Audits becoming mandatory for Georgia’s Film Tax Credit

Georgia’s transferrable Film Tax Credit has proven extremely popular, contributing significantly to a sharp rise in film and television production in the state over recent years. With Georgia now recognized as the “Hollywood of the South,” high demand for this lucrative credit drove state tax authorities to revamp the program in 2020; updated rules including mandatory audits of productions that utilize the credit went into place on January 1, 2021.

Georgia House Bill 1037 specifies that the requirement that applicants undergo an audit for their projects before claiming or selling a credit will be phased in gradually. Audits are mandatory only for credits of more than $2.5 million that are first certified in 2021; the threshold decreases to $1.25 million for productions certified in 2022, and in subsequent years audits will be required prior to claiming, utilizing or transferring a film tax credit of any amount.

Audits must be performed by a CPA firm selected from a list of providers approved by the Georgia Department of Revenue (GDOR) or by GDOR itself. The audit process must be completed before the state issues final certification of any film tax credit for Georgia-based projects. Productions will be scrutinized to verify that they qualify under program regulations and to determine which activities, wages and other expenses paid as part of the project are eligible to be counted toward the credit.

Another notable inclusion in the updated law is a change in the longevity of the credit, which goes from five years to three years. Under the new rules, the credit can be transferred and claimed for three years from the last day of the tax year in which film credit receives final certification, whereas previous regulations allowed the credit to endure for five years.

In addition to those two major changes, HB 1037 makes minor revisions to program rules and provides clarification of definitions and eligible costs under the program. Together, these updates are intended to streamline the process of applying for, certifying and claiming the Georgia Film Tax Credit – a welcome development for those who had struggled with the program’s previous labyrinthine and somewhat unpredictable procedures.

Our experienced advisors to the entertainment industry assist production companies in applying, qualifying for and claiming the Georgia film production tax credits and other state, federal and local tax incentives. These credits represent a valuable opportunity to boost your bottom line and improve your competitive edge by dramatically lowering tax liability of Georgia-based projects and enhancing net profitability.

We invite you to reach out to our entertainment industry practice leader to discuss the potential benefits of Georgia Film Tax Credits for your operations. Please contact Bob Heuel to learn more about how Mauldin & Jenkins can help you at bheuel@mjcpa.com or 770.980.2360.