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Brief History of the U.S. Film Tax Credit (Part Two)


Exploring Georgia’s Film Industry Tax Credits Series – Part Two

by Senior Editor, Mollee D. Harper

“If you build it, he will come.” – Shoeless Joe Jackson, Field of Dreams

Georgia’s entertainment tax credit, GEIIA passed in 2005, is already one of the most successful business incentive programs at the state level, and a clear contributor to Georgia’s rise to stardom as a formidable competitor in the film industry, on and off the big screen. While the use of tax incentives to encourage U.S. film and television production has gained momentum again in recent years, the film industry tax credit program is actually not new. This program was first introduced almost twenty-five years ago.

For most, Hollywood, California and New York, New York come to mind first as the nation’s west and east coasts hubs for entertainment and arts of all kinds. Yet, the entertainment industry has a more diverse history in geography than most realize. Would you believe Louisiana was actually the first state to offer a tax incentive for the entertainment industry in 1992? With a remarkable legacy including “A Streetcar Named Desire” and “The Big Easy,” is not hard to see why.

Much like Georgia’s recent rise, the “Hollywood of the Bayou” has had its own illustrious history with the big screen dating back to 1918 with their local production of “Tarzan of the Apes”. In recent years Louisiana has even led California in annual entertainment revenues. In 2011, Louisiana hosted over 150 productions with an attributed $1.3 billion in film industry-related revenues to the state.

Minnesota, Hawaii and Missouri were the second, third and fourth states to pass a tax credit program for the film industry in the late ‘90s. At one time, 44 states offered a film tax incentive. Although Michigan, Alaska and a few other states have eliminated the tax credit altogether, would you believe there are only 12 states that don’t offer film incentive packages?

That means there are 38 states, including Georgia, that welcome the entertainment industry to develop productions in their backyards by offering a “revenue-share” system in tax incentives, today.   

Like each state tax system, each state incentive program varies in structure based on qualifying expenditures within the state that are used directly in a qualified production activity as well as transportation, housing, equipment rentals, lighting, sound scores and even wages for local talent. The incentive programs range from tax credits against individual and/or corporate income taxes to exemptions against sales tax, and also include rebate and grant programs.

Most states enforce a minimum spend amount, typically between $300,000 to $500,000, along with an annual cap amount that ranges from Oklahoma’s low cap of $5 million annual to the other end of the spectrum in Louisiana where they imposed an $180 million annual cap last year.

All entertainment incentive programs provide specific rules for the sale or transfer of tax credits earned and whether or not unused portions can be rolled over on an annual basis. In addition, specific parameters are provided as to whether the incentive can be applied to pre-production, production, and/or post-production expenditures, and applied to a single project or fiscal year, or spread across multiple projects over multiple years. 

Most state entertainment incentive packages include provisions for the labor needed for large-scale productions. High-dollar wages for writers, directors and actors may be included or excluded as qualifying expenditures. State policymakers further entice studios and businesses with wage incentives to employ and use their local talent, creating additional revenue generation for their local economy through employment.

In some states like Georgia, local colleges, universities and trade schools are also partners in the program, developing new curriculum and training programs to ensure local talent can make the grade.

See Part One.


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