Elected officials in Georgia have invested hundreds of millions of dollars in recent years to lure film and television productions to the state.
Now a new federal effort being led by Georgia U.S. Sen. Johnny Isakson seeks to give industry financiers further incentive to invest in artistic projects in the Peach State and beyond.
Earlier this month, the Republican added language to the Senate tax plan approved by committee Tuesday that would let investors in film, television and live theater productions immediately write off their expenditures on their federal tax forms the year a project is made.
Industry experts say the change would provide an incentive to financiers — those helping to underwrite everything from small independent films to blockbuster franchises — to invest in additional projects more quickly since they would receive their tax benefits in the first year, rather than spread out over several.
Stephen Weizenecker, an entertainment tax lawyer in the Atlanta office of Barnes & Thornburg LLP, said the change could free up investors to take more artistic risks in states such as Georgia since they’ll be seeing financial benefits sooner.
“That same investor who’s now going to be looking at some potential tax savings at the federal level is going to look at a state like Georgia and say, ‘OK, I can also put more money in because I know for all the money I could spend in Georgia, if we play our cards right, I’m going to get 30 percent of that investment back,’ ” he said. “So now Georgia becomes a very, very attractive state for that production to move to.”
That’s no accident.
Georgia in recent years has developed one of the country’s most generous film and TV production tax incentive schemes, doling out more than $1 billion in credits over the past decade in order to attract studios to the state.
But in order to do that, the state has forgone hundreds of millions of dollars in tax revenue a year. The tax credit program will cost $376 million this year, according to Georgia State University estimates.
The effort has helped the state draw major film franchises such as "Captain America" and "Fast and Furious," as well as dozens of television productions, including "The Walking Dead" and "Stranger Things." In May, Georgia was ranked as the No. 1 filming location worldwide by one industry survey, beating out traditional hot spots such as California and New York.
Elected officials have pointed to billions in direct and indirect economic activity generated by the industry — Gov. Nathan Deal’s office estimated film and television production generated some $9.5 billion in economic development during fiscal 2017.
But others say those claims of financial benefit could be flimsy. A May report from the Pew Charitable Trusts listed Georgia among two dozen states that lacked well-designed plans for evaluating whether taxpayers were receiving adequate economic benefits for their investment.
"Despite the significance of the program, Georgia lacks a process for evaluating the film tax credit and other incentives," the Pew report stated. "Evaluations could help lawmakers determine how well these policies are working for the state's budget and economy, and for businesses too."
Isakson’s entertainment industry provision would cost the federal government about $1.7 billion in lost revenue over the next decade, according to congressional estimates.
If the provision is passed as part of a final House-Senate tax deal — it was not included in the House-passed tax bill, and the Senate is still debating its own legislation — it would expire after five years.
Similar benefits have been included in the federal tax code in recent years on a shorter temporary basis. The most recent benefits expired late last year.
Extending it permanently has been at the top of the film and television industry’s Washington agenda for years.
“The U.S. film and television industry supports two million American jobs and is comprised of tens of thousands of small businesses across all 50 states. Meaningful tax reform, as reflected in the Senate plan, will encourage economic growth and job creation in American industries, including film and television,” Charles Rivkin, the CEO of the Motion Picture Association, said in a written statement after the Senate tax bill was unveiled.
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