Blockbuster Changes Pitched for Georgia’s Film Tax Credits

Key Points
  • Top Georgia lawmakers proposed major changes to Georgia’s Film Tax Credit program.
  • The changes include eliminating the ‘transferability’ of film tax credits.
  • Lawmakers also want to put an annual $900 million cap on tax credits.

The Gist

The Georgia Senate Finance Committee’s proposed changes to a sweeping tax bill would make film tax credits non-transferable and put an annual cap on the program, a reform that critics of the credits say is necessary, but advocates say would crush Georgia’s booming film and TV industry.

Note: On Mar. 31 the Senate Rules Committee scrapped the proposed provisions on the Film Tax Credit.

What’s Happening 

Georgia’s film tax credit program is one of the most generous incentives in the country for movie producers, making the Peach State the third biggest market for film and television production behind California and New York, respectively.

But for several years state audits and economic studies have suggested that the tax credit program, which issued $1.2 billion in credits last year, is a losing proposition for Georgia taxpayers and essentially amounts to a subsidy for Hollywood on the state’s dime.

Unlike nearly every other tax credit program in the state, Georgia has no cap on how much credit is issued per year to filmmakers, and more importantly, unused credits can be bought and sold – or “transferred,” as it is known – to companies or individuals with a Georgia tax bill. The tax credits are used to lower one’s tax liability in a dollar-to-dollar exchange. 

This week, the state Senate Finance Committee amended a tax reform bill to propose a $900 million annual cap on tax credits and end the transferability of tax credits in 2023. By comparison, California’s cap is $330 million and New York’s is $420 million a year.  

“It’s way higher than the average for the last five years on that film tax credit, and it just keeps growing, and I could get into the things we’re paying for: Private jets and chefs and personal trainers and stuff that probably needs cleaning up,” state Sen. Chuck Hufstetler (R–Rome), the Senate Finance Committee chairman, said on Monday as the new version of the bill passed committee by a 9-3 vote. “I think we need some limitations on it.”

Hundreds of millions of dollars worth of tax credits are transferred each year, and because credits don’t expire for five years, some lawmakers have become concerned that the liability for the state has grown out of control. 

But film industry advocates say that eliminating the transferability of tax credits would be disastrous for the industry.

“The removal of transferability would effectively annul the program,” said Peter Stathopoulos, a tax consultant, and partner at the Atlanta-based firm Bennett Thrasher which helps clients buy credits from production companies. 

“It would make it just a teeny fraction of what it was before,” added Stathopoulos, who also holds a top position in a film-industry advocacy group called the Georgia Production Partnership.

“The transferability provision would be extremely damaging to the industry. The industry opposes that,” he said. 

Illustration by Brittney Phan for State Affairs.

Why It Matters

Georgia’s film tax credit program is massive. How huge? The foregone tax revenue is equivalent to roughly 3-4% of the annual state budget, enough to fund several large state agencies. The size of the program grew from over $200 million in 2015 to over $1 billion annually in the last three fiscal years.

Its champions have vaunted it as a roaring success, making Atlanta – and Georgia as a whole – the “Hollywood of the South.” The Georgia Department of Economic Development (GDECD) claims that from 2005 to 2021 the program has generated more than $24 billion in direct spending in the state.

“(With) 75,000 people working in this industry in this state, I feel very cautionary about our whacking this tax credit that’s made us the third-highest state in the country for film activity,” state Sen. Nan Orrock (D–Atlanta), who also sits on the Senate Finance Committee, said on Monday.

“$4 billion into our economy every year, it’s hard to have a comfort level with [the changes] being added in… it just seems incautious to me,” she said.

J.C. Bradbury, a professor at Kennesaw State University, likens the credits to a subsidy and estimates they cost each Georgia household about $300 per year. 

“The reality is that most companies film in Georgia because we paid them to film here,” he said, adding that “every program that's being filmed in Georgia is resulting in more losses to taxpayers, so it's not necessarily a bad thing [for the tax credit program to be limited].”

According to a fiscal note by the Department of Audits and Accounts on Wednesday, the proposed cap on the tax credit program would generate at least $386.5 million in additional state revenue by 2025, with further gain expected from the transferability provision.

Year-on-year growth of the Georgia Film Tax Credit. Courtesy of J.C. Bradbury.

Currently, the tax credit program offers productions valued over $500,000 the ability to collect tax credits worth up to 30% of qualified production costs. So a $100 million blockbuster production could get $30 million in credits to spend on state taxes. Whatever they don’t use, they can sell to anyone, whether that’s an individual with a Georgia tax bill, a small business, or a large company like Coca-Cola or Delta. 

“If we covered 30% of the cost of making toilets, we'd be the toilet manufacturing capital of the world. I mean, that's why film studios are here,” Bradbury said.    

Tony West, deputy state director of Americans for Prosperity Georgia, rejects the idea that the film industry would just pack up and leave because of the cap and said that the extraordinary growth of the credit puts the state “at fiscal risk.”

“The idea that this is in some way going to harm the industry just doesn't make sense to me on its face,” West said.  “Our position is pretty simple: if the point of the program is to incentivize businesses to come here and film here, they should use the credit or they should lose the credit.”

What’s Next?

Georgia House Speaker David Ralston (R–Blue Ridge) has signaled that he and the sponsor of the overall bill, state Rep. Shaw Blackmon (R–Houston County), oppose the Senate’s version of the bill that affects the film tax credits, making the prospect that these reforms hit the Governor’s desk an uphill battle. 

Bradbury is at least glad the conversation is happening, he said, and in addition to capping the program and eliminating the transferability, said he’d like to see more transparency.

“We need to see who is getting the credits and who's buying them and selling them because I don't think citizens have a good grasp on who is benefiting from these policies,” he said. 

Join the Conversation 

Check out State Affairs' previous investigation into Georgia’s Film Tax Credit Program: "Lights, Camera, Tax Credits: A Peachy Deal for Hollywood, but What About Georgia Taxpayers?"

For more detail on how Film Tax Credits work, read our explainer: "What Makes Georgia’s Film Tax Credits Special?" 

What do you want to know about Georgia’s Film Tax Credits? Share your thoughts/tips by emailing: [email protected] or on Twitter: @alemzs

Want to contact your local state legislator about this issue? Find your legislator here. 

Follow Key Players for This Story:

Georgia Department of Economic Development: @gdecd

Americans for Prosperity Georgia: @AFPGeorgia

Georgia Production Partnership: @GA_production

J.C. Bradbury: @jc_bradbury

Georgia Budget and Policy Institute: @GaBudget