Malloy’s plan would cap tax relief for ESPN, NBC Sports [Connecticut Post]

February 25, 2015

Article as it appeared in the Connecticut Post

ESPN finds itself on the wrong end of the score for a change in Connecticut. The recipient of $26 million in tax credits from the state during the last fiscal year, the self-proclaimed World Wide Leader In Sports could see its corporate tax liability as much as double under Gov. Dannel P. Malloy’s austerity plan.

The same could go for other digital media, animation and television-production companies that rely on the credits to offset up to 70 percent of their corporate tax liability, including Stamford-based NBC Sports and Greenwich-based Blue Sky Studios.

The percentage of corporate tax relief would be cut in half, to 35 percent, by the state, which is grappling with a $2.7 billion projected deficit over the next two years.

“The proposed changes could have a significant impact on ESPN and the growing Connecticut television industry,” Mike Soltys, an ESPN spokesman, told Hearst Connecticut Media. “We are analyzing it. The credits have had a positive return for Connecticut.”

The Disney-owned family of sports networks didn’t say how much additional corporate taxes it anticipated owing the state, which has budgeted $37.4 million for credits over the next two years.

Representatives of Malloy, whom ESPN welcomed last year to the anchor’s desk of its flagship program, “SportsCenter,” to christen its new $178 million digital center at its Bristol headquarters, defended the policy shift.

The only way to balance the $40 billion proposed budget is to close corporate tax loopholes, according the governor’s aides, who said a wide spectrum of companies are affected, not just those in the entertainment industry.

“While we appreciate that not everyone will agree with the steps we’ve taken 100 percent of the time, we are making smart decisions in this budget today to build a Connecticut for the future tomorrow,” Malloy spokesman Devon Puglia said.

Both NBC Sports and Blue Sky Studios declined to comment, with the latter saying only it was aware of the proposal.

Critics of the governor’s plan say it could significantly devalue the tax credits, both from a standpoint of reducing tax liability and selling them off through tax credit brokers as many companies do.

“It creates a chilling effect on that market,” said state Rep. Jeffrey Berger, D-Waterbury, co-chairman of the General Assembly’s Finance, Revenue and Bonding Committee.

Berger said a lobbyist for NBC, which received $42 million from the state during the last fiscal year for its Connecticut divisions, recently aired the network’s concerns to him. The credits are separate from a $20 million forgivable loan the state awarded to NBC, which moved its sports division from New York City to Stamford in 2013 and brought with it 450 jobs. Between its sports division and talk show tapings in Stamford, NBC spent $181 million locally during last fiscal year.

“I think it’s important to look at it as an economic driver and job creator,” Berger said.

Credits are awarded on a sliding scale that ranges from $10,000 for every $100,000 spent on production to $300,000 for every $1 million. Production companies are also eligible for a 20 percent tax credit for construction costs.

Kevin Segalla, founder of the Connecticut Film Center in Stamford, which advances money to movie and television production companies in return for tax credits, cautioned that the cap could make the state less enticing.

“I think it will limit expansion of the industry, without a doubt,” Segalla said. “Listen: We understand the state has a budget deficit that the need to contend with. I think there’s pain all around.”

Once a magnet for Hollywood productions, Connecticut suspended its tax credit program for films in 2013. The moratorium is expected to remain in place, saving the state $8 million over the next two years.

State Sen. L. Scott Frantz, R-Greenwich, ranking member of both the finance and commerce committees, panned the governor’s plan to cap the tax relief.

“I would be very disappointed as a business leader of a larger corporation in Connecticut being wooed into using tax credits and then having them change the terms literally in a year or two of consummating that deal, well before the value of these tax credits can be realized,” said Frantz, who also represents parts of Stamford and New Canaan. “That’s poor business decision-making and doesn’t reflect well on the state.”