The trade in credits is sparking new criticism of the economic development program.
“The public assumes that the film tax credits are going to the film industry to bring jobs - not to Walmart,’’ said Deirdre Cummings, legislative director for the Massachusetts Public Interest Research Group, an advocacy organization based in Boston. “I think the general public would have a problem with that.’’
Companies and individuals use tax credits to reduce tax bills. For example, a $1 million credit reduces a company’s tax payment by that amount.
But most film companies do not owe enough in state income taxes to use the credits, so they typically sell them.
A production company that is awarded $10 million in tax credits might sell them to a broker for $8.7 million. The broker then sells the credits to a financial company that owes state incomes taxes for a bit more - say for $9 million, earning the broker a $300,000 profit. The financial firm can then claim the full $10 million in credits on its tax return, saving $1 million.
The practices were highlighted last month when prosecutors charged a Cape Cod filmmaker, Daniel Adams, with fraudulently obtaining $4.7 million in credits for the films “The Golden Boys’’ and “The Lightkeepers.’’
Prosecutors said Walmart Stores Inc. and Bank of America Corp. bought the credits through a broker to reduce their taxes.
The companies do not report how much they earn in Massachusetts or pay in taxes in the state. The state Department of Revenue generally does not disclose how much individuals and corporations pay in taxes because of confidentiality laws.
Bank of America declined to comment. Walmart said it “makes every effort’’ to comply with state laws.
