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9 months ago
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A Georgia House subcommittee left unchanged a cap on tax credits that can be transferred each year as pols tinker with the 15-year old film and television production incentives prized by the industry that have transformed the state into a major player in the entertainment economy.
“It isn’t what we were hoping for, that’s for sure,” said one Georgia industry insider. He and others expected the cap would have been expanded or otherwise changed in a second version of the bill presented today. It still may be as the bill heads to the full Ways & Means Committee, then to the House floor.
Auditing was tightened up a few years ago but the state’s rich 30% incentives have had no cap and relatively few requirements beyond displaying the Georgia Peach logo in credits. The film and TV credits are among the state’s largest across industries, accounting for $1.2 billion at peak production post-Covid. Rep. Kasey Carpenter, who drafted the bill for the Income Tax subcommittee of House Ways & Means, called the ongoing number quite large but also too unpredictable, leaving the state open to potential shortfalls for other projects.
HB1180 out earlier this month caps production tax credits eligible to be transferred each year to 2.5% of the state’s projected annual budget – or about $900 million at the current budget. It only impacts companies headquartered outside of Georgia that can’t use the tax credits themselves but sell (or transfer) them locally in what’s become a booming market.
An updated version of the bill presented today says the credits will be granted on a first-come, first-served basis (instead of pro-rated as in the original). It calls for credits that are eligible to transfer but exceed the cap to be transferable the following year.
A revision in the second draft exempts the video game industry. To help the local music industry, it also adds the use of Georgia musicians as one of ten ways productions to qualify for the added 10% 9to make 30%). They must pick four of the ten. And it expands the definition of rural counties to anything outside the 60 square-mile Atlanta metro area.
Critics call the cap too low and the rollover confusing and even risky. The current tax regime pays for itself, they say, given jobs created and the impact of film and television production on the state economy, including a local industry that’s taking root.
“There are a lot of people who believe messing with this is a huge mistake. They recognize that no one knows exactly why it works, but what we do know is that it’s working, and it’s working very, very well,” says one Georgia businessman who has worked with the industry. “It’s a matter of unintended consequences.”
Production employees 60,000 people in Georgia and had an economic impact of $8.5 billion in 2022. Sound stage construction and training programs are booming. They need outside productions to keep that steady and growing. Many out-of-state productions monetize Georgia tax credits by borrowing against them, which could become harder if outcomes aren’t clear to bankers and financiers.
Critics say the proposed 2.5% or $900 million annual cap is too low and are very wary of the rollover provision. The bill is a flat 2.5% and doesn’t add extra to cover the previous year’s shortfall so could snowball.
There’s a fear that first come first served would cut out lower budged independent films, a point raised by Jill Helton of Pigmental Studios, which is developing a campus in St. Marys. She asked members to rethink the bill. Other reps for Georgia’s film industry present said there were things to still be worked out. One committee members raised a letter of protest sent by local producers including Trilith studio, Shadobox Studios and Gray.
Rep. Carpenter said state studies showed that 75% of indie films would be fine.
And committee members noted a few things in defense of the bill: the state budget is fluid and the credit expands with it. With production slowed by Hollywood strikes last year, $900 million will be plenty for this year and next. The changes don’t take effect until 2026.
Local producers like Tyler Perry or others based in Georgia can access the tax credits in full each year because they are using them, not selling/transferring, which could have the effect of nudging studios others to set up shop directly in the state. Comcast/NBC Universal is there, Lionsgate is the anchor tenant of a new studio.
“Everything about the tax credit has been successful to this point,” said the person involved in the industry. “If you just don’t mess with things for ten more years, at the end you will probably have real production companies, you will probably have real capital that knows how to make money in film and television, and you will have that all based in Georgia. A real industry versus outsourced manufacturing of film and television subsidized by the state.”
HB 1180 will have at least another hearing at the House then a floor vote. A key deadline is Feb. 29 – the midpoint of the legislative session called “crossover day” when bills must move from one house to the other. If it’s not sent to the Senate by midnight, it will die, at least for now.
The Senate can approve or mark it up and return it for a straight accept or reject vote by the House. If passed, it moves to the desk of Gov. George Kemp.
“My favorite bill is a bill that doesn’t get introduced,” said a GA-based tax expert. “But, at the end of the day, no other state has committed 2.5% of its revenue and budget – almost a billion dollars – to the film industry.” The state “wants to make sure that they are showing a return on investment.”
The bill lays out ten (previously nine) requirements to qualify for the extra 10% tax credit uplift, over the 20% base credit fo which roductions must fulfil four.
They are: At least $30 million of production expenditures in the state; having 50% of production in state; using 50% Georgia crew; using 50% Georgia vendors; dedicating 50% of photography in rural counties; shooting 50% of photography days at Georgia studio facilities, or making a capital improvement to a facility; inking a lease of at least five-year lease with a studio facility; keeping 20% of post-production expenditure in GA; participating in a workforce development program; using a qualified Georgia promotion (like the Peach) or other marketing opportunities “of promotional value to the state.”
