governor Deval Patrick has included a public disclosure measure with his budget proposals for the past two years.

“We want to promote greater accountability and better public information about how tax dollars are being spent,’’ said Jay Gonzalez, state secretary of administration and finance.

Some business groups lobbying against the disclosure measures argue that tax information should remain confidential, as it historically has.

“These proposals represent a fairly dramatic change in that policy,’’ said John Regan, executive vice president of Associated Industries of Massachusetts.

However, the current proposals would address some of AIM’s concerns because they would apply only to tax credits awarded in the future. That way, Regan said, companies will know ahead of time that their names will be released if they apply for the subsidies.

The group that represents medical device makers said it has no objection to the proposals.

“It seems to me that information should be made available to the public,’’ said Thomas Sommer, president of the Massachusetts Medical Device Industry Council.

“Massachusetts is one of the last states to provide that information.’’

Todd Wallack can be reached at twallack@globe.com.