The Georgia Department of Revenue issued proposed film tax credit regulations on August 22, 2017. The regulations are open to comment until September 26, 2017.
What are the main changes?
The primary reason for the regulations appears to be the implementation of statutory changes to the film tax credit for interactive digital entertainment companies (the minimum payroll expense threshold to claim credits was lowered to $250,000). That being said, the following were the substantive changes applicable to film and television.
Deletion of the Shooting Schedule
The most concerning was the deletion of the “shooting schedule” method of allocating payroll expenses. The existing regulations provide that payroll and 1099 contractor expenses be allocated based on time spent by the individual working in the state. However, there is a safe harbor allowing allocation based on shooting days in the state if you can’t track actual time spent in the state. The “shooting schedule” method of allocation was replaced by the more generic language “or some other reasonable method which approximates the actual time spent in Georgia”;
Another substantive change was actually a liberalization. Under the old rules, if you wanted to claim credits against payroll withholding taxes you had to do it at least 30 days before the filing of your tax return. The proposed rule would allow you to make the election 30 days after the due date for filing the return.
Using a Pure Pass-Through Company
The proposed regulation incorporates language for a bulletin that made it clear you can’t use a pure pass-through company. Under the proposed language, purchases/rentals of property from a Georgia vendor only count for credits if the vendor ordinarily holds such property in inventory;
Clarification of Expenses
The proposed language clarifies you can’t take expenses related to publicity.
Services Not Performed on Filming Site
The proposed language makes it clear that expenses incurred to a Georgia vendor for services not performed at the filming site (e.g., insurance and payroll services) need to be allocated within and without Georgia if the services are performed within and without the state. Under this language, you would arguably have to allocate payments to insurers and payroll companies based on how much of the film is shot in Georgia, versus taking the whole fee.
The proposed rules would only allow per diems based on US General Services Administration rates.
If you have questions about the proposed regulations or other entertainment tax credits, contact Peter Stathopoulos by calling 770.396.2200.