The Georgia State Film Tax Credit – A 7 Step Cycle
September 15, 2014 2 Comments
The purpose of this article is to introduce Indie Producers, and CPA’s new to film, the workings of film tax incentives in the booming State of Georgia. In most cases Georgia’s documents are very clearly laid out. In this article I have stripped down the full cycle from start of finish into 7 steps, with references to key forms and legislation, with a tip or two thrown in.
Indie Producers need to know this so they can bring some financing to the table when searching for funding. CPA’s need to know this to be able to provide services to their filmmaking clients.
1. The Rate and Type of Tax Credit Offered
Rate of tax credit is a 20% base + 10% if use the Georgia Logo – a no-brainer – of course we will use the Georgia Logo and add it to the credit roll (5 seconds of exposure required). So, 30% is the rate. Reference: Rules of the GA Dept of Economic Development, Chapter 159-1-1.01(1). The type of tax credit is referred to as a “Transferable Tax Credit”; that is, you can sell the tax credit to a Georgia taxpayer who can then apply that tax credit to their state tax liabilities.
2. Estimate the Tax Credit as Part of the Financing
The Tax Credit is the one thing that the Indie Producer can bring to the table as a Producer. This is key and fundamental to BEING a Producer. Essentially all labor qualifies up to $500,000 per person on payroll, as well as all non-labor costs that have a real Georgia address. So, work through your budget estimating at 30%. Reference: Rules of the Dept of Rev., Income Tax Div Chapter 560-7-8-.45(6)(c) and (d) and (f).
Note that the project will not qualify for the tax credits if it is not fully funded/financed anyway, so estimating the tax credit is a crucial first step to arranging the financing. See Reference: Rules of the GA Dept of Economic Development Chapter 159-1-1.04(3)
3. Applying for Certification to be a “Qualified Project”
See the application form by clicking here. It is pretty straight forward. It’s interesting to note that the application does not require a budget, but it does require a script. Also, the application cannot be made prior to 90 days of principal photography – so, you really should have all of your ducks in a row by then, down to the key cast and crew. Reference: Rules of the GA Dept of Economic Development Chapter 159-1-1.04(1)
4. “Qualified Production Expenses” Gathered in the “Georgia Expenditure Form”
See the Georgia Expenditure Form by clicking here. You would get these costs from the production’s Final Cost Report. Note: The film accountant would need to have a good understanding of what qualified as an expense and be tracking those costs within the general ledger. The State of California publishes a great document called Expenditure Tracking Tips. Download it by clicking here. It’s very useful.
5. Claiming the Tax Credit from the State
See the Film Tax Credit Form by clicking here. You need to file this completed form attached to the original certification received in #1 above, along with the production company’s Georgia income tax return. Reference: Rules of the Dept of Rev., Income Tax Div Chapter 560-7-8-.45(8)(a). Per 560-7-8-.45(8)(b)2 the State has 120 days to review the credit and make a determination. The better the presentation, the faster the review – thus, the recommendations on the Georgia site to use a CPA even though it isn’t mandatory. (BTW I know an experienced Georgia CPA who is quick and excellent if you need one – not me; honestly, it’s not something I like doing).
6. Selling the Tax Credit (“Letter of Eligibility”)
Once the review is successful the state will issue a “Letter of Eligibility”. Reference: Rules of the Dept of Rev., Income Tax Div Chapter 560-7-8-.45(8)(b)(3). You can now market this letter to the highest bidder. It’s best to use a broker here – again, I have a reliable acquaintance experienced in brokering these Letters of Eligibility. The goal is to sell the tax credit for more than 85% of its value to a Georgia taxpayer who has state tax liabilities. Note that the tax credit can be sold in multiple pieces to different taxpayers; however, the credits cannot be re-sold. Reference: Rules of the Dept of Rev., Income Tax Div Chapter 560-7-8-.45(11)(b).
7. File Notice of Credit Transfer
You’re not quite finished yet. Now you need to file a Notice of Tax Credit Transfer (Form IT Trans) with both the Dept of Economic Development and the Dept of Revenue within 30 days of each sale of the film tax credit. Reference: Rules of the Dept of Rev., Income Tax Div Chapter 560-7-8-.45(11)(d).
Wheww. Now you’re done! If you need help working your way through any part of the above, please send me a comment.
See http://www.filmaccounting.com for my most recent workshops.