But legislators are looking to rein in this largess just a bit. House bill 1180, released Wednesday, makes some notable tweaks, some more obvious than others. (You can read the bill in full here.)
Major TV and film producers to date have embraced the credit for its relative simplicity and the fact it is uncapped, meaning there is no limit to how much the state can dole out any given year. It handed out more than $1.2 billion in credits in fiscal years 2021 and 2022.
The proposed bill will create a few more barriers to get the maximum 30% credit, which is equal to Sony getting $30 million in credits for spending $100 million on a single movie here. Productions will have to meet four out of nine criteria, such as at least 50% of the crew being Georgia residents, hiring at least 50% of vendors from Georgia, signing a long-term lease with a Georgia-based studio or providing marketing such as showing the Peach logo at the end of a film or TV show.
That logo or a similar marketing move is currently the only criteria needed to get the full 30% instead of a base 20%.
The bill also caps the amount of tax credits that can be transferred to another party any given year. The proposed limit is 2.5% of the state budget. If such a cap were placed on the current estimated $37.5 billion state budget for the fiscal year ending June 30, that would equal $937.5 million.
This is important because most TV and film companies are based in California and New York and have few, if any, state tax obligations. So through a tax broker, they can sell those credits to, say, Atlanta-based companies such as Home Depot or Delta Air Lines, who can then buy those credits at a discount and defray the cost of their own tax load in the state.
Credit: SONY
Credit: SONY
If the cap is reached any given year, companies would have to prorate any remaining credits and use them the following fiscal year. A potential backlog could reduce the amount of available tax credits in future fiscal years and reduce the number of productions in the state.
The good news is that the amount of actual credits transferred any given year has never exceeded $900 million, according to the Department of Revenue. So a backlog may not happen. Notably, the limit will go up as long as the state budget goes up since it’s a percentage of the budget, not a flat dollar amount.
And for a place like Tyler Perry Studios, which is actually based in Georgia, the transfer limit would not necessarily be a problem since it can use the tax credit for creating films and TV shows to reduce its own state tax obligations without having to sell it to someone else. (Other studios such as Assembly in Doraville and Trilith Studios in Fayetteville do not actually create content and are not directly eligible for tax credits. Those studios were built because companies like NBCUniversal and Disney, which do receive the tax credits, are willing to spend money there.)
Up to this point, what has made Georgia special is that its tax credit has no real cap. All other states who have solid tax incentive programs have caps. New York City’s cap is $700 million a year. California has a lottery offering up to $330 million a year in tax credits. New Mexico caps the credit at $160 million over five years. Louisiana’s cap is $180 million per fiscal year.
Georgia in effect is competing with entire countries such as England and Canada that offer comparable tax credits but have significantly larger budgets and no caps on their film and TV tax credit programs.
The Georgia House bill also raises the minimum spend on a single production to qualify for the credit from $500,000 to $1 million. That $500,000 floor has been around since 2008. Given rising costs to produce any TV or film production over the past 16 years, this move won’t necessarily have any major impact.
The big question is: will this bill make it to law? It’s too early to say for sure, but it appears to have plenty of internal support in the Georgia House and Senate. Gov. Brian Kemp has been supportive of the current tax credit but has not yet commented about these possible changes.
“This bill is a positive sign that the House values the film industry’s contribution to Georgia,” said Randy Davidson, publisher of Georgia Entertainment News. “However, many details need to be looked at including the impact on smaller productions and the nine options in the bill to get the full credit.”
The Georgia Production Partnership and Georgia Screen Entertainment Coalition, major lobbyists for the state’s film industry, are currently assessing the bill and have not made public comments about it.
“The legislature has taken a measured and thoughtful approach to this issue,” said Stephen Weizenecker, a long-time Atlanta entertainment attorney. “They have expressed a desire to continue to work with us to come up with solutions that protect Georgia’s investment in the industry. I’m cautiously optimistic that the final version of this will work for both the industry and the state.”
