PROVIDENCE — With critics questioning how much Rhode Island has benefited from the $52 million in tax credits the state has offered — and the $30.8 million in tax credits it has already provided the television and movie industry to film here — the state’s Division of Taxation yesterday morning proposed new curbs on the operations of the three-year-old incentive program.

In a move aimed, at least in part, at boosting the measurable benefits to the Rhode Island economy, state tax officials have now taken the position that an expense only counts toward the credit if it was performed, purchased, provided or rented by a Rhode Island resident or vendor.

After a 15-month records fight with The Journal, the state Film & Television Office late last month provided the first glimpse of how much of this out-of-state production money was going to Rhode Island residents and businesses. And to the extent it was documented, it wasn’t much.

In an interview yesterday morning, state tax administrator David M. Sullivan said the new rules more accurately reflect what the film tax-credit law, sponsored by the Democratic leaders in the House and Senate, actually says.

He would not comment when asked if he believed the state film office has been misinterpreting, or misapplying, the tax-credit law at a hefty cost to the state over the last three years.

Here’s the way it works: to get a tax credit equal to 25 percent of its Rhode Island production costs, a company has to spend a minimum of $300,000 on items that are “directly attributable to activity within the state.”

As to what that means, the state’s Film & Television Office has, up until now, taken its cues from the private accountants working for the film companies who have interpreted this phrase to mean: “All goods and services purchased for use in the production of the film in the state of Rhode Island will be included as a ‘state-certified production cost’ even if purchased outside of Rhode Island or from a non-Rhode Island vendor.”

That interpretation may have been costly to Rhode Island.

The production company that spent 26 days here filming Hard Luck, a feature film starring Wesley Snipes and Cybill Shepherd that went straight to DVD, received a $2.65-million tax credit. That represented 25 percent of the roughly $11 million the company reported spending in Rhode Island on the production.

But only $1.9 million of the $11 million went to “Rhode Island vendors or residents,” according to documents the state film office initially whited-out and then produced after lawyers for the state were persuaded by The Journal to release an unedited version. That included amounts spent on payroll, makeup, costumes, building materials, hotel accommodations, location rentals, vehicle leases, unspecified “professional fees” and catering.

Lest there be any further doubt about what this means, the new rules that state tax officials proposed yesterday include examples, such as this one, of what would count in the future and what would not: “Wardrobe purchased or rented from a vendor within Rhode Island will constitute a cost incurred within the state; however, ward-robe purchased or rented from an out-of-state vendor and shipped to Rhode Island will not.”

Similarly, “catering expenses and services provided by a vendor within Rhode Island will constitute a cost incurred within the state; however, catering from an out of state vendor will not.” (Even in the area of food, Hard Luck Productions paid more to out-of-state catering companies, $87,633, than to in-state caterers, $52,071. Other production companies that received the tax credits did not distinguish, as Hard Luck did, how much they paid Rhode Island residents and companies.)

The new rules specifically exclude certain categories of expenses from the tax-credit calculation, including salaries and wages of individuals located outside Rhode Island and “any cost associated with the promotion or marketing of the productions.” Available for viewing on the state tax department’s Web site ( www.tax.state.ri.us), the proposed regulations will be aired at a public hearing April 11 at 2 p.m. at the Department of Administration building, across the street from the State House, on Smith Hill. If they remain intact, they will take effect approximately 20 days later.

Sullivan, the state tax administrator, noted that these are the first rules and regulations the state film office, headed by Steven Feinberg, has had since its inception. For the first time, “we have defined in regulation what is a ‘qualified cost,’ ” echoed Gary Sasse, Sullivan’s boss and the director of the state’s newly created Department of Revenue.

At this point, the department has not analyzed how much Rhode Island taxpayers might have saved had these rules been adopted earlier. “That’s not really my role. My role is to interpret the law,” Sullivan said.

Asked whether these rules would apply to productions already in the pipeline for the tax credits — but not yet complete — Sullivan deferred to Feinberg who, in an e-mail yesterday, said the “old rules” would prevail until new ones are finalized. But “these proposed new rules will not [affect] productions currently in the pipeline and therefore, the estimate probably won’t change,” he said.

While Sullivan said the tax and film offices have been working together for some time on the new rules, the actual posting came a week after The Journal published an analysis of the workings of the film tax-credit program. Earlier incarnations of the film tax credit date back to 2000, but they provided credits to individual investors not to the production companies. Since the 2005 adoption of the current credit, 22 productions — big and small — have queued up for the tax credits. The largest so far to take advantage of the tax break was Underdog, a live action version of the 1960s TV cartoon series. The smallest include TV ads that state Rep. John Loughlin, R-Tiverton, produced for the New Jersey-based Party City discount store chain; an animated one-hour variety show that the Providence-based Tango Pix produced in collaboration with the Hasbro toy company, and five episodes that Providence Pictures produced for the PBS science series NOVA.

There’s no question the tax credits have helped feed a cottage industry of craftsmen and industry professionals, many of whom list their names and contact information on the film office Web site. But in a year when the state is contemplating major cutbacks in health and welfare aid to the poor to close a massive deficit, critics — who include Republican Governor Carcieri — have questioned how much the state has gotten in return.

Speaking for Carcieri recently, his spokesman Jeff Neal said: “Unfortunately, after several years of operation, it still isn’t clear to what extent the film tax-credit program achieves the goal of creating jobs and boosting the Rhode Island economy.”

The credits only have value to a person or corporation with a Rhode Island tax liability, so here’s the way it usually works:

Say a production company qualifies for $100,000 in tax credits but has no income-tax liability in Rhode Island, it can sell the credits, directly or through a broker, to someone who does.

That taxpayer might pay $85,000 for the opportunity to use those credits to write off $100,000 in tax liability. The production company gets money it otherwise would not have had, and the hypothetical taxpayer in this example has saved a net $15,000 in taxes.

A handful of people have emerged as specialized brokers in this field.

Asked yesterday if he feared the adoption of the new rules might cost Rhode Island film business, Feinberg e-mailed this response: “I believe the refinements will encourage more creation of supporting infrastructure for film and TV production within our state.”

“In winter there tends to be a slowdown due to [inclement] weather. However, we already had two productions with Hachiko and The Clique and we have another, Tell Tale, beginning next week. Brotherhood Season 3 has also been announced. So far, this has been a healthy year for film in R.I., especially considering the length of the writer’s strike and a potential actor’s strike looming in the summer.”

kgregg@projo.com