Report: Georgia film tax credit stronger now

ATLANTA — Georgia’s generous TV and film credits survived the 2020 pandemic intact. The state Legislature tightened audit requirements but didn’t make any major changes that would scare off cost-sensitive film production companies.

With budget pressures in 2021, there is no guarantee the tax credits won’t face more scrutiny in the future, but according to a report by Monarch Private Capital, a new bill signed this month by Gov. Brian Kemp “will provide more integrity and security for the Georgia Film Tax Credit Program.”

Atlanta-based Monarch works with large production companies to sell their tax credits to third-party buyers that could use them. Marco Cordova, the firm’s director of film finance who wrote the report, said the bill should fend off some critics of the tax credits and hopefully “appease as many stakeholders as possible.”

Earlier this year, the Georgia Department of Audits and Account released critical reports about the credits that have fueled a flood of TV and film productions into Georgia over the past decade. The audit found companies received millions of dollars’ worth of credits they didn’t earn, the lax oversight making the program “ideal for fraud.”

So the bill requires most companies that qualify for the credits to be audited starting Jan. 1, 2021, though auditing requirements will be phased in for smaller projects. And to relieve the extra workload, the Department of Revenue will also be able to farm out some of the auditing work to qualified outside auditors.

“The new requirements will add minimal incremental costs” to his clients, Cordova said. “It will be better in the long run. Buyers will feel more safe and it will help pricing” when selling the credits.

Georgia has handed out more than $2.4 billion in film and TV tax credits the past three years through July 31, 2019, and $4 billion since the credits were passed in 2008. The state now dispenses more tax credits per year than Canada, New York or California. The industry in return has generated more than $6 billion in direct spending in the state from 2017 to 2019 and tens of thousands of jobs.

Some state legislators considered capping the credits, something other states do. The fact there is no cap is what has drawn big-budget films into the state, including many Marvel movies and multiple “Hunger Games” films. Any cap would greatly reduce the appeal of the credit.

But supporters of the tax credit tamped that talk down and capping did not make it into the bill.

The pandemic shut down film and TV production in March, and there was virtually no production in the final four months of the fiscal year ending July 31, 2020. So the number of tax credits given out will certainly fall sharply for FY 2020.

But in recent weeks, production has ramped up again. The Georgia film office has 29 active film and TV productions listed, down from a typical 40 but far more than July 16, when the number was 13.

The backlog of production has meant the state’s 100 or so stages are filling up quickly, and studio operators are optimistic they’ll be able to make up for lost time.

“I think the prognosis is quite promising,” said Kris Bagwell, who runs EUE Screen Gems, home to Netflix’s “Stranger Things.” “Obviously, it’s going to take some time to return to previous activity levels, but compared to many businesses, I think production — especially episodic TV — will recover relatively well.”

The only headwind, he noted, “is the persistently high COVID infection rate in Georgia. If productions start getting shut down by outbreaks while other states decline in new cases, Georgia will become less attractive to shoot in.”