Massachusetts Game Developers! Time to Get Some Tax Credits!

Ah yes - could there be a more exciting title to a blog in the whole world? I don't THINK so. But seriously, I have some important news for game developers and game development companies in Massachusetts. There is a bill in the House right now that would extend tax credits to game development companies in the same manner that they are currently offered to motion picture companies that film in Massachusetts. I've provided hyperlinks for both the proposed changes and the current bill, but I'll break it down for all of you that don't like spending the little free time you have reading statutes.

First, a little overview of tax credits. Unlike tax deductions, which reduce the total gross income on which you pay taxes, tax credits actual reduce the amount of taxes themselves. So if you have a $10,000 tax bill and $4,000 in credits, you only pay $6,000. With that in mind, onward we go!

1) Game Development companies would get a 25% tax credit based on the total payroll for production costs in Massachusetts if total production costs (not just payroll) are $50K or more during a given tax year. This doesn't include employees that are paid over $1,000,000.00 (I don't think many folks have to worry about that part!)

2) You get an additional 25% credit for all other production expenses, excluding payroll for production if @ least 50% of the total production costs were incurred in Massachusetts.

3) You apply the credits to your total tax bill, thereby reducing it. If you have credits left over, you have 2 choices: you can ask for them back, and you will be refunded 90% of their value; or you can carry them over for 5 more years.

4) You can also SELL the credits to other people/companies! However, if you acquire a transferred credit, you can't get a refund on it (see 3)), but you can still carry that acquired credit over for up 5 five years. And you need to sell the commissioner if you transfer it.

So that's pretty much it! I'm not a tax attorney, but my understanding of the situation is that the 25% is pulled from the total amount spent. So, if you spend $600,000 total on production, and $100,000 is payroll, you get a tax credit worth 25% of payroll ($25,000) plus 25% on the balance of $500,000 ($125,000). However, I'm still doing some research on this for some of my gaming clients, so I may amend after a further look.

However, I think the important thing is that no matter what the amount, this is directly benefiting your company and the gaming industry at large in Massachusetts. Our state has some of the brightest minds in the industry, and I would strongly encourage you to write to your local congressmen and ask them to lobby in support of the bill. Game development companies bring jobs to the area and keep our brightest minds here in the state of Massachusetts. You guys are some of those minds and we want you to stay! So please consider taking the time to lobby for yourself and others.