Georgia is unique amongst the states with large entertainment incentive programs in that there is no audit required to claim and sell Georgia entertainment tax credits. Nonetheless, many production companies choose to have their qualified production expenditures voluntarily audited by a third party CPA firm or by the Georgia Department of Revenue (the “Department”) as a prerequisite to selling their entertainment tax credits.
Historically, there have not been many “involuntary” audits of production companies (meaning random selection for income tax audits like any other taxpayer). However, the Department appears to be ramping up involuntary audits of production companies, focusing on qualified production expenditures and resultant entertainment tax credits. These audits are mostly being performed by the same group that performs the voluntary audits. The Department does not appear to be treating these as audits requiring the taxpayer to reimburse the Department for the costs of the audit.
The group that performs the voluntary audits has historically been reasonable in interpreting Georgia’s statutes and regulations governing the incentive program. However, the Department appears to be tightening in certain expense categories, most notably “excessive” travel and “extravagant” expenses.