Film, TV tax credit House bill, if passed, would be biggest changes since 2008

The proposal would cap the amount of credits that could be transferred any given year.
A behind-the-scenes photo of "Stranger Things" from season 3, shot in metro Atlanta. Shown: Shawn Levy, Noah Schnapp, Finn Wolfhard. NETFLIX

Credit: Tina Rowden/Netflix

Credit: Tina Rowden/Netflix

A behind-the-scenes photo of "Stranger Things" from season 3, shot in metro Atlanta. Shown: Shawn Levy, Noah Schnapp, Finn Wolfhard. NETFLIX

The film and TV tax credit in Georgia that passed in 2008 was so generous it drew all major media companies to the state to shoot hundreds of films, scripted TV series, game shows and reality series.

Over 16 years, Netflix, Apple TV+, Amazon and Lionsgate, to name a few, have spent more than $23 billion in the state while pocketing more than $5.5 billion in tax credits. Tens of thousands of jobs have been created.

It’s also why Eddie Murphy, Kevin Hart, Lindsay Lohan and Kevin Bacon are shooting in the state now.

But legislators are looking to rein in this largess just a bit. House bill 1180, released Wednesday, makes some notable tweaks, some more obvious than others. (You can read the bill in full here.) If anything, it makes what has been a relatively simple program significantly more complicated.

Major TV and film producers to date have embraced the credit for said simplicity and the fact it is uncapped, meaning there is no limit to how much the state can dole out any given year. Georgia certified more than $1.2 billion in credits in both fiscal years 2021 and 2022, by far the most generous tax credit the state hands out to any industry.

The proposed bill will create a few more barriers to get the maximum 30% credit, which is equal to Sony getting $30 million in credits for spending $100 million on a single movie here. Productions will have to meet four out of nine criteria, such as at least 50% of the crew being Georgia residents, hiring at least 50% of vendors from Georgia, signing a long-term lease with a Georgia-based studio or providing marketing such as showing the Peach logo at the end of a film or TV show.

That logo or a similar marketing move is currently the only criteria needed to get the full 30% instead of a base 20%.

This appears to mean more paperwork for producers to submit as well as more paperwork for the Department of Revenue to peruse.

The bill also caps the amount of tax credits that can be transferred to another party any given year. The proposed limit is 2.5% of the state budget. If such a cap were placed on the current estimated $37.5 billion state budget for the fiscal year ending June 30, that would equal $937.5 million.

This is important because most TV and film companies are based in California and New York and have few, if any, state tax obligations. So through a tax broker, they can sell those credits to, say, Atlanta-based companies such as Home Depot or Delta Air Lines, who can then buy those credits at a discount and defray the cost of their own tax load in the state.

"Bad Boys for Life," released in early 2020, was shot in part in metro Atlanta despite being fictionally shot in Miami. SONY

Credit: SONY

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Credit: SONY

If the cap is reached any given year, companies would have to prorate any remaining credits and use them the following fiscal year. A potential backlog could reduce the amount of available tax credits in future fiscal years and reduce the number of productions in the state.

The good news is that the amount of actual credits transferred any given year has only exceeded $900 million once, at just shy of $960 million for the fiscal ending July 1, 2021, according to data provided by the Department of Revenue. That year, the country was in the midst of the pandemic and Georgia was the first state to open up. There was a backlog of productions at the time when streamers were spending freely on movies and TV shows.

The numbers fell off sharply in fiscal year 2022 ($589.4 million) and fiscal year 2023 ($422.9 million), a year that was hurt by the writers strike. (The actors strike began after the fiscal year had ended.)

In the near term, if the 2.5%-of-budget transfer cap passes, a backlog may not happen. Currently, media companies are not spending with freewheeling abandon the way they were three or four years ago. And notably, the limit will go up as long as the state budget goes up since it’s a percentage of the budget, not a flat dollar amount.

And for a place like Tyler Perry Studios, which is actually based in Georgia, the transfer limit would not necessarily be a problem since it can use the tax credit for creating films and TV shows to reduce its own state tax obligations without having to sell it to someone else. (Other studios such as Assembly in Doraville and Trilith in Fayetteville do not actually create content and are not directly eligible for tax credits. Those studios were built because companies like NBCUniversal and Disney, which do receive the tax credits, are willing to spend money there.)

Up to this point, what has made Georgia special is that its tax credit has no real cap. All other states who have solid tax incentive programs have some sort of cap. New York City’s cap is $700 million a year. California has a lottery offering up to $330 million a year in tax credits. New Mexico caps its credit at $160 million over five years. Louisiana’s cap is $180 million per fiscal year. New Jersey maxes out at $100 million a year.

Georgia in effect is competing with entire countries such as England and Canada that offer comparable tax credits but have significantly larger budgets and no caps on their film and TV tax credit programs.

The Georgia House bill also raises the minimum spend on a single production to qualify for the credit from $500,000 to $1 million. That $500,000 floor has been around since 2008. Given rising costs to produce any TV or film production over the past 16 years, this move won’t necessarily have any major impact.

The big question is: will this bill make it to law? It’s too early to say for sure, but it appears to have plenty of internal support in the Georgia House and Senate. Gov. Brian Kemp has been supportive of the current tax credit but has not yet commented about these possible changes.

“This bill is a positive sign that the House values the film industry’s contribution to Georgia,” said Randy Davidson, publisher of Georgia Entertainment News. “However, many details need to be looked at including the impact on smaller productions and the nine options in the bill to get the full credit.”

The Georgia Production Partnership and Georgia Screen Entertainment Coalition, major lobbyists for the state’s film industry, are currently assessing the bill.

“The legislature has taken a measured and thoughtful approach to this issue,” said Stephen Weizenecker, a long-time Atlanta entertainment attorney. “They have expressed a desire to continue to work with us to come up with solutions that protect Georgia’s investment in the industry. I’m cautiously optimistic that the final version of this will work for both the industry and the state.”

Steve Rothschild, an Atlanta partner at The Strategic Group, an investment firm that handles tax credits, said it appears the cap is high enough to “provide a robust incentive, but any cap and its process will need to be clear to production companies so they can plan and not have risk.” He also thinks the $1 million qualification minimum will make it tougher for small independent producers trying to climb the ranks.

Because of evidence of fraud, the state began requiring mandatory audits for each qualified project starting in 2021 for bigger projects and last year for all projects.

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