Georgia Lawmakers Move to Limit Nation’s Largest Film Incentive

After studying the issue for the last eight months, Georgia lawmakers unveiled a proposal on Wednesday to limit the state’s lucrative film and TV tax incentive

Published Time: 09.02.2024 - 05:31:13 Modified Time: 09.02.2024 - 05:31:13

After studying the issue for the last eight months, Georgia lawmakers unveiled a proposal on Wednesday to limit the state’s lucrative film and TV tax incentive.

Georgia has the largest production tax credit in the country, with $1.24 billion in credits certified last year. Over the last decade, soundstages have sprouted up around Atlanta and hundreds of productions have come to the state, including “May December,” “Black Panther,” “Stranger Things,” and “The Walking Dead.”

Unlike in most other states, the Georgia credit is not capped. As it surpassed $1 billion a year, some lawmakers have worried that it poses a risk to state finances and makes it harder to cut income taxes across the board.

“What we’ve seen from legislative leaders is a clear desire to rein in the overall cost of this program,” said Danny Kanso, a fiscal analyst at the Georgia Budget and Policy Institute.

Four officials, including the lieutenant governor and the House speaker, unveiled legislation on Wednesday that would limit the amount of credits that can be transferred in a year. The bill would also establish modest requirements to claim the full amount — 30% of in-state production costs — instead of the 20% base.

“This is all about using the taxpayers’ dollars in the most effective and efficient manner,” said state Sen. Chuck Hufstetler at a press conference.

The bill, HB 1180, would not cap the amount of tax credits certified by the state. But it would place a limit on productions’ ability to monetize them.

The Georgia Screen Entertainment Coalition, which represents studios, production facilities and other industry stakeholders, said in a statement that it is studying the bill.

“We’re reviewing the legislation and we’ll work closely with legislators to protect this program that has successfully built a Georgia-based film industry,” said executive director Kelsey Moore, adding that the tax credit has created “billions of dollars in economic impact to the benefit of Georgians across the state.”

The bill must still go through both houses of the legislature, and is expected to face a barrage of lobbying and possible amendments.

A joint House-Senate committee began a top-to-bottom review of all of the state’s tax credits last June, as lawmakers sought to evaluate whether they generate a sufficient return on investment. In November, GSEC issued a report arguing that every $1 in film credits creates $6.30 in economic benefits.

The incentive enjoys considerable support, as it has created thousands of production jobs and helped promote the state’s image around the world. In 2022, lawmakers quickly shut down an effort to place a strict $900 million cap on the program.

Stephen Weizenecker, an Atlanta entertainment attorney who focuses on film incentives, said the -

new bill shows that lawmakers are trying to walk a middle ground.

“This is a thoughtful plan to balance the interests of the state and the industry, and to continue to encourage the industry to grow in the state,” he said.

Most production companies are not based in Georgia and do not pay state income tax. They sell their film credits, at a small discount, to Georgia companies and wealthy individuals who do have state tax liability. A recent audit found that 97% of film tax credits are transferred to another party before they are redeemed.

The bill would limit the amount that could be sold in any year to 2.5% of the state’s estimated revenue — or $902 million for the upcoming fiscal year.

At the press conference, Hufstetler said the goal was to smooth out the redemption of credits, so the state is not hit with a big liability all at once.

“Some of these are kept over several years. They could all be redeemed in one year,” he said. “It doesn’t really change the tax credits that are out there.”

But Kanso said the practical effect will be to limit the size of the program.

“I think this is viewed as a first step,” he said. “It’s a way to put a cap into law without maybe having to say that in such clear terms.”

Had the limit been in place in recent years, it likely would have been exceeded in 2017, 2018 and 2019, according to a review of state audit reports and budget data.

Credit redemptions have declined since 2020 due to the pandemic and a delay in utilization caused by a new auditing requirement. But projections in state audits and budget documents show that the amount of credits expected to be redeemed in 2025 and beyond would again exceed the limit in the bill.

Under the bill, if any credits cannot be transferred in a particular year, they could carry forward to the next year. Hufstetler noted that there would still be no limit on claiming credits that are not transferred.

“Anybody that pays taxes in Georgia doesn’t have to transfer them,” he said. “So we might have encouraged some companies to move to Georgia in the process as well.”

Under current law, credits are worth 20% of in-state costs plus 10% if the film or TV show displays a title card with the Georgia peach logo. The bill would make it a little harder to get the extra 10%, requiring productions to meet at least four out of these nine criteria:

The bill would also raise the spending threshold to qualify for credits from $500,000 in annual production activity to $1 million per project.

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