The power of entertainment tax credits.

• Author: Koppel, Michael D.

In recent years, Atlanta and other towns in Georgia have evolved into a mecca for feature film and television productions. The transformation of Georgia from the land of peaches and peanuts to the location for Oscar- and Emmy-caliber movies and TV shows could be credited to the Georgia Legislature and the Georgia Department of Economic Development's film, music, and digital entertainment tax credit (Ga. Code [section] 48-7-40.26(c)).

As Hollywood came to realize that filming on location outside a soundstage in Los Angeles could save money, even given the travel and relocation costs, a number of states have courted entertainment production companies. Many states have created tax credits to attract productions to their states. The most powerful incentives over the last decade have been state income tax credits.

The promise of increased economic activity has motivated states to create the credits and make their administration more efficient. According to Lee Thomas, director of the Film, Music and Digital Entertainment division of the Georgia Department of Economic Development, the additional economic output related to Georgia's program in 2007 was around $244 million, and by 2012 it had grown to $3.1 billion (Ramati, "Buzz for 42 Heightens as Premiere Approaches," The ('Macon) Telegraph (April 6, 2013)).

Technical Aspects

Some states have attempted to persuade production companies to film in their locales by offering sales tax or payroll exemptions, but by far the most common state tax incentive for encouraging filming in one state over another has been the state income tax credit.

Most entertainment tax credits are designed as incentives to economic development in the state, so they are based on expenditures in the state or amounts paid to vendors or employees located in the state. Georgia's tax credit base, for example, consists of expenditures normally incurred in a video production (e.g., camera equipment, lighting, stage and studio equipment rentals, electrical and sound recording supplies, and makeup), but also may include hotel and lodging, airfare and insurance (if purchased through Georgia-based travel or insurance agencies), purchase or rental of vehicles, and payroll of up to $500,000 per employee (Ga. Comp. R. & Regs. [section]560-7-8-.45).

The credits are generally limited to projects that have a minimum qualifying production expenditure total (or "spend") in the state. The minimum amount may vary based on the type of production...