UPDATE: The provisions were removed on Thursday after furious lobbying by those who support the credit
The tax credits are currently uncapped, which means there is no limit to how many credits can be handed out in any given year. During the fiscal year ended July 1, 2021, the state provided $1.2 billion in tax credits to companies like Netflix, Paramount and Sony. That is by far the biggest tax credit the state gives to any particular interest group and is the most any state in the United States provides.
Any film or TV show spending $500,000 or more qualifies for the credit. If a company spends $10 million on a movie, they could get back $3 million in tax credits. If the company doesn’t have enough tax liabilities in the state of Georgia, it can sell those credits at a slight discount to a party that does. There are brokers in the state that specialize in finding buyers for the sellers.
Since most major studios shooting in Georgia are based in California or New York, if the tax credits were made non-transferable, they would be of little value to them. As a result, they would likely pull out of Georgia and the $900 million cap would be rendered immaterial. (California’s tax credit is capped at $660 million per year and is largely non-transferable but most of the production companies are based in the state. The New York credit system is capped at $420 million and is also non-transferable.)
Atlanta-based Tyler Perry Studios would be an exception but Perry has always been committed to the state of Georgia, with or without the tax credits. WarnerMedia, Disney, Apple TV+ and the like have no such loyalties to the state.
Some Republican politicians over the years have groused that the tax credits go to big California-based corporations and line the pockets of liberal Hollywood types. But the credit does generate tens of thousands of jobs in the state and many of those people are Republicans.
Over the past 14 years since the very generous credits were passed, the industry has become a powerhouse in the state. More than 50 active film and TV productions are happening at any given time. Expensive film sequels are currently in production such as “Creed 3,” “Black Panther: Wakanda Forever” and “Guardians of the Galaxy Vol. 3.” There are more than 20 film studios in the state with 100-plus high-end stages and plenty more to come.
“It’s abundantly clear there is a hidden agenda with these senators,” Brown said. “Billions of dollars have been spent to build an infrastructure. They have a lot of explaining to do. Tens of thousands of jobs are at stake.”
Bruce Seaman, a retired economics professor at Georgia State University who remains a litigation consultant, calls this change “pretty dramatic no matter what your view on the debate about the merits of the credits is in general.”
Nonetheless, he doesn’t think the proposal has any realistic chance of surviving given the extreme ramifications. “Eliminating transferability of the tax credits would be devastating,” he said. “It’s absolutely vital they remain transferable to be effective.”
Tax advisor Steve Rothschild, one of the largest brokers of tax credits in the state, said even the $900 million cap could be problematic because production companies like to plan ahead and not knowing if they would get them could impact their decision-making in terms of coming to Georgia.
J.C. Bradbury, an economics professor at the Kennesaw State University who has been critical of the tax credits over the years, said a $900 million cap in and of itself is “a reasonable step. It puts some brakes on it.” He notes that the tax credits encompass more than 4% of the entire state budget.