Georgia lawmakers take aim at film, data center tax breaks

Legislative leaders announced plans Wednesday to increase requirements for film companies to receive the state's film tax credit, one of the most lucrative tax credits in the country.

Legislative leaders announced plans Wednesday to increase requirements for film companies to receive the state's film tax credit, one of the most lucrative tax credits in the country.

After a year of study, Georgia House and Senate leaders announced Wednesday that they’d back suspending a tax break for data centers and increasing requirements for film companies to receive one of the most lucrative tax credits in the country.

The proposal would also cap how much of the tax credits that film companies can sell in a year.

Lt. Gov. Burt Jones, House Speaker Jon Burns and the chambers’ tax-writing committee chairmen made the announcement at a Capitol press conference.

Senate Finance Chairman Chuck Hufstetler and House Ways and Means Chairman Shaw Blackmon led a panel between the 2023 and 2024 sessions looking at whether a host of costly state tax breaks were giving taxpayers a good return on their investments.

Under Hufstetler’s leadership, the Senate Finance Committee in particular has been aggressive in recent years in wanting the state to review and possibly curtail tax breaks, which multiplied over the past 20 years as lawmakers backed incentives that lobbyists assured them would create jobs.

Senate Finance Chairman Chuck Hufstetler discusses new legislation taking aim at the state's tax breaks for the film industry and data centers during a press conference Wednesday. Joining him were House Speaker Jon Burns, from left, Lt. Gov. Burt Jones and House Ways and Means Chairman Shaw Blackmon.

Credit: Natrice Miller/AJC

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Credit: Natrice Miller/AJC

“This is all about using taxpayer dollars in the most effective and efficient manner,” said Hufstetler, a Republican from Rome.

Under the proposal, which will start in the House, the state would raise the minimum required investment to be eligible for the film tax credit from $500,000 to $1 million. Companies would have to do more to get an extra 10% credit they can now receive for embedding the Georgia logo in projects.

The Georgia peach logo has been attached to most every movie and TV show shot in the state since 2008 as a requirement for receiving the state's film tax credit.

Credit: File photo

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Credit: File photo

And filmmakers — who usually sell the tax credits — would only be able to collectively peddle the equivalent of 2.5% of the previous year’s state revenue estimate. Blackmon, a Republican from Bonaire, said that provision will likely be changed to the previous year’s budget. If that change is made, that would work out to a little more than $900 million using this year’s budget.

The film tax credit has been a target in the Senate for years because of the cost. The most recent state audit to examine the credit — released in December — said the industry will earn $1.35 billion worth of credits this fiscal year, rising to $1.4 billion by 2029.

Meanwhile, the audit said Georgia’s growing film industry creates far fewer jobs than boosters say, and the tax credit costs taxpayers $59,455 per job.

The industry estimates 92% of the film work done in Georgia — about $4.4 billion in direct spending a year — wouldn’t occur without the ability to receive tax credits.

Well over half of the states and many countries have incentives to lure film and TV production, and Georgia is competing with those locations, supporters say.

About 97% of the credits are sold by film companies that pay little in Georgia taxes. Snatching them up are people or companies that owe state taxes, according to state auditors. Most of the credits are bought by individual taxpayers, the audit said.

For instance, if a film company spends $3.3 million in Georgia and meets all the necessary state criteria, it can earn a 30% tax credit worth $1 million.

But since many companies aren’t based in Georgia, they owe little or no money in state taxes. So they sell the credit at a slight discount to a person or company that owes state taxes.

The buyer may pay $800,000 for a $1 million credit. The film company gets $800,000, while the buyer saves $200,000 in taxes.

The data center tax break has only fairly recently become a target for elimination.

Since 2018, Georgia has provided lucrative tax savings for large or “hyperscale” data centers. The law provides tax breaks for the equipment housed within these facilities, mirroring a Virginia law that dozens of other states have copied. The House proposal calls for suspending the break.

An aerial photograph shows the construction site of one of five data centers that DataBank operates in Atlanta. (Hyosub Shin / Hyosub.Shin@ajc.com)

Credit: HYOSUB SHIN / AJC

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Credit: HYOSUB SHIN / AJC

Data center servers run 24/7, requiring huge amounts of electricity to keep them powered. As the facilities flock to Georgia, the state’s largest utility — Georgia Power — has said it needs to significantly the boost capacity of its system to keep up with the demand.

Georgia Power has asked state regulators to allow them to add almost 3,400 megawatts of new capacity, equal to about three times the maximum output of one of the new nuclear reactors at Plant Vogtle. Company executives have testified that data centers are responsible for about 80% of its expected new load.

Microsoft, which operates multiple data centers across Georgia, said incentives are an important factor it considers when planning new facilities. However, tax breaks are just one of 35 criteria it takes into account, a company spokesperson said.

Despite their mammoth size, data centers employ only a few dozen workers — they’re storage centers for computer servers, not people.

Blackmon said if the tax exemption is brought back at some point, the House plan would increase the salary requirements for data center jobs to qualify.

“We believe these measures meet an expected level of fiscal responsibility while at the same time preserving a very business-friendly, job-creating environment,” he said.

Burns, a Republican from Newington, praised the proposals.

“From rebalancing our priorities when it comes to incentivizing data centers — which currently use a disproportionate amount of our state’s energy supply — to streamlining our film tax credit to encourage a better return on investment and more transparency,” he said, “these proposals will take our state’s No. 1 business climate to even greater heights.”

Jones said examining special-interest tax breaks is an important step toward his long-term goal of seeing the state eliminate income taxes.

Danny Kanso, senior fiscal analyst for the Georgia Budget and Policy Institute think tank, praised the proposal.

“These common-sense safeguards would keep hundreds of millions of Georgians’ tax dollars in-state, rather than flowing to enrich out-of-state corporations, while placing important guardrails to better manage the state’s largest tax credit program,” he said.

Staff writers Maya Prabhu, Drew Kann and Zachary Hansen contributed to this article.

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