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Georgia Entertainment TaxGeorgia Entertainment Tax
CreditsCredits
Are they right for you and your
clients?
U.S. Entertainment Tax CreditsU.S. Entertainment Tax Credits
• Introduced in U.S. by Louisiana and
New Mexico in 2002
• Designed to Compete with International Production
Incentives and Currency
Exchange Variables
• The Original State Supported Economic Stimulus
Packages
• Stems Runaway Production and Creates Jobs
Georgia Entertainment IndustryGeorgia Entertainment Industry
Investment ActInvestment Act
 Originally Created and Passed by the Georgia
General Assembly in 2005 with a Multi-Tiered
Incentive Structure Totaling 17%
 Reorganized and Simplified in 2008, then Passed by
the Georgia General Assembly with a More
Competitive 20% Base Benefit and 30% Maximum
Benefit
Georgia Entertainment IndustryGeorgia Entertainment Industry
Investment ActInvestment Act
The Act Incentivizes Four Major
Entertainment Segments:
1) Film & TV Projects
2) Commercials
3) Music Videos
4) Interactive Gaming
Georgia Entertainment Industry ActGeorgia Entertainment Industry Act
Results: Gross Qualified Investments*
2007 = $262.1M
2008 = $294.7M
2009 = $770.2M
2010 = Estimated to Exceed 2009
* Figures Provided by Georgia Film, Music &
Digital Entertainment Office, a Division of the
Georgia Department of Economic Development
Georgia Entertainment Industry ActGeorgia Entertainment Industry Act
2009 GA Production Snapshot:
Film & TV Production $716.7M
Commercial Production $23.8M
Music Video Production $1.6M
Video Game Development $28M
Total Qualified Investment $770.2M
Total Economic Impact $1.37B
Georgia Entertainment Industry ActGeorgia Entertainment Industry Act
2009 GA Projects Included:
14 Major Studio Feature Films
12 Independent Feature Films
36 TV Movies or Series
251 TV Commercials
28 Music Videos
7 Major Video Game Projects
Why should a Georgia taxpayer considerWhy should a Georgia taxpayer consider
buying Entertainment Tax Credits?buying Entertainment Tax Credits?
 Tax credits are a smart way to reduce tax liability by
purchasing at a discounted rate.
• Purchasers get a direct dollar-for-dollar offset against
Georgia income taxes which can be carried forward five
years to be applied against future Georgia income taxes.
• The available credits may be purchased by single
or multiple buyers.
Why should a Georgia taxpayer considerWhy should a Georgia taxpayer consider
buying Entertainment Tax Credits?buying Entertainment Tax Credits?
Other Tax Credits:
 Low Income Housing Tax Credits (LIHTC)
 Environmental Tax Credits
 Energy Tax Credits
 Education Tax Credits
Why should a Georgia taxpayer considerWhy should a Georgia taxpayer consider
buying Entertainment Tax Credits?buying Entertainment Tax Credits?
LIHTC:
 Complex
 15-year Recapture Window
 Must be Partner
 Best for AMT Filers
Why should a Georgia taxpayer considerWhy should a Georgia taxpayer consider
buying Entertainment Tax Credits?buying Entertainment Tax Credits?
Tax Credits Sold at Discount from Face Amount
Example (Assumes 10% discount):
• Taxpayer has $5M in Georgia Income Tax Liability
• Same Taxpayer Would Pay only $4.5M to Offset $5M
Georgia Income Tax Liability
• Tax Savings = $500,000 = 11.1% Immediate Return on
the Taxpayers’ $500,000 Investment in the Tax Credits
• If Tax Credits are Purchased 60 Days Before Needed,
Buyer Gains 66.6% Annualized ROI
Entertainment Tax Credit UpsideEntertainment Tax Credit Upside
 The taxpayer does not buy any interest in the
production itself and, therefore, is not affected
by the outcome of the production or liabilities
created by the production.
 These credits are simple and easy to apply with
predictable delivery dates.
Entertainment Tax Credit DownsideEntertainment Tax Credit Downside
• One-Time, Simultaneous Transfer of All Tax
Credits From the Producer
• There is a possibility of “recapture” if the
Georgia DOR disallows any of the claimed
expenses upon audit.
• 3-Year Recapture Window (15-Year LIHTC
Recapture Window)
Protection Against RecaptureProtection Against Recapture
• Taxpayer Needs Indemnification/Guaranty to
Pay Any Assessed Taxes Related to the Credits
• Credit Status of the Guarantor is Critical
• Price of Tax Credits Will Vary Depending on
Credit Worthiness of Guarantor
Protection Against RecaptureProtection Against Recapture
 Georgia CPA Firm Performs “Agreed Upon
Procedure” to Confirm Producer’s Proper Amount of
Credits
• To Date, No DOR Audits Have Resulted in Recapture
• Recapture Rules are Much Less Complicated Than
Other Tax Credits
Does Georgia Benefit fromDoes Georgia Benefit from
Entertainment Tax Credits?Entertainment Tax Credits?
Yes. The 20% base credit result in an economic breakeven point for the
state taking into account the items below, based on a Georgia State
University Department of Economics evaluation.
This includes affects of:
Direct Spending
 Indirect pending
 Induced Spending
 Job Creation & Long-Term
Infrastructure Growth
Does Georgia Benefit fromDoes Georgia Benefit from
Entertainment Tax Credits?Entertainment Tax Credits?
The additional 10% benefit is exchanged for in-kind Georgia
branding that is distributed nationally and internationally
with every Georgia-produced film, television program, music
video and gaming product, which results in a profit for the
state.
This includes:
 1-to-1 ROI in Year One
 5-to-1 Regular Long-Term (5-Year) ROI
 25-to-1 Legacy (20+ Years) ROI
 Increased Tourism & Trade
Denise Evans-Elsbree
Principal Partner
www.gfcc.us
Denise@gfcc.us
678-409-8394
Georgia Entertainment Tax CreditsGeorgia Entertainment Tax Credits
Good for Georgia
 The Credits Spur Economic Growth
Good for Georgia Tax Credit Purchasers
 The Credits Decrease the Actual Amount Paid for
State Income Tax Liability, with an Immediate Return
on the Taxpayer’s Investment in the Tax Credits

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Are Georgia Credits RIght For You?

  • 1. Georgia Entertainment TaxGeorgia Entertainment Tax CreditsCredits Are they right for you and your clients?
  • 2. U.S. Entertainment Tax CreditsU.S. Entertainment Tax Credits • Introduced in U.S. by Louisiana and New Mexico in 2002 • Designed to Compete with International Production Incentives and Currency Exchange Variables • The Original State Supported Economic Stimulus Packages • Stems Runaway Production and Creates Jobs
  • 3. Georgia Entertainment IndustryGeorgia Entertainment Industry Investment ActInvestment Act  Originally Created and Passed by the Georgia General Assembly in 2005 with a Multi-Tiered Incentive Structure Totaling 17%  Reorganized and Simplified in 2008, then Passed by the Georgia General Assembly with a More Competitive 20% Base Benefit and 30% Maximum Benefit
  • 4. Georgia Entertainment IndustryGeorgia Entertainment Industry Investment ActInvestment Act The Act Incentivizes Four Major Entertainment Segments: 1) Film & TV Projects 2) Commercials 3) Music Videos 4) Interactive Gaming
  • 5. Georgia Entertainment Industry ActGeorgia Entertainment Industry Act Results: Gross Qualified Investments* 2007 = $262.1M 2008 = $294.7M 2009 = $770.2M 2010 = Estimated to Exceed 2009 * Figures Provided by Georgia Film, Music & Digital Entertainment Office, a Division of the Georgia Department of Economic Development
  • 6. Georgia Entertainment Industry ActGeorgia Entertainment Industry Act 2009 GA Production Snapshot: Film & TV Production $716.7M Commercial Production $23.8M Music Video Production $1.6M Video Game Development $28M Total Qualified Investment $770.2M Total Economic Impact $1.37B
  • 7. Georgia Entertainment Industry ActGeorgia Entertainment Industry Act 2009 GA Projects Included: 14 Major Studio Feature Films 12 Independent Feature Films 36 TV Movies or Series 251 TV Commercials 28 Music Videos 7 Major Video Game Projects
  • 8. Why should a Georgia taxpayer considerWhy should a Georgia taxpayer consider buying Entertainment Tax Credits?buying Entertainment Tax Credits?  Tax credits are a smart way to reduce tax liability by purchasing at a discounted rate. • Purchasers get a direct dollar-for-dollar offset against Georgia income taxes which can be carried forward five years to be applied against future Georgia income taxes. • The available credits may be purchased by single or multiple buyers.
  • 9. Why should a Georgia taxpayer considerWhy should a Georgia taxpayer consider buying Entertainment Tax Credits?buying Entertainment Tax Credits? Other Tax Credits:  Low Income Housing Tax Credits (LIHTC)  Environmental Tax Credits  Energy Tax Credits  Education Tax Credits
  • 10. Why should a Georgia taxpayer considerWhy should a Georgia taxpayer consider buying Entertainment Tax Credits?buying Entertainment Tax Credits? LIHTC:  Complex  15-year Recapture Window  Must be Partner  Best for AMT Filers
  • 11. Why should a Georgia taxpayer considerWhy should a Georgia taxpayer consider buying Entertainment Tax Credits?buying Entertainment Tax Credits? Tax Credits Sold at Discount from Face Amount Example (Assumes 10% discount): • Taxpayer has $5M in Georgia Income Tax Liability • Same Taxpayer Would Pay only $4.5M to Offset $5M Georgia Income Tax Liability • Tax Savings = $500,000 = 11.1% Immediate Return on the Taxpayers’ $500,000 Investment in the Tax Credits • If Tax Credits are Purchased 60 Days Before Needed, Buyer Gains 66.6% Annualized ROI
  • 12. Entertainment Tax Credit UpsideEntertainment Tax Credit Upside  The taxpayer does not buy any interest in the production itself and, therefore, is not affected by the outcome of the production or liabilities created by the production.  These credits are simple and easy to apply with predictable delivery dates.
  • 13. Entertainment Tax Credit DownsideEntertainment Tax Credit Downside • One-Time, Simultaneous Transfer of All Tax Credits From the Producer • There is a possibility of “recapture” if the Georgia DOR disallows any of the claimed expenses upon audit. • 3-Year Recapture Window (15-Year LIHTC Recapture Window)
  • 14. Protection Against RecaptureProtection Against Recapture • Taxpayer Needs Indemnification/Guaranty to Pay Any Assessed Taxes Related to the Credits • Credit Status of the Guarantor is Critical • Price of Tax Credits Will Vary Depending on Credit Worthiness of Guarantor
  • 15. Protection Against RecaptureProtection Against Recapture  Georgia CPA Firm Performs “Agreed Upon Procedure” to Confirm Producer’s Proper Amount of Credits • To Date, No DOR Audits Have Resulted in Recapture • Recapture Rules are Much Less Complicated Than Other Tax Credits
  • 16. Does Georgia Benefit fromDoes Georgia Benefit from Entertainment Tax Credits?Entertainment Tax Credits? Yes. The 20% base credit result in an economic breakeven point for the state taking into account the items below, based on a Georgia State University Department of Economics evaluation. This includes affects of: Direct Spending  Indirect pending  Induced Spending  Job Creation & Long-Term Infrastructure Growth
  • 17. Does Georgia Benefit fromDoes Georgia Benefit from Entertainment Tax Credits?Entertainment Tax Credits? The additional 10% benefit is exchanged for in-kind Georgia branding that is distributed nationally and internationally with every Georgia-produced film, television program, music video and gaming product, which results in a profit for the state. This includes:  1-to-1 ROI in Year One  5-to-1 Regular Long-Term (5-Year) ROI  25-to-1 Legacy (20+ Years) ROI  Increased Tourism & Trade
  • 19. Georgia Entertainment Tax CreditsGeorgia Entertainment Tax Credits Good for Georgia  The Credits Spur Economic Growth Good for Georgia Tax Credit Purchasers  The Credits Decrease the Actual Amount Paid for State Income Tax Liability, with an Immediate Return on the Taxpayer’s Investment in the Tax Credits