Georgia Legislature

FILE — A copy of the rules of the Georgia State Senate sits on a desk on the Senate floor in the Capitol in Atlanta. (AP Photo/David Goldman)

ATLANTA — Poor administration of Georgia’s film tax credit, the state’s largest and arguably most generous, is wasting millions of tax dollars, a new state audit has found.

In a 75-page report, the Georgia Department of Audits and Accounts accused the state departments of Revenue and Economic Development of lacking the controls necessary to prevent improper granting of credits to film production companies.

“Due to control weaknesses, companies have received credits for which they are not eligible and credits that are higher than earned,” the report stated in its opening paragraph. “The issues can be attributed to limited requirements and clarity in state law, inadequately designed procedures, insufficient resources and/or agency interpretations of law that differ from our own.”

The General Assembly first approved the film tax credit in 2005, then increased it three years later when lawmakers found it wasn’t attracting as much interest as they had anticipated. The 2008 legislation raised the base credit rate to 20% for film companies that spend at least $500,000 on qualified productions, with an additional 10% for a qualified promotion of the state, typically featuring the Georgia peach logo at the end of a film’s closing credits.

The film industry skyrocketed in Georgia after the 2008 changes, soaring from $242 million during fiscal 2007 to $9.5 billion by the end of fiscal 2018. By early 2016 Georgia had vaulted to No. 3 in the nation in filming movies and TV shows, behind only California and New York.

According to the audit, the state delivered more than $3 billion in credits from 2013 through 2017. The numbers grew steadily during that period, from more than $667 million in 2016 to more than $915 million in 2017.

Despite granting more credits than any other state, the audit found that Georgia requires film companies to provide less documentation than any of the 31 other states offering film tax credits. Georgia is among only three state that do not require an audit by the state or a third party.

While the state Department of Revenue does require limited documentation to receive the credit, the audit found many production companies failed to provide the documentation yet still received the credit.

In its defense, the revenue agency responded to the report by noting that 38% of its tax credit processing work is devoted to the film tax credit, even as it administers more than 50 tax credits on the books.

The Department of Economic Development pointed to “limited resources and the inability to access confidential taxpayer information” as obstacles to the agency’s efforts to administer the credit.

Fiscal conservatives in the General Assembly have complained about the cost of the film tax credit from time to time. With state tax revenues running well below projections through the first five months of the current fiscal year, the film tax credit and other tax incentives could face scrutiny during the 2020 legislative session that begins next week from lawmakers looking for ways to reduce spending.

“Some were great policy when they took place” said Georgia Rep. Brett Harrell, R-Snellville, chairman of the House Ways and Means Committee. “But times change and we need to reevaluate them.”

Some of those productions in recent years have chosen Polk County as a place to bring film crews. Cedartown has hosted IFC’s “Hap and Leonard” and HBO’s “Watchmen” in 2017 and 2018 respectively. Rockmart in 2019 provided a setting for the new Jon Stewart film “Irresistible” for several weeks of filming.

The Georgia Screen Entertainment Coalition released a response to the report, citing the $3 billion annually spent by production companies in Georgia and the thousands employed in the industry in “high-paying jobs” as proof that the film tax credit is working.

“The film tax credit is a good deal for Georgia and its taxpayers,” said Kelsey Moore, executive director of the coalition. “The state’s film industry has seen unbelievable growth since the credit was put in place, and taxpayers are now reaping the rewards of the billions of dollars the industry – and taxpayers – have invested. Reducing or eliminating the tax credit wouldn’t cause a surge in tax revenues; it would do the opposite. We’d lose an industry, we’d lose good jobs, we’d lose the huge economic impact of the productions and we’d lose the public and private sector investments we’ve made in the industry since 2008.”

The coalition’s statement cited 399 productions filmed in Georgia in the last fiscal year, and spending of nearly $3 billion per year in the state, “with that figure set to grow exponentially over the next decade.”

“Georgia’s film and TV industry is responsible for nearly 92,500 jobs and more than $5.2 billion in total wages,” the statement reported. “More than 85 percent of the people working on sets are Georgians, and the average salary for on set workers is $85,000.”

The statement also said that “industry stakeholders in Georgia have expressed their willingness to work with state government on reforms to the credit that would prevent budget disruptions.”

“Increasingly, leaders in the state’s film industry are Georgians who live and pay taxes here,” Moore said. “They care about the state’s success and fiscal health. The film industry is contributing to the state’s progress, and we want to be at the table on plans to keep it moving forward.”

Capitol Beat News Service’s Bureau Chief Dave Williams provided statewide coverage of this story, and SJ Editor Kevin Myrick contributed local items.

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