(The Center Square) – Additional oversight may be on the way for an entertainment tax incentive program that costs Georgians millions of dollars.
A bill heading to Gov. Brian Kemp's desk would require an audit of film and TV projects that receive the tax credits and would limit the expenses that can be claimed in the process.
The measure, House Bill 1037, received final approval from the General Assembly on Friday, but Kemp needs to sign the bill for it to become law.
According to industry leaders, the Georgia film tax credit has transformed the state into the Hollywood of the South. The incentive program, however, cost the state nearly $900 million in tax revenue in 2019, which was about 3.1 percent of the state's budget.
The program offers up to a 30 percent tax credit to production companies that spend at least $500,000 on selected projects in the state.
State auditors published two reports in January that highlighted shortfalls in the program.
Auditors found state officials exaggerated the program's economic effect, and the incentives were issued to more than 80 ineligible productions, costing taxpayers $60 million.
While the Georgia Department of Economic Development reported spending outcomes from the production credit of $4.1 billion in 2016, considering the foregone revenue that had could have been spent on education and health care, auditors said the credit's actual output is about $2.8 billion.
There also were questions surrounding the number of in-state jobs the industry produced.
Georgians acquired 80 percent of the jobs on the productions that received the tax incentive, but more than half of the wages were paid to nonresidents, according to auditors. Nonresident labor accounted for $245 million of credited projects in 2016.
State auditors recommended stricter review measures for the program.
Economic Development officials disagreed with the auditors' conclusions on the ineligible credits but agreed with the need for greater oversight. Officials said the department was crippled by a lack of resources to increase safeguards.
If HB 1037 becomes law, starting on Jan. 1, 2022, an independent auditor or the Department of Revenue will review participating productions that are requesting a credit greater than $1.25 million.
The state would screen and approve the private accountants before the audit.
All production companies applying for credits would need to follow the audit requirements by Jan. 1, 2023.
The measure would hold 10 percent of the credit, set aside for companies that promote Georgia in their work, until the distribution of the project. It also would reduce the carry forward period for the credits from five years to three years.
The bill would stop work or services done, or purchases made outside of Georgia, from being counted by production companies as expenditures toward the credit.
The House voted, 154-10, to approve the final version of the bill Friday. The Senate passed HB 1037 with a 45-1 vote June 25.
Some lawmakers have called for an expansion of the incentive program.
However, Sen. Chuck Hufstetler, R-Rome, chairman of the Senate Finance Committee, said last week the committee would consider putting a cap on the credits next year.