ATLANTA – A bill the General Assembly passed three years ago bringing additional scrutiny to Georgia’s film tax credit is reducing the program’s impact on state tax revenues, witnesses testified at a legislative committee hearing Wednesday.
House Bill 1037 requires all film productions located in Georgia to undergo mandatory audits by the state Department of Revenue or third-party auditors selected by the state agency.
The audits have allowed the revenue department to do a better job determining which expenditures by film production companies qualify for the film tax credit and which don’t, Chester Cook, the agency’s deputy commissioner, told members of a joint House-Senate committee formed to determine whether Georgians are getting a healthy return on the revenue the state loses to tax credits and exemptions.
Georgia’s film industry tax credit of 20% goes to production companies that spend at least $500,000 on qualified productions, with an additional 10% available for qualified promotions, typically featuring the Georgia peach logo at the end of a film’s closing credits.
But in reality, the result of the added scrutiny the audits provide is that more of producers’ expenses are being deemed as unqualified, which reduces the value of the tax credits.
“The effective rate of the credit is not 30%,” said Pete Stathopoulos, a partner with Cobb County-based Bennett Thrasher, one of five accounting firms the state uses to audit the tax credits. “It’s much less.”
Stathopoulos said the 2020 legislation also forces production companies to wait until a project is completed to apply for the tax credit. With projects frequently requiring multiple years to finish, that delays the process, he said.
“It has a downward effect on the credit benefit,” he said.
Other witnesses testified Wednesday that the state’s film tax credit is largely responsible for the $4.1 billion in direct spending by the industry in Georgia during the last fiscal year, according to a recent report from the state Department of Economic Development.
Film industry executives who responded to a survey commissioned by the Georgia Screen Entertainment Coalition said 92.1% of their spending in Georgia would not have occurred without the existence of the tax credit.
“In an era of increased competition for production … in Georgia, the credit is a cornerstone piece,” said Leon Forde, managing director of Olsberg Spi Ltd., the London-based creative industries consulting firm that conducted the survey.
However, Georgia’s film tax credit is by far the most expensive tax incentive the state offers, which prompted the 2020 legislation and contributed to the creation this year of the Joint Tax Credit Review Panel.
Several witnesses who testified Wednesday said the film tax credit is more than paying for itself.
Frank Patterson, CEO of Trilith Studios in Fayetteville, said the facility, with 32 sound stages and more than 1.5 million square feet of space, has spawned 65 local businesses with more than 1,000 employees.
“These dollars would not have been invested without the tax credit,” he said.
Misti Martin, president of the Cherokee County Office of Economic Development, said the filming of the movie “American Made” a few years ago spurred the revitalization of downtown Ball Ground, which grew from just 12 businesses on Main Street to 26.
“It was the shot in the arm Ball Ground needed to start its redevelopment,” she said.
The review panel will continue meeting throughout the fall before recommending potential legislative changes for the full General Assembly to consider when lawmakers convene the 2024 session in January.