An exhibit from the official audit of the administration of the Georgia Film Tax Credit
Last fall, North Carolina Governor Roy Cooper created a “Governor’s Advisory Council on Film, Television and Digital Streaming” to advise him “on efforts to grow and develop North Carolina’s film industry and support the work of the State Film Office.”
As I saw it, the only way this council could actually serve the public interest would be to keep reminding the governor that state film incentives don’t work and do more harm than good.
The council would likely seek to change the state film incentives from a grant program back to the (likely unconstitutional) refundable tax credits for film productions. Going further, however, North Carolina’s film incentives advocates have long been envious of Georgia’s film incentive program.
A complete disaster
Performance audits of the administration and economic impact of Georgia’s Film Tax Credit ought to put the kibosh on any Tar Heel envy of it. To call it disastrous is insufficient. This program has been operating like a train wreck starting dumpster fires on the RMS Titanic.
Here are a few findings from the administration audit for 2016. This list is by no means comprehensive; it’s a 66-page audit, and these are some the most jaw-dropping findings:
- Georgia’s Department of Economic Development (DEcD) certifies projects that weren’t even eligible (p.13)
- Georgia’s Department of Revenue (DOR) allowed “voluntary compliance” by production companies such that it still authorizes credits to companies that “fail to submit even the small amount of required documentation” (p. 13)
- A company could, in fact, purchase an item from out of state, declare it as a Georgia expenditure, receive a tax credit for it, and because Georgia allows the tax credits to be sold to other Georgia taxpayers to offset their own tax liabilities, sell that tax credit for cash on a secondary market (p. 13)
- The taxpayer who would buy that tax credit at a discount on the secondary market would use it for a Georgia tax saving at face value (p. 12)
- Companies very, very rarely use the tax credits themselves (0.13 percent); they transfer most of them (p. 10)
- DEcD had “trusting relationships” with production companies such that they took a company’s word for it that the company wouldn’t claim a tax credit for a production it had canceled, a credit the company later obtained anyway (pp. 14-15)
- “Georgia has the largest film incentive of any state but requires the least documentation” (p. 18)
- Tax credits were issued for $2.2 million in expenditures made out of state, including labor (p. 21)
- Companies receive credit amounts higher than what they earned, and nearly half (47 percent) of the records reviewed were inaccurate, costing the state a net $15.5 million more in unearned credits (pp. 28-29)
- Nineteen projects had “duplicate entries not invalidated by DOR” that “resulted in excess credits of approximately $20 million” (p. 30)
- Only about one out of five companies receiving the credits submitted completed documentation (p. 32)
- One-fourth of the credits went to projects for which no documents were submitted at all (p. 32)
- There were “16 projects, totaling $25.8 million in credits, that appear to have significant out-of-state footage” (p. 46)
- There were “15 television pilots and independent films from 2015-2018 totaling $13.1 million in credits where there was no evident the project was ever completed,” three of which “never began filming” (p. 46)