Targeting Georgia, Are we ready?

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Commentary from Randy Davidson, Georgia Entertainment News

The hit piece on Georgia arrived recently from a Hollywood trade publication. The Variety article implied fraud on the whole from a single accusation that has yet to be proved.

Variety asserts that Warner Bros. claimed a production tax credit in Georgia on more than $600,000 worth of airplane equipment that was never used in the state. The expenses were associated with the movie “Sully” directed by Clint Eastwood.

“As part of the effort to shift expenses to Georgia, the production went so far as to truck a small piece of airplane fuselage to a studio in Atlanta. The cost of the item matched the cost of a mothballed Airbus A320 that was used in California. The fuselage piece was not used in the film, but it was claimed as a Georgia-based expense.

“Variety learned of the alleged tax fraud from a whistleblower who asked not to be identified. The same person also reported the issue to the Georgia attorney general’s office, which stated in writing last July that it had opened an investigation. Prosecutors are awaiting the results of an audit from the state’s Department of Revenue, which oversees the film incentive program.”

I want to cover a few items that must be considered by all in Georgia’s entertainment industry. It doesn’t matter if the “source” of the article is the staff accountant of the movie, the Koch brothers or key influencers in competing states. Despite this hit piece on Georgia (hit piece as in strategically dropping names not associated with the story and editorially drawing conclusions on the whole) it brings up important issues.

Everyone appreciates the need for the tax credits to be certified.  However, Georgia’s process is significantly different than other jurisdictions that offer a film tax credit. Currently only one entity, a firm in California contracted by the Department of Revenue, is authorized to perform the audit that certifies the tax credit. The processing time for the certification is taking anywhere between eight and eighteen months. While some production companies can afford to wait for the certification to transfer the credits, others need to be able to transfer them sooner to get the full benefit of the credits.  

Georgia should take a more efficient approach to certifying the tax credits.  In New York and California, the initial review for the certification of the tax credit is handled by local authorized accounting firms. Both states have an agreed upon procedure that accounting firms follow to analyze the acceptability of the credits. After their initial review, the firm forwards the application and supporting materials to the states’ contractors.  The state’s agent reviews the application and if there are no issues certifies the tax credit application.

Not only would an in-state review process benefit productions large and small, the method followed in both New York and California for certifying the tax credits fulfills another goal of the program. Keeping the certification process in-state would provide an additional economic benefit to the accounting firms that become authorized by the Department of Revenue to perform the reviews.

“Sully’s” expenses were audited by the Georgia Department of Revenue. But auditors are unable to be on site and know if a piece of equipment is or isn’t part of the production. Further, there is no reason Warner Brothers or any reputable production company would try to do anything to negatively impact the program. It would be much more of a problem for Warner Brothers than anything that could be gained. As one source told us, “This whistleblower has provided Georgia and the industry a favor. We can show how good and tight the program is and that the production companies stand behind their accounting with the Department of Revenue.”

Warner Brothers has a long and credible history in the State of Georgia as does Clint Eastwood’s company Malpaso Productions. Another source said the emails from an unidentified person lacks similar standing. “We should allow the process in the State of Georgia to continue without pre-judging these accusations.”

Have mistakes been made? Most likely. Are there some that abuse the system for singular or limited gain? Probably. There are problems in every government program but that doesn’t mean the benefits of such programs should be ignored. If there is Medicare fraud – convict. If there is Social Security fraud – convict. If there is tax incentive fraud – convict. But don’t do away with Medicare, Social Security or film tax credits.

Other stories will come and go as we continue to succeed. Georgia has the best film incentive program in the history of the world. The incentive programs in the state have driven real and measurable results for Georgia’s economy. We have a target on our back and it’s up to Georgians to make sure the facts are not glossed over.

Randy Davidson, President

Georgia Entertainment News

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