Impact of the Georgia Film Tax Credit
Information reported has improved, but credit has not been capped
Greg S. Griffin | State Auditor
Lisa Kieffer | Director
FOLLOW-UP REVIEW • REPORT NUMBER 22-05B • October 2022
270 Washington Street, SW, Suite 4-101 Atlanta, Georgia 30334 | Phone 404.656.2180 | audits.ga.gov
Performance Audit Report No. 22-05B
Performance Audit Division
Greg S. Griffin, State Auditor
Lisa Kieffer, Director
October 2022
Why we did this review
This follow-up review was conducted
to determine the extent to which the
Department of Economic Development
(GDEcD) and the General Assembly
addressed the findings presented in
our January 2020 performance audit
(Report #18-03B).
The 2020 audit evaluated the
effectiveness of the credit as a tax
incentive and economic development
program, including the economic and
fiscal impact of the credit.
A companion report on the credit’s
administration was also released in
January 2020. A separate follow-up
report on the administration of the
credit was released in July.
About the Film Tax Credit
First passed in 2005, Georgia’s film
tax credit provides an income tax
credit to production companies that
spend at least $500,000 on qualified
productions. The base credit rate
was raised to 20% in 2008, with an
additional 10% for a qualified
promotion of the state (e.g., Georgia
logo). The credit is transferable, and
most credits are sold by production
companies to other taxpayers.
The value of the annual credit amount
generated grew from $669.4 million in
2016 to approximately $961.0 million
in 2019, a 44% increase.
1
This figure was provided by the Motion Picture Association.
Impact of the Georgia Film Tax Credit
Information reported has improved, but
credit has not been capped
What we found
Steps have been taken to improve the accuracy of reporting
on the film tax credit’s economic impact and evaluate the
impact of state tax benefits more broadly. However, the
credit has not been capped to control its growth, as
recommended.
Economic Impact of the Credit
Since our audit, the Department of Economic Development
(GDEcD) has focused on direct spending by production
companies, rather than reporting on the credit’s total
economic impact. Our original audit noted that GDEcD’s
economic impact calculations used an inflated multiplier,
which nearly doubled the credit’s impact. (The multiplier
estimates the film vendors’ and employees’ additional
spending in the state, which increases economic impact
above the production companies’ direct spending. The
additional spending is known as indirect and induced.)
GDEcD has improved its reporting on film jobs but has still
misrepresented distribution jobs as resulting from
production-related spending. While the credit supports film
production in the state, GDEcD had previously included film
distribution jobs (e.g., movie theater workers) when
publicizing credit-related spending, tying the credit to
inflated job numbers. Since our original audit, GDEcD no
longer includes industry-wide job totals in its annual press
releases on film production spending. However, it has still
attributed wages that are unrelated to credit spending. For
example, GDEcD claimed that Georgia-filmed productions
“delivered” $9.2 billion in wages,
1
but this amount included
wages from distribution-related jobs (which are outside these
productions), which GDEcD did not disclose.
Additionally, the General Assembly has passed legislation to
initiate evaluations of tax provisions like the film tax credit. Our original report noted that decision
makers and the general public needed additional information to properly assess the costs and benefits
of the film tax credit. In 2021, the General Assembly passed Senate Bill 6, which provides for economic
analyses of tax benefits, such as credits, deductions, and exemptions. Benefits are evaluated upon a
request from the chairperson of the House Ways and Means Committee or the Senate Finance
Committee.
Due to the resources necessary to accurately evaluate the economic and fiscal impacts of the credit, we
did not update the analysis performed for our original report. We did, however, review federal
employment figures
2
and found approximately 16,500 jobs in film production in Georgia in 2019, an
increase of 51% over the 10,900 reported in 2016, likely due to increased production activity.
Credit Cap
Despite the growth in the film tax credit, there has been no legislation passed to cap the credit. The
Senate Finance Committee included a cap in 2022 legislation, but the cap was removed prior to final
passage of the bill. As shown in Exhibit 1, the credit has more than doubled since 2013, reaching $961
million in tax year 2019. It remains the state’s largest income tax credit and the largest film incentive in
the country. Additionally, due to the carryforward period, the state has a large amount of outstanding
film tax credits. As of June 2022, the Department of Revenue (DOR) reported $1.4 billion in credits
that had been earned by production companies but had not yet been claimed (for credits earned
through tax year 2019).
Exhibit 1
Film Tax Credits
1
Increased Significantly, Tax Years 2013-2019
Production companies typically sell their film tax credits to other taxpayers because they have little to
no Georgia income tax liability.
3
Our original report presented preliminary statistics for credits
generated in tax year 2016. Updated figures indicate that approximately 97% of credits generated in tax
2
These figures are published by the U.S. Bureau of Labor Statistics in the Quarterly Census of Employment and Wages. The jobs
include temporary and part-time jobs but do not include self-employed workers.
3
The increased production activity in Georgia does not increase income taxes owed by companies because income taxes owed
are based on sales (or other receipts), not production costs.
$407 M
$487 M
$552 M
$669 M
$979 M
$876 M
$961 M
2013 2014 2015 2016 2017 2018 2019
1
Amounts for recent years could change because companies can submit amended returns for three years after
the due date, and credits may be adjusted due to DOR audit.
Source: Due to data limitations, the source varied by year: GDEcD application data, 2013-2014; DOR reporting,
2015; DOR Business Credit Manager data, 2016-2019
More than
$4.9 Billion
generated
+
136
%
since 2013
year 2016 were transferred to another taxpayer (e.g., sold), while less than 1% of credits were used by
the production companies against their own income tax liability or their employee income tax
withholding.
4
Benefits Accruing to Other States
Film tax credit provisions have not been changed to reduce economic benefits flowing to other states.
Our original audit noted that most states incentivized hiring residents over nonresidents, but Georgia
did not. As such, nonresidents and out-of-state vendors can provide services within the state, and the
expenditures qualify for the credit. Our original audit also found that while most jobs (80%) were held
by Georgia residents, most wages (53%) went to nonresidents, who typically hold the higher paying jobs
(e.g., principal actors).
However, newly required audits may reduce ineligible out-of-state expenditures. House Bill 1037,
passed in 2020, mandates audits for all film projects receiving the credit, and DOR has improved its
audit procedures. While expenditures for nonresident wages and out-of-state vendors are still eligible
for the credit, these changes should reduce ineligible expenditures for work performed outside the
state, which were unlikely to be identified prior to our original audit.
GDEcD’s Response: GDEcD generally agreed with or had no comment on the current status as
presented in the following table. Where applicable, additional GDEcD comments are included in the
table.
The following table summarizes the findings and recommendations in our 2020 report and actions
taken to address them. A copy of the 2020 performance audit report 18-03B may be accessed at Impact
of the Georgia Film Tax Credit.
4
While DOR data does not differentiate between sales, affiliate transfers, and pass-throughs to company owners, the consensus
is that most credits are sold because the companies have little Georgia income tax liability. Additionally, the remaining credits
from 2016 could still be transferred or used by the companies due to late or amended returns.
Impact of the Georgia Film Tax Credit
1
Impact of the Georgia Film Tax Credit
Follow-Up Review, October 2022
Original Findings/Recommendations
Current Status
Finding 1: Projects receiving the film tax credit in
2016 had a net impact of $2.8 billion on the state's
economy.
No recommendation
No action required
Finding 2: Tax revenue generated as a result of
the economic activity inspired by the film tax
credit offsets only a small portion of the credit.
No recommendation
No action required
Impact of the Georgia Film Tax Credit
2
Impact of the Georgia Film Tax Credit
Follow-Up Review, October 2022
Original Findings/Recommendations
Current Status
Finding 3: The impact of the film tax credit on the
state’s economy has been significantly
overstated, leaving decision makers without
accurate information necessary to assess the
credit.
Our review found that GDEcD had overstated the
economic impact of the film tax credit. For more
than 30 years, GDEcD had used a 3.57 multiplier to
estimate total impact. This multiplier was higher
than any known industry multiplier in Georgia and
nearly twice the 1.84 multiplier found in our study.
Additionally, GDEcD reported misleading jobs data
by including jobs unrelated to production (e.g.,
movie theater workers) when discussing credit-
related spending. GDEcD also included jobs held
by nonresidents in project press releases and
agency performance measures.
We recommended that GDEcD use a reasonable
multiplier to estimate economic impact, avoid
including jobs unrelated to production when
discussing the credit, and collect information on
the number of jobs held by Georgia residents,
while discussing resident and nonresident jobs
separately.
Partially Addressed – After our review, GDEcD changed how
it publicizes the credit’s impact on the state’s economy.
However, GDEcD’s reporting on film production jobs is still
misleading at times.
GDEcD no longer publicizes overall economic impact and as
such does not rely on a multiplier to estimate additional
spending by film vendors and employees (i.e., indirect and
induced spending). Instead, GDEcD has begun reporting
production companies’ direct spending, which is the amount
the companies report they plan to spend in Georgia. For
example, GDEcD reported in its annual press release that
production companies spent $4 billion in fiscal year 2021.
GDEcD reporting on job figures has been more mixed. It has
stopped publicizing the overall number of film industry jobs
in its annual press release, which had included jobs unrelated
to production. However, other reported numbers have still
tied credit-related production spending to nonproduction
jobs. For example, GDEcD reported that productions filmed in
Georgia in 2019 “delivered” $9.2 billion in total wages, but it
did not disclose that those wages also included distribution
jobs (e.g., movie theater workers) unrelated to production, as
well as the indirect and induced jobs supported by them.
Additionally, federal data showed approximately 10,700
Georgia jobs
5
in film production in 2020, while GDEcD
reported “tens of thousands of Georgians” were employed in
film production. For job numbers, GDEcD typically relies on
the Motion Picture Association, which represents film studios
that benefit from the credit.
Regarding jobs held by residents, GDEcD edited its project
expenditure form to request the number of Georgia
residents hired (in addition to all hires). This can be used to
more accurately present information on “Georgians hired” in
press releases for individual projects. However, GDEcD has
not changed its agency performance measure to exclude
nonresident workers from “work days created by film and
television production.”
GDEcD’s Response: While GDEcD agrees with the status, it
“stands by its reporting of the direct spend and job figures
related to the film industry in Georgia, as this information
comes directly from its expenditure form collected from all
applicants, as well as other reputable sources.”
5
The number of workers in film production is typically lower than the number of jobs. Workers can hold multiple jobs when
they move to a new job once a production (e.g., movie or commercial) is completed. Jobs may also be held by nonresidents.
Impact of the Georgia Film Tax Credit
3
Impact of the Georgia Film Tax Credit
Follow-Up Review, October 2022
Original Findings/Recommendations
Current Status
Finding 4: A significant portion of the credit’s
benefits accrue to other states.
Our report noted that 88% of the 2016 credit went
to production companies with no permanent
locations in Georgia, and 53% of wages used
toward the credit were paid to nonresidents.
Nonresidents typically hold higher paying jobs
such as principal actors, directors, and department
heads. Most other states (65%) with a film incentive
had provisions that required or incentivized hiring
residents over nonresidents, but Georgia’s credit
did not. Additionally, production companies could
use out-of-state vendors for on-site services. We
also noted that most projects were not audited,
and for those that were, auditors did not always
identify and disallow out-of-state expenditures.
We recommended that the General Assembly
consider changing the credit’s provisions to
reduce credits allowed for out-of-state workers
and service providers.
Partially Addressed –While the General Assembly did not
change statutory provisions that allow expenditures for out-
of-state vendors and workers, it did pass a new audit
requirement to identify ineligible expenditures. This provision
from House Bill 1037 should reduce credit amounts earned
for expenditures incurred outside the state.
No changes have been made to incentivize hiring Georgia
residents over out-of-state workers and service providers. As
a result, productions receive the same incentive (up to 30%)
for hiring nonresidents, allowing significant economic benefits
from the credit to flow to other states.
However, changes were made in response to our report on
the credit’s administration, which recommended mandatory
audits and stronger controls to prevent ineligible out-of-state
expenditures. (The follow-up report is available at:
Administration of the Georgia Film Tax Credit.) In 2020, the
General Assembly passed House Bill 1037, which clarified that
expenditures are only eligible for the credit if they occur in
Georgia. For example, nonresident wages are still eligible for
the credit, but only if the work is performed in-state. The
legislation also required audits for any film project
6
receiving
the credit, which should help to detect and disallow ineligible
out-of-state expenditures. Additionally, DOR (which oversees
the audits) implemented new standards for expenditure
eligibility that better consider economic impact, such as
requiring auditors to assess where services were performed
and disallowing most goods shipped from out-of-state by an
in-state vendor.
GDEcD’s Response: “GDEcD contends that the legislature
addressed this finding in HB 1037, by requiring mandatory
audits on all productions. Further, GDOR has addressed this
finding through its related audit procedures. It is within the
legislature’s purview to decide whether to take additional
action related to this finding.”
6
Projects from qualified interactive entertainment production companies are exempt from the audit requirement.
Impact of the Georgia Film Tax Credit
4
Impact of the Georgia Film Tax Credit
Follow-Up Review, October 2022
Original Findings/Recommendations
Current Status
Finding 5: Most states with a film incentive have
program caps to limit the fiscal risk to the state.
Most other states (87%) with a film incentive have
a cap to limit the total incentive amount (a
program cap) and/or a cap for individual projects.
However, Georgia did not cap its credit (with the
exception of qualified interactive entertainment
companies). As a result, film tax credits had grown
to $915 million in 2017 (as of March 2019) and
represented an increasing percentage of state
income tax receipts each year. During our review,
Georgia had the largest film incentive of any state.
We recommended that the General Assembly
consider options for capping the film tax credit to
reduce the fiscal risk to the state. Alternatively, the
General Assembly could consider other provisions
to reduce the cost of the credit, such as excluding
above-the-line (e.g., principal actors, directors) or
nonresident wages.
Partially Addressed – Though considered during the 2022
legislative session, no cap on the film tax incentive has been
implemented.
In 2022, the Senate Finance Committee passed a version of
House Bill 1437 that would have capped the film tax credit at
$900 million per year. However, this provision was removed
prior to final passage of the bill.
The annual credit amount has grown since our audit. As
shown in Exhibit 1, the credit reached approximately $961
million in 2019. Though actual credit amounts cannot yet be
determined for more recent years, GDEcD estimates for fiscal
years 2021 and 2022 exceed $1 billion, making Georgia’s the
largest film incentive of any state. New York and California
7
have the next largest incentive amounts, which are capped
at $420 million per year.
As a percentage of state income tax receipts, the credit has
grown in a pattern similar to Exhibit 1. The credit reached
8.2% of income tax collections in 2017, before falling to 6.9%
in 2018 and rising again to 7.1% in 2019.
In addition, our original report noted that outstanding film tax
credits had reached $1.7 billion as of March 2019. These were
credits already earned by production companies (through tax
year 2017) but not yet claimed against taxes. DOR indicated
this amount had fallen to $1.4 billion in outstanding credits
(through tax year 2019), as of June 2022. The decrease is
likely due to production shutdowns during the COVID-19
pandemic (resulting in fewer credits earned) and delays in
earning the credit due to the new audit requirement from
House Bill 1037.
7
California’s credit is typically capped at $330 million. However, the cap was increased to $420 million in 2021 for a period
of two years.
Impact of the Georgia Film Tax Credit
5
Impact of the Georgia Film Tax Credit
Follow-Up Review, October 2022
Original Findings/Recommendations
Current Status
Finding 6: Limited information has been available
to decision makers and the general public
regarding the film tax credit.
Our report noted that Georgia had no process in
place for evaluating the film tax credit or other
incentives. We also found that Georgia did not
permit disclosure of individual companies or
projects receiving the credit, unlike most other
states (74%) with a film incentive.
We recommended that the General Assembly
consider requiring periodic, objective evaluations
of the film tax credit program and amending state
law to require DOR to disclose the production
company, production name, and credit amount for
each project receiving the credit.
Partially Addressed – The General Assembly passed
legislation to provide for economic evaluations of tax
benefits. However, no changes were made to require or
allow the disclosure of projects receiving the film tax credit.
In 2021, the General Assembly passed Senate Bill 6, known as
the “Tax Credit Return on Investment Act of 2021.” Effective
July 2021, the legislation allows the General Assembly to
request economic analyses of tax benefits, such as credits,
deductions, and exemptions. The chairpersons of the House
Ways and Means Committee and the Senate Finance
Committee may each request analyses of up to five specific
provisions per year. The Department of Audits and Accounts
contracts with economists to conduct the analyses, which
must include net change in state revenue, net change in
state expenditures, net change in economic activity, and net
change in public benefit (if applicable). Under Senate Bill 6,
analyses on two tax credits, Georgia Agribusiness and Rural
Jobs Act and low-income housing, have already been
published.
The General Assembly has not passed legislation requiring
the disclosure of projects or companies receiving the film tax
credit.
6 Findings
0 Fully Addressed
4 Partially Addressed
0 Not Addressed
2 No Recommendations
This page intentionally left blank
