Did you know this? Caryn Rousseau reports for the Associated Press (emphasis added):

The New York-bound musical “Kinky Boots” enjoyed a pre-Broadway run at a downtown Chicago theater this fall, but only after the state of Illinois lured producers with something that’s scarce these days — money.

The Cyndi Lauper and Harvey Fierstein production that’s based on a 2005 movie, along with a second musical, “Big Fish,” were the first to apply for a certificate making them eligible for a state theater tax credit. …

Producers say the credit — worth up to $500,000 per production or a cap of $2 million per year — was instrumental in their decision to bring the shows to Chicago instead of going straight to New York or previewing in Seattle, Toronto or San Francisco.

[Proponents] say the unique tax break brings Chicago something more than money — a show-business shine that generates buzz. Only Louisiana and Rhode Island have similar legislation, intended to bring shows to cities like New Orleans and Providence.

Rhode Island’s tax credit didn’t get much attention when it passed this year, but GoLocalProv did a story:

The state is expanding its film tax credit program to include musical and theatrical productions in a new law that will likely benefit just one local theater business ….

Under the new law, production companies whose shows have been or will be on Broadway can apply for tax credits to offset the costs of developing and rehearsing their shows in this state. But the law stipulates that those companies must use a venue with seating for 1,500 and where “live exclusive theatrical productions are, or are intended to be, exclusively presented.” …

Just two theater venues, out of about a dozen in the state, meet the criteria in the law: the Providence Performing Arts Center, or PPAC and the Veterans Memorial Auditorium, which PPAC manages through a subsidiary company. …

The lead sponsor of the original Senate bill, Sen. Josh Miller said that’s because “adventurous” arena shows like the ones at the Dunkin Donuts Center don’t have the proven track record of economic development that Broadway shows at the PPAC do. (Miller’s bill, along with its House counterpart, eventually got absorbed into the House budget, which passed last week.)

Two more largely unknown subsidiaries that 38 Studios established are not incorporated in Rhode Island, casting further doubt on whether the company is eligible for millions of dollars in tax credits it needs from the state.

In November 2009, Curt Schilling’s embattled video game company apparently incorporated two limited liability companies under Delaware law, records show: Mercury Project LLC and Precision Jobs LLC. Neither company was registered in Rhode Island.

WPRI 12 reported Wednesday evening that 38 Studios’ failure to incorporate in Rhode Island could make it ineligible for more than $8 million in state tax credits it’s seeking to avoid insolvency. The governor’s office says officials are looking into the question of 38 Studios’ corporate residency.

(more…)

Here’s something I haven’t seen anyone mention amid all the excitement over Fidelity moving workers from Massachusetts to Rhode Island – the state is giving the company significant financial assistance in return for building out its Smithfield facility.

The EDC borrowed a combined $35 million on Fidelity’s behalf to help the company pay for upgrades and then an expansion in Smithfield – $25 million in 1996 and another $10 million in 2002. Rhode Island taxpayers are also shouldering part of the payments so long as Fidelity keeps meeting certain targets for employment here.

EDC Executive Director Keith Stokes specifically cited the Fidelity agreement in defending the 38 Studios deal to the press last year. A third-party consultant monitors Fidelity on behalf of the EDC to keep tabs on whether it’s in compliance, he said.

Rhode Island spent $2.6 million in 2008-09 to cover its share of Fidelity’s repayments, Revenue Department documents show. The outstanding balance on the original $35 million debt was $27.7 million as of June 30, 2009, the documents say.

A separate report shows Fidelity received tax credits from Rhode Island worth $5 million in 2008-09 and $3.5 million in 2009-10. I’m not sure how those two payment streams interact, if at all; EDC spokeswoman Judy Chong said she is putting together materials explaining Fidelity’s state support now.

And they’re off!

In the wake of the 38 Studios deal, an effort appears to be gaining momentum in Massachusetts to create new tax breaks for video game companies. The latest to weigh in is The Boston Globe’s editorial page, which today called for the Bay State to enact a law providing incentives to gaming firms. Here’s how The Globe wants it to work:

To fulfill the first goal [of increasing the state's competitive advantage], a tax credit for Massachusetts video game companies could help offset the salaries and benefits of the wide variety of staffers required to create and publish a video game. The exact amount of this credit will likely be a source of debate; for comparison’s sake, the province of Quebec offers a 37.5 percent refundable tax credit for labor costs, while Georgia’s offer is a refundable credit worth 30 percent of total production costs. …

To promote a permanent presence, the state should also offer a workforce tax credit. … If it were calculated based on the growth of a company’s employment rolls over a several-year period and how much money it spent on development, this tax credit could provide incentive for companies to stay in Massachusetts for the long term.

I have no idea what the prospects are on Beacon Hill for these proposals, but if they do gain steam I wouldn’t be surprised to see officials in Rhode Island say the state needs to enact its own incentives in order to keep competing with Massachusetts for gaming jobs.

Curt Schilling was adamant last summer that he wasn’t looking for tax breaks as an enticement to bring 38 Studios to Providence. That may be true in his case, but if local officials are really looking to turn Rhode Island into a gaming hub they made decide to create such a program anyway. We’ll see.

It’s a banner day for Yushin America, a robotics company that has 60 employees on Kenney Drive in Cranston.

The wholly owned subsidiary of Japan’s Yushin Precision Equipment was featured prominently in a New York Times story today about the various business tax breaks included in the Obama-GOP tax deal currently making its way through Congress:

At Yushin America, a Rhode Island company that makes and maintains robotic manufacturing equipment, executives say that the business tax breaks would allow them to invest in new machinery, new employees and even a new roof.

“It’s a chance for us to put it back in the business and grow,” said Michael Greenhalgh, operations manager of the company in Cranston, which employs 60 people and has annual sales of about $21 million.

Tax cuts intended for businesses are a relatively small part of the $858 billion tax bill scheduled for a final vote in the Senate as early as Tuesday.

The Joint Committee on Taxation estimated that about $75 billion of the tax breaks in the plan were aimed at businesses, including $13 billion for a two-year extension of the coveted research and development credit, which helps cover the cost of wages for employees involved in research. The proposal also commits $22 billion for accelerated depreciation, which in 2011 would allow businesses to write off 100 percent of their capital expenditures immediately instead of over several years.

I called up Greenhalgh, who’s worked at Yushin for 10 years, to ask how his company wound up making it into the article, and he said it was probably thanks to the tax consultants who helped the firm’s management figure out how they qualified for the research-and-development tax credit.

Yushin makes robotic equipment that other companies then use to manufacture their own products. Consumers don’t buy Yushin’s products – “they’re going to buy the thing that my thing touches,” Greenhalgh said, from phones and computer keyboards to medical products like drains and IVs.

This is the first time that 22-year-old Yushin America applied for the R&D credit, Greenhalgh said. “The rules have been relaxed,” he said. “Before you had to be NASA and run around with leather binders documenting everything.” Now companies like Yushin can conduct a sample of their engineers’ work to extrapolate how much of what they do qualifies for the tax breaks.

Yushin sent in its materials for the tax credit early this fall, but Greenhalgh said the company is still waiting to receive its checks from the government.

(image credit: Yushin America)

you paid for 6.75 of those dresses

Rhode Island’s tax credit for movies and TV shows has been controversial ever since it was enacted back in 2005. The law offers companies a credit to get back 25% of their production costs if they film here so long as the production costs at least $300,000. Since it was created, state taxpayers have helped subsidize flicks like “27 Dresses” and “Dan in Real Life.”

Gov. Carcieri proposed eliminating the credit when he put together his budget proposal for this year but lawmakers opted to keep it, although they did cap its total cost at $15 million last year. The credit is managed by the Rhode Island Film & TV Office, which has an annual budget of $278,157.

It remains to be seen whether the film credit program will survive next year’s $300 million budget deficit – but Rhode Island won’t be alone in dumping it if that’s what winds up happening, Bloomberg News reports:

Incentives for Hollywood have been scaled back in Wisconsin, capped in Rhode Island, suspended in New Jersey, Iowa and Kansas and scheduled to expire in Arizona. While states continue to expand and introduce subsidies, programs around the country face allegations of corruption, doubts about job-creating power and, most of all, questions about affordability.

“We are starting to stem the tide of state government pandering to the film industry,” said Bill Ahern, policy director for the Washington-based Tax Foundation, which advocates lower taxes.

In the last five years, $3.5 billion in tax credits, rebates and other financial assistance have gone to makers of films, television shows and commercials, according to a calculation by the foundation. In the next fiscal year, states will face $72 billion in budget deficits, the National Conference of State Legislatures estimates.

The subsidies began in Louisiana in 1992 and today are offered by 42 states. A shakeout will halve the number in the next decade as lawmakers conclude they can’t sustain funding, according to Larry Brownell, head of the Association of Film Commissioners International in Redondo Beach, California, which represents every state with incentives except Massachusetts.

Speaking of which, the Film & TV Office’s website lists the 1956 musical “High Society” as a past project – I know that movie’s set in Newport, but was it actually filmed there?

GoLocalProv has a story this morning about how Curt Schilling’s 38 Studios could potentially be eligible for millions of dollars from Rhode Island’s film and TV tax credit:

In the state’s effort to lure Curt Schilling’s video game company to Rhode Island with a massive loan guarantee, the state unintentionally may have allowed the former Red Sox pitcher to exhaust the tax credit program designed to help the film and television industry. …

Two experts—Steven Monacelli, a founding partner at the prominent accounting firm Restivo Monacelli and URI business professor Ed Mazze—confirmed yesterday that Schilling not only could apply for the credits but also could receive millions of dollars in tax credits in addition to his $75 million loan guarantee.

It’s a good catch by the new organization. One thing it doesn’t include, though, are Schilling’s own comments about tax credits, which he made yesterday during the WEEI interview that I wrote about last night. I didn’t include it in my story, but here’s what the former pitcher said about tax credits:

Unbeknownst to a lot of people, we’re not looking for tax credits. Tax credits are an endgame play. For a studio that has 100 people and that doesn’t burn – you know, you’re talking about an EA [Electronic Arts], or a Sony, or an Activision or a Nintendo for tax credits. You need 300, 400, 500, 600 people and a monthly burn of $5 [million] to $10 million for tax credits to move the needle.

Tax credits for us are not – they were never, ever something we were after. Because we’re in the middle of development. We don’t need tax credits. We need capital. And that’s why I continue to fund [the company].

But you’re looking at probably annually in the $100 million range, if not more, [in tax revenue to Rhode Island] if we’re successful. And again, you’re looking at moves – I’m going to be moving close to 100 people to the state from another state, which you can imagine literally, you know, 50 to 75 to 100 new homeowners, and then another 200 to 300 over the next two years, as well.

Now, none of those comments rule out the possibility that 38 Studios could eventually seek out tax credits in Rhode Island. But it certainly doesn’t sound like they were a part of what drew Schilling here – and he will have to answer some tough questions if the company goes looking for them anytime soon.