Georgia Film Tax Credit Expanded to Post-Production
For taxable years beginning on or after January 1, 2018, the Georgia legislature has expanded the film credit to cover “qualified post-production expenditures.” What is unique about this new law is that qualified post-production expenditures incurred in Georgia may relate to footage shot outside of Georgia.
“Post-production” refers to tasks that must be done after the filming ends, including the editing of raw footage to cut scenes, the insertion of transition effects, and the inclusion of music, voice, and other sound.
The Georgia Department of Revenue (DOR) has released guidance on eligibility for the post-production tax credit with examples of when and how it applies.
Who is eligible to claim the credits?
Post-production companies incurring expenditures in Georgia of more than $500K and with an aggregate payroll of $250,000 or more can earn tax credits at the rate of either 30 percent or 35 percent (depending upon the county in which the services are performed), up to a maximum of $2 million in tax credits. The new law provides a 20 percent tax credit for “smaller post-production companies” with a minimum spend of $100K on qualified post-production and payroll in Georgia.
To qualify as a post-production company under this new law, a company must be a Georgia vendor, that is, maintain a business location (i.e., a physical presence) in state, which would require the formal registration, licensing, and payroll tax payments as applicable. The company must also be approved by the DOR.
When and how are the credits claimed?
A post-production company may use the tax credits against income taxes and, if the company elects, any excess can offset payroll withholding taxes. For pass-through entities, such as LLCs, partnerships and S Corporations, the post-production film tax credit will pass to members, shareholders, or partners based on their year ending profit/loss percentage.
Unused credits may be carried forward for five years and sold to other Georgia companies within that five-year carryover period. A credit can only be sold once and may not be resold once it has already been transferred, however, credit amounts can be divided up and sold to several different taxpayers.
What are considered “qualified post-production expenditures”?
“Qualified post-production expenditures” are defined to include expenses for footage shot either inside or outside of Georgia and cover the following costs:
- Costs associated with photography and sound synchronization
- Expenditures for sound recordings and musical compositions, lighting, and related services and materials
- Editing and related services
- Rental of facilities and equipment
- Leasing of vehicles
- Costs of food and lodging
- Digital or tape editing, film processing, transfers of film to tape or digital format, sound mixing, computer graphics services, special effects services, and animation services
- Total aggregate payroll
- Airfare, if purchased through a Georgia travel agency or travel company
- Insurance costs and bonding, if purchased through a Georgia insurance agency
- Other direct post-production costs reflecting generally accepted entertainment industry practices
The enactment of the Georgia post-production film tax credit extends our already competitive film production tax incentives into a new category of costs and will thereby encourage more film production companies to do business within the State.