Ga. Senate greenlights closer audits of generous film tax credits

Tax credits for film production companies will receive closer scrutiny under a proposed law. Getty images creative

A film tax credit program that has attracted TV and movie productions to the state over the past 15 years could soon feel a bright spotlight on its books.

Productions that want the tax credit will be required by 2023 to pay for auditors to comb through their financial reports to ensure they are entitled to the valuable tax credits. Georgia granted $915 million in tax credits in 2017, up dramatically from $407 million four years earlier.

The program, which state auditors said early this year was frequently abused, offers production companies up to a 30% tax credit if they spend $500,000 or more in Georgia and include a Peach logo in their work. If the state House approves changes to East Cobb Republican Rep. Matt Dollar’s House Bill 1037 Friday, producers would also be subject to an audit to ensure production spending occurred in Georgia.

Supporters say the tax credit makes the state a welcoming place for film and TV production, bringing jobs and tax revenue to the state. But in January, state auditors found the benefits might fall short of the claims of proponents.

“The Georgia Department of Economic Development has used an inflated multiplier to calculate credit-related economic activity and has reported misleading job numbers,” one state report says. “However, many of the reported jobs are unrelated to the credit. The Motion Picture Association data used indicate that more than half of the Georgia jobs are in activities unrelated to film production, such as theater workers.”

Another report found that production companies claimed millions of dollars in tax credits for projects that did not originate in Georgia or for expenses that were not related to production.

“While the state has granted billions in credits, it does not have an adequate system of controls to prevent the improper granting of credits,” the report says. “We found issues with the credit’s administration by the Departments of Revenue and Economic Development. The issues can be attributed to limited requirements and clarity in state law, inadequately designed procedures, insufficient resources, and/or agency interpretations of law that differ from our own.”

Whatever its flaws may be, the credit is a boon to the state economy, said Chickamauga Republican Sen. Jeff Mullis.

“There are a lot of falsehoods in this industry,” he said. “First off, it provides over $8 billion and a half dollars to the state of Georgia. It provides over 90,000 direct jobs, and then a ripple effect, and these are all Georgia jobs.”

Under Dollar’s bill, all film and TV projects that want to claim the tax break would have to face auditors starting in 2023. Production companies will foot the bill for the audits, said Rome Republican and Senate Finance Committee Chairman Chuck Hufstetler.

“I’ve heard from many of the companies and they’re telling me they’re very good with being audited,” he said. “They feel like it’s going to come out fine. If there’s any bad actors, it will show that as well, but as we continue to study these and the others, we’ll have a full audit done on each of these, and the company will pay for it.”

Ross Williams
Before joining the Georgia Recorder, Ross Williams covered local and state government for the Marietta Daily Journal.Williams' reporting took him from City Hall to homeless camps, from the offices of business executives to the living rooms of grieving parents. His work earned recognition from the Georgia Associated Press Media Editors and the Georgia Press Association, including beat reporting, business writing and non-deadline reporting. A native of Cobb County, Williams holds a bachelor’s degree in English from Atlanta's Oglethorpe University and a master’s in journalism from Northwestern University.