Georgia agencies defend state’s film tax credit

The sun sets at the Georgia State Capitol building in Atlanta, Monday, January 27, 2020. (ALYSSA POINTER/ALYSSA.POINTER@AJC.COM)
The sun sets at the Georgia State Capitol building in Atlanta, Monday, January 27, 2020. (ALYSSA POINTER/ALYSSA.POINTER@AJC.COM)

Georgia agencies tasked with running the state’s film tax credit and a metro Atlanta economist told lawmakers Tuesday that audits released last month unfairly assessed the administration and impact of the program.

Thomas Cunningham, the chief economist with the Metro Atlanta Chamber, said while he agreed with some of the audit’s recommendations — such as discontinuing the use of an inflated formula to calculate economic impact — he believed some of the findings were “off track.”

Reports released by state auditors in January found millions of dollars in ineligible expenditures by film companies weren't disallowed by the state for credits. The also found the economic benefits of the popular program have been inflated.

“The numbers here are pretty plain,” Cunningham told members of the House Working Group on Creative Arts and Entertainment, citing 2016 data from the audit. “A $667 million expenditure gets $4.6 billion in income generated — that’s about a 7-to-1 return. That’s not bad.”

Auditors estimated the economic impact to be $2.8 billion in 2016 after considering what would have happened if the state had instead spent the money given in tax credits on things such as education or health care.

Officials with Georgia’s Economic Development and Revenue departments also said they agreed with some of the audits’ recommendations and are working to implement them.

The Georgia Department of Economic Development is responsible for determining which films and TV projects are eligible for the tax credits. The state Department of Revenue implements and administers the credits.

Georgia has grown its film industry by giving the country’s most lucrative credits for film work — up to 30%. About $4 billion in tax credits have been handed out in Georgia.

But those in the film and TV industry seeking tax credits are not required to be audited by the Department of Revenue, though officials with some of the larger projects will volunteer to undergo the process. State auditors said any production seeking the credit should be audited.

Chester Cook, the director of audits for the Georgia Department of Revenue, said he has a staff of 10 auditors who exclusively work on film tax credits.

“If you decide to go that route, we need to work closely with the department and our industry partners to look at the ramp-up period,” he said. “That would be a tremendous increase in the number of audits.”

Department of Economic Development attorney Andrew Capezzuto said the agency has already implemented some of the recommendations from state auditors. He said the agency was no longer using an outdated formula to determine a film project’s financial benefit to the state. Capezzuto said the department also has changed its forms to track how many film and TV jobs go to Georgia residents.

State Rep. Randy Nix, a LaGrange Republican, said he disagreed with those who have called for limiting the tax credit.

“When people come back and tell me, ‘Well, the state is giving away $667 million’ … that $667 million comes from $4.6 billion,” Nix said. “They look at just the tax credit and they don’t recognize it’s a push-pull thing. You eliminate the tax credit, the $4.6 billion is not there.”

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