On top of transparency concerns, critics have homed in on the ability of film companies to sell credits as too much of a giveaway for Georgia to stomach. Anyone in Georgia can buy film credits – typically for 80 to 90 cents on the dollar – to help offset their own annual income taxes, regardless of whether they had anything to do with a movie or show’s creation, according to several local accounting firms.

The market for buying and selling film tax credits is huge in Georgia, according to Peter Stathopoulos, a tax consultant and partner at the Atlanta-based firm Bennett Thrasher that helps clients buy credits. It’s a major reason why many big studios find Georgia so enticing as one of the only states that offers transferable credits, Stathopoulos said. 

If the tax credit were “purely an income tax credit, it would not have been that useful to companies coming into Georgia to make new investments in the state that did not have pre-existing income tax liabilities in the state,” Stathopoulos said. Unlike other states that offer rebates to film companies instead of sellable credits, Stathopoulos said, “Georgia doesn’t have to cut a check for the incentive.”

Georgia is among several states that offer tax credits for film productions instead of rebates or grants. (Credit: Georgia Department of Audits and Accounts)

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Critics don’t view it that way. For Bradbury and others, selling Georgia’s credits makes for a practice that’s not usually allowed with federal tax credits, resulting in a lopsided win for film companies over the state when factoring in the loss of tax revenues.

“Most film companies don’t owe any taxes in Georgia, so that tax credit itself is useless to them,” Bradbury said. “Where it becomes valuable is that they can sell it to someone else.”

Along with brokering credit sales, some accounting firms including Bennett Thrasher also help state revenue officials audit individual tax credit applications for accuracy, records show. Stathopoulos also said he’s helped draft state legislation on the credits, and he currently holds a top position in a film-industry advocacy group called the Georgia Production Partnership.

Peter Stathopoulos is a tax consultant and partner at the Atlanta-based firm Bennett Thrasher. (Credit: Peter Stathopoulos)

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Some critics like Bradbury see the close ties between auditors, accountants and lawmakers as akin to “the fox guarding the henhouse” – and ripe for reform.

“The problem with the program isn’t that it’s abused and some illegal purchases are made,” Bradbury said. “The problem is that everything is totally legal. Almost every expenditure is qualified.”

For his part, Stathopoulos said his firm follows the letter of state law when it comes to keeping conflicts-of-interest out of credit sales, credit audits and his advocacy work.

“States make certain choices about which businesses they want in their state and which ones they want to pay for,” Stathopolous said. “I’m personally glad that this state chose [the film industry].”

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NEXT

Part VI: The Land of Make-Believe