California upgraded its film incentive program. How will this affect Georgia?

Since Georgia instituted its film tax credit in 2005 and expanded it in 2008, the state has emerged as the top film and TV production hub in the U.S. outside California and New York.

But film incentives remain controversial. Critics say the jobs created locally are often low paying and easily moved if the credits were to ever dry up. Or in the case of what’s happened recently, other locations start giving away more.

In recent years, countries in Europe and elsewhere have instituted their own incentives, and Georgia, California and other production hubs have seen business shift overseas. Producers have cited not only the foreign incentives but other lower costs as well.

Credit: AP

Credit: AP

The impact on Georgia of California updating its program will likely not be felt until it goes into effect. California leaders are likely to try to position the Golden State as more cost-competitive to Georgia and other rivals.

A spokesperson for Gov. Brian Kemp did not immediately respond to a request for comment.

What’s more concerning is the international threat, said Kate Fortmueller, an associate professor in Georgia State University’s School of Film, Media and Theatre.

“This is now the expectation,” Fortmueller said. “Tax incentives are the expectation of how people will be able to get their movies or show made. So in the sense of California wanting to continue to maintain a business, this is what they had to do.”

California’s moves come amid a troubling period for film and television production in the U.S. After a post-pandemic surge led by streaming companies, production has been on the decline. Budget-conscious studios have sent a number of projects overseas, where incentives are higher and labor is cheaper.

States with production hubs are all vying to land a smaller amount of projects. New York almost doubled its cap to $700 million in 2023, and in May of this year, added $100 million in credits for independent projects. That same month, Texas legislators passed a bill to boost its program up to $300 million every two years for the next decade. Georgia reinstated a separate incentive for postproduction, and streamlined its auditing procedures.

Within the past year, the decline and offshoring of production has caught the attention of legislators both at the state and federal level. Last autumn, shortly after Newsom proposed to increase California’s cap, U.S. Sen. Adam Schiff, D-California, said he is working on legislation to implement a federal film incentive.

In May, President Donald Trump said he would direct his administration to impose a 100% tariff on movies produced in foreign countries. Newsom then said he wanted to partner with the administration to create a $7.5 billion federal incentive to boost the film industry.

Credit: TRILITH STUDIOS

Credit: TRILITH STUDIOS

As Newsom signed the cap increase into law last week, he said the state could not have predicted competing so intensely with places like Georgia. Even still, Newsom said, California was “playing in the margins.”

The update doesn’t mean that production will resume at a clip that it was two or three years ago.

But California’s move could sweeten the pot in boosting domestic production altogether, said Brennen Dicker, the chairman of industry group Georgia Screen Entertainment Coalition. Dicker, who is also the executive director of Georgia State University’s Creative Media Industries Institute, said every production hub is trying to lure work back into the country.

There’s still a little bit of a competitive spirit among states with incentive programs, said Kelsey Moore, the executive director of the Coalition.

“I think California doubted Georgia’s ability there for quite a while,” Moore said. “Certainly as the whole industry has slowed down, they’re still seeing work leave LA for Georgia, and they want it back. Likewise, some of our legislators and industry folks are feeling competitive, too, and want to protect what we’ve built.”

How the Georgia and California film incentives work

In Georgia, production companies spending at least $500,000 can earn tax credits up to 30% of what they spend on materials, services and labor in Georgia when they meet certain standards. What they can’t use to defer their own taxes — many aren’t based here and have little tax liability — they can sell to other taxpayers for cash at upward of 90 cents on the dollar. Qualified expenditures include “above-the-line” labor such as actors.

California will now provide a credit up to 35%. Shoots relocating from other places could earn 40%. The program is nontransferable and it does not include reality television shows, documentaries, talk shows or above-the-line labor expenditures. The amount of credits awarded by the state cannot exceed $750 million. Projects are awarded credits based on what is called a “jobs ratio,” which evaluates how much economic benefit the production will bring to the state based on wages and other qualifiers. The higher the ratio, the higher the project is ranked in its respective category. The film commission then awards credits to the highest ranked projects.