A Connecticut-based digital animation studio received almost $50 million more in film production tax credits from the Department of Economic and Community Development than it should have, according to a new report from state auditors.
The review, which covered DECD activities between 2016 and 2019, found that, in July 2016, the department allowed the unnamed studio to start receiving film production tax credits rather than digital animation tax credits, which had been limited to $15 million per year for all recipients combined.
Over the following three years, DECD issued the company a total of $94.4 million in film production tax credits, more than double what the agency was authorized to disburse under the capped digital animation tax credit program.
“Since the General Assembly established a separate program for digital animation companies, it does not appear that it intended for digital animation companies to be eligible for film production tax credits,” the auditors wrote.
In a statement included in the report, DECD officials said they disagree with the auditors’ findings and asserted that the company did in fact qualify for the assistance it received based on the department’s interpretation of state statutes. DECD intends to seek clarification on the matter from the state legislature, they said.
The Associated Press has identified the company in question as Greenwich-based Blue Sky Studios, which is slated to shut down later this month and lay off around 450 employees.
While under the ownership of 20th Century Animation, Blue Sky Studios produced 13 feature-length films, including the successful “Ice Age” series, released between 2002 and 2012. Disney took control of the company in 2019 following its acquisition of 21st Century Fox.
Disney confirmed its plans to shutter Blue Sky back in February, citing the financial toll of the COVID-19 pandemic on its operations.
The auditors’ report also faulted DECD for its handling of other companies, including an unnamed manufacturing business that received more money through the state’s First Five program than it qualified for.
The department has still not conducted financial reviews for seven projects totaling $97 million, and did not verify whether four companies that received $23.2 million in assistance had litigation pending, according to the review.
