Georgia Lawmakers Move to Limit Nation’s Largest Film Incentive

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After finding out the problem for the final eight months, Georgia lawmakers unveiled a proposal on Wednesday to restrict the state’s profitable movie and TV tax incentive.

Georgia has the biggest manufacturing tax credit score within the nation, with $1.24 billion in credit licensed final yr. Over the final decade, soundstages have sprouted up round Atlanta and a whole bunch of productions have come to the state, together with “May December,” “Black Panther,” “Stranger Things,” and “The Walking Dead.”

Unlike in most different states, the Georgia credit score will not be capped. As it surpassed $1 billion a yr, some lawmakers have frightened that it poses a threat to state funds and makes it more durable to chop earnings taxes throughout the board.

“What we’ve seen from legislative leaders is a clear desire to rein in the overall cost of this program,” stated Danny Kanso, a fiscal analyst on the Georgia Budget and Policy Institute.

Four officers, together with the lieutenant governor and the House speaker, unveiled laws on Wednesday that may restrict the quantity of credit that may be transferred in a yr. The invoice would additionally set up modest necessities to assert the complete quantity — 30% of in-state manufacturing prices — as a substitute of the 20% base.

“This is all about using the taxpayers’ dollars in the most effective and efficient manner,” stated state Sen. Chuck Hufstetler at a press convention.

The invoice, HB 1180, wouldn’t cap the quantity of tax credit licensed by the state. But it could place a restrict on productions’ skill to monetize them.

The Georgia Screen Entertainment Coalition, which represents studios, manufacturing amenities and different business stakeholders, stated in a press release that it’s finding out the invoice.

“We’re reviewing the legislation and we’ll work closely with legislators to protect this program that has successfully built a Georgia-based film industry,” stated govt director Kelsey Moore, including that the tax credit score has created “billions of dollars in economic impact to the benefit of Georgians across the state.”

The invoice should nonetheless undergo each homes of the legislature, and is anticipated to face a barrage of lobbying and doable amendments.

A joint House-Senate committee started a top-to-bottom evaluate of all the state’s tax credit final June, as lawmakers sought to judge whether or not they generate a enough return on funding. In November, GSEC issued a report arguing that each $1 in movie credit creates $6.30 in financial advantages.

The incentive enjoys appreciable help, because it has created hundreds of manufacturing jobs and helped promote the state’s picture around the globe. In 2022, lawmakers shortly shut down an effort to put a strict $900 million cap on this system.

Stephen Weizenecker, an Atlanta leisure legal professional who focuses on movie incentives, stated the brand new invoice reveals that lawmakers are attempting to stroll a center floor.

“This is a thoughtful plan to balance the interests of the state and the industry, and to continue to encourage the industry to grow in the state,” he stated.

Most manufacturing corporations will not be primarily based in Georgia and don’t pay state earnings tax. They promote their movie credit, at a small low cost, to Georgia corporations and rich people who do have state tax legal responsibility. A current audit discovered that 97% of movie tax credit are transferred to a different get together earlier than they’re redeemed.

The invoice would restrict the quantity that could possibly be bought in any yr to 2.5% of the state’s estimated income — or $902 million for the upcoming fiscal yr.

At the press convention, Hufstetler stated the aim was to easy out the redemption of credit, so the state will not be hit with a giant legal responsibility suddenly.

“Some of these are kept over several years. They could all be redeemed in one year,” he stated. “It doesn’t really change the tax credits that are out there.”

But Kanso stated the sensible impact will likely be to restrict the dimensions of this system.

“I think this is viewed as a first step,” he stated. “It’s a way to put a cap into law without maybe having to say that in such clear terms.”

Had the restrict been in place lately, it doubtless would have been exceeded in 2017, 2018 and 2019, in accordance with a evaluate of state audit experiences and price range information.

Credit redemptions have declined since 2020 because of the pandemic and a delay in utilization brought on by a brand new auditing requirement. But projections in state audits and price range paperwork present that the quantity of credit anticipated to be redeemed in 2025 and past would once more exceed the restrict within the invoice.

Under the invoice, if any credit can’t be transferred in a specific yr, they may carry ahead to the subsequent yr. Hufstetler famous that there would nonetheless be no restrict on claiming credit that aren’t transferred.

“Anybody that pays taxes in Georgia doesn’t have to transfer them,” he stated. “So we might have encouraged some companies to move to Georgia in the process as well.”

Under present legislation, credit are value 20% of in-state prices plus 10% if the movie or TV present shows a title card with the Georgia peach emblem. The invoice would make it a little bit more durable to get the additional 10%, requiring productions to satisfy at the least 4 out of those 9 standards:

  • at the least 50% of the crew is from Georgia
  • at the least 50% of the distributors are from Georgia
  • at the least $30 million is spent in state
  • at the least 50% of pictures days are in a rural county
  • at the least 50% of studio days are in a Georgia studio, or the corporate makes capital enhancements to a Georgia studio
  • at the least 50% of studio days are in a Georgia studio, or the corporate indicators a long-term lease with a Georgia studio
  • at the least 20% of post-production or VFX is carried out by Georgia distributors
  • participation in a workforce improvement program, such because the Georgia Film Academy
  • the peach emblem

The invoice would additionally increase the spending threshold to qualify for credit from $500,000 in annual manufacturing exercise to $1 million per mission.

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