Georgia Cap On Film & TV Production Tax Credits Clears House Committee; Local Industry Laments At Packed Hearing

Jill Goldsmith
·7 min read

A Georgia House subcommittee left unchanged a cap on tax credits that can be transferred each year as pols tinker with the 15-year old film and television production incentives prized by the industry that have transformed the state into a major player in the entertainment economy.

“It isn’t what we were hoping for, that’s for sure,” said one Georgia industry insider. He and others expected the cap would have been raised or otherwise changed in a second version of the bill presented today. It still may be as the legislation heads to the full Ways & Means Committee, then to the full House.

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Auditing was tightened up a few years ago but the state’s rich 30% incentives have had no cap and relatively few requirements beyond displaying the Georgia Peach logo in credits. The film and TV credits are among the state’s largest across industries, accounting for $1.2 billion at peak production post-Covid. Rep. Kasey Carpenter, who drafted the bill for the Income Tax subcommittee of House Ways & Means, called the ongoing number quite large but also too unpredictable, leaving the state open to potential shortfalls for other projects.

HB1180 out earlier this month caps production tax credits eligible to be transferred each year to 2.5% of the state’s projected annual budget, which would be about $900 million at the current level. It only impacts companies headquartered outside of Georgia that can’t use the tax credits themselves but sell (or transfer) them locally in what’s become a booming market.

An updated version of the bill presented today says the credits will be granted on a first-come, first-served basis (instead of pro-rated as in the original). It calls for credits that are eligible to transfer but exceed the cap to become transferable the following year.

There are a few revisions in the second draft. It sets aside video game production. To help the local music industry, it adds use of Georgia musicians as one of ten ways productions can qualify for the full tax credit (they must pick four of the ten). It expands the definition of rural counties to anything outside the 60 square-mile Atlanta metro area.

Critics call the cap too low and the rollover from year to year confusing and risky. The bill is a flat 2.5% and doesn’t add extra room to cover the previous year’s shortfall, so that could snowball. Depending on how it’s calculated, the current tax regime kind of pays for itself, they say, pointing to the the number of jobs created and the impact of film and television production on the state economy, including a local industry that’s taking root.

“There are a lot of people who believe messing with this is a huge mistake. They recognize that no one knows exactly why it works, but what we do know is that it’s working, and it’s working very, very well,” says one Georgia businessman. “It’s a matter of unintended consequences.”

Production employees 60,000 people in Georgia and had an economic impact of $8.5 billion in 2022. Sound stage construction and training programs are booming, and need outside productions to keep steady and growing. Out-of-state productions can monetize Georgia tax credits by borrowing against them but the new proposal creates uncertainty for bankers and financiers.

There’s a fear that the first-come, first-served would cut out lower budget independent films, a point raised by Jill Helton of Pigmental Studios, which is developing a campus in St. Mary’s in Camden County in southern Georgia. In remarks at the packed hearing (that had committee members joking about charging admission), she asked them to “reconsider” the annual cap.

“We look forward to continuing to review the bill and work with its authors to make sure it is in a place that it does not harm the film industry,” said Kelsey Moore, executive director at Georgia Screen Entertainment Coalition. A committee member said he was holding a letter of protest sent by a group of local producers including Athena Studios, Trilith, and Shadowbox Studios.

In defense of the bill, members noted the state budget is of course fluid and the 2.5% credit would expands with it. And short-term, production slowed by Hollywood strikes means that $900 million would be more than enough for this year and probably next. The changes aren’t set to take effect until 2026 in any case.

Local producers like Tyler Perry or others based in Georgia can access tax credits in full each year because they use them, they don’t transfer them. Could that end of nudging others to set up shop directly in state. Comcast/NBC Universal is there. Lionsgate is the anchor tenant of a new studio.

Maybe, but it’s too soon, some say. “Everything about the tax credit has been successful to this point,” said the industry insider. “If you just don’t mess with things for ten more years, at the end you will probably have real production companies, you will probably have real capital that knows how to make money in film and television, and you will have that all based in Georgia. A real industry, versus outsourced manufacturing of film and television subsidized by the state.”

Critics hope time is on their side. HB 1180 needs a full committee hearing and a positive vote in House to send it to the Senate by a key Feb. 29 deadline – that’s the midpoint of the legislative session, called “crossover day,” when bills must move from one house to the other. If it’s not sent to the Senate by midnight then it will die, at least for now. The Senate can approve or mark it up and return it for a straight accept or reject vote by the House. If passed, it moves to the desk of Gov. Brian Kemp.

“My favorite bill is a bill that doesn’t get introduced,” said one GA-based tax expert. “But, at the end of the day, no other state has committed 2.5% of its revenue and budget – almost a billion dollars – to the film industry.” The state “wants to make sure that they are showing a return on investment.”

The bill lays out ten (previously nine in the first draft) requirements to qualify for the extra 10% tax credit uplift, above the 20% base. Productions must chose four out of: At least $30 million of production expenditures in the state; 50% of production in state; using 50% Georgia crew; using 50% Georgia vendors; dedicating 50% of photography days outside the Atlanta metro area; dedicating 50% of photography days at Georgia studio facilities, or making a capital improvement to a facility; inking a lease of at least five-year lease with a studio facility; keeping 20% of post-production expenditure in GA; participating in a workforce development program; using a qualified Georgia promotion (like the Peach) or other marketing opportunities “of promotional value to the state.”

The newly added option calls for the recording in Georgia of a production’s music score or one or more songs soundtrack, licensing music from a Georgia resident, contracts with Georgia residents to composition or performance of music for score or soundtrack.

“This body is trying to come up with legislation that will be sustainable over time,” said Rep. Bruce Williamson. He acknowledged the worries in the room but said, “at the same time, it has to take into consideration the revenue of the state of Georgia.”

Carpenter added: “This is a very successful tax credit program and I guess the point is we are…trying to make sure it is sustainable into the future. We appreciate the film industry.”

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