Tax Laws and the Exploding Film Industry in Georgia

Wednesday, June 25, 2014

Tax Laws and the Exploding Film Industry in Georgia
By Steve R. Harless

From Clint Eastwood to Jennifer Lawrence to Zombies, the film industry has fallen head over heels for Georgia. Cities like Atlanta, Savannah and even Covington host big name celebrities making top movies and television shows thanks to the state’s hospitable climate, proximity to the country’s busiest airport and availability of varied environments and space in which to create sets. However, the explosive growth in the industry has occurred since 2008 when the Georgia General Assembly and Governor Sonny Purdue passed the Georgia Entertainment Industry Investment Act.

Allowing companies to earn a tax credit of up to 30 percent, the Act has led to Georgia residents seeing production crews parked in their neighborhoods as a commonplace event. Visiting filmmakers can find the full range of talent they need in state too with the help of the Georgia Film & Television Sourcebook, which boasts more than 30,000 skilled production professionals and more than 1,000 production suppliers and support vendors.

The evolution of the industry post-Georgia Entertainment Industry Investment Act cannot be overstated. “In FY 2013 alone, television networks, Hollywood studios, production companies and independent producers invested more than $3.3 billion in Georgia,” according to the Georgia Department of Economic Development. The stipulations of the Act provide a 20 percent tax credit to projects including films, television programs, commercials, music videos, animation and game development spending at least $500,000 on production in Georgia. There is no cap to this provision. What’s more, productions can earn an additional 10 percent tax credit for including a promotional Georgia logo in the film title or credit. The tax credit market is booming too including 2013 Georgia Film Credits, which investors can purchase from the recipient film companies.

Other benefits to production companies shooting in Georgia include largely permit- free filming policies. For the most part in this state, permits are not required for shooting on private property, however there are some municipalities that require permits. There is a Georgia Film, Music & Digital Entertainment Office to handle incoming inquiries, and the Georgia Department of Revenue will help companies review eligibility for the Georgia Film Tax Credit. Most production aspects including music scoring, post-production and even insurance do qualify for the tax credit as long as these took place in the state or were handled by a Georgia agency.

It’s not just the tax savings that favors the film industry these days. Federal law is making launching multi-million dollar production exploits easier too. Thanks to the Jumpstart Our Business Startups (JOBS) Act and Amendments to Regulation D – related to Rule 504 – new businesses, including the wide range of film production – can now easily raise capital up to $1 million per year without previous red tape and expense. Rule 505 allows up to $5 million per year, and Rule 506 is for amounts greater than $5 million. However both of these are more expensive and have more rigorous requirements than Rule 504.

What used to be an expensive endeavor involving big legal and investment banking fees can now be self-directed and completed more quickly and cheaply. At its core, the JOBS Act seeks to make cost-effective access to capital for companies of all sizes free from “overly burdensome regulations,” according to the U.S. Securities and Exchange Commission. With Rules like 504, the SEC is required to work on facilitating capital formation while promoting investor protection.

The film business is booming. Although some critics question whether the money the industry brings to Georgia is truly worth the lost tax revenue, there is no slowing in sight. From tax clients looking for credits and benefits to funding startups efficiently, tax laws favor the media moguls of tomorrow!

H&A specializes in tax matters for those in the entertainment and film industry and preparation of 504 documentation for those needing to solicit funding for low-cost film production or new startup business concepts.

Steven R. Harless, CPA, Managing General Partner of Harless & Associates.