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Across the Entertainment Industry, governments use film tax credits to attract productions, boost local employment, and increase tourism and business activity. These incentives have become a cornerstone of film financing, helping offset production costs while encouraging studios to shoot within a specific jurisdiction. Two of the most common types are refundable and transferable credits. While both provide meaningful cost relief, they differ significantly in timing, process, and cash flow benefits. Understanding these differences is essential for producers, investors, and financial advisors navigating film industry tax incentives.
Refundable film tax credits are considered the most direct and predictable incentive. When a production’s tax credit exceeds its state tax liability, the remaining balance is refunded in cash by the state government. Even if the production owes no state taxes, it can still claim and receive the refund after submitting the proper filings, cost certifications, and audit documentation.
Many states, including Hawaii and New Mexico, offer refundable film tax credit programs designed to attract in-state production spending. Hawaii provides a 22 percent credit for productions on Oahu and 27 percent on neighboring islands, while New Mexico offers a 25 percent refundable base credit on qualified expenditures. Both programs require pre-approval, detailed expense documentation, and a final audit or certification after filming. Although the approval process can take several months, refundable credits give producers full-value benefits without the need to sell or transfer them.
For instance, if a production spends $1 million in a state offering a 30 percent refundable credit, it will receive $300,000 in cash after certification and filing. This structure provides producers with certainty and transparency in budgeting. Refundable credits are often viewed as lower risk because the payment comes directly from the government, not the marketplace.
Transferable film tax credits provide flexibility for productions that do not owe taxes in the jurisdiction where they film. In these cases, the credit can be sold or transferred to another taxpayer,such as a corporation or individual, with sufficient tax liability to use it. The seller receives cash from the buyer, typically at a discounted rate.
Georgia’s program under the Georgia Film Tax Credits is one of the most well-known examples. Productions can earn up to a 30 percent transferable credit for qualified in-state expenditures, with 20 percent as a base credit and an additional 10 percent for including the Georgia promotional logo in the final product. Georgia film tax credits are commonly sold through brokers at prices ranging from $0.87 to $0.97 per dollar of credit, allowing the purchasing taxpayer to effectively reduce their state tax liability by 3 to 13 percent.
This model offers faster liquidity compared to waiting for a refund, but it requires additional steps, including negotiation, legal agreements, and brokerage assistance. Productions must also maintain meticulous financial records to ensure that all qualifying expenditures are eligible.
| Feature | Refundable Credit | Transferable Credit |
| Monetization | Cash refund from the state | Sold to another taxpayer for cash |
| Value | Full face value | Discounted, typically 3 to 15 percent |
| Timing | Payment after filing and approval | Cash upon successful sale |
| Complexity | Simpler process | Requires buyer, contract, and compliance |
| Risk | Low, depends on audit approval | Subject to market pricing and buyer demand |
Refundable credits are often more predictable but slower to pay. Transferable credits provide quicker access to cash but at a reduced value and with added administrative work.
Whether refundable or transferable, film incentives require thorough recordkeeping and financial review. States often mandate an independent CPA examination of qualified expenditures before issuing credits or refunds. Documentation must include invoices, payroll records, vendor contracts, and proof of in-state spending.
Working with professionals familiar with entertainment accounting can help ensure compliance with each jurisdiction’s requirements. Bennett Thrasher, for example, provides Audit Services and consulting support that assist film and television productions in preparing cost certifications, managing audits, and maintaining proper internal controls. These steps not only satisfy state regulators but also protect productions from potential disallowances or delays in payment.
For productions using transferable credits, additional diligence is required when negotiating sales. Contracts should clearly state the credit amount, transfer terms, and any buyer warranties. Sellers should confirm that buyers meet state eligibility requirements to avoid transfer complications.
When comparing film tax credits by state, productions should evaluate their overall tax exposure, financing structure, and cash flow needs. Refundable credits work best for companies seeking full-value returns and willing to wait for the refund process. Transferable credits are often ideal for special-purpose entities or out-of-state producers who need faster liquidity.
In both cases, planning early is essential. Understanding local requirements, application deadlines, and audit processes can prevent missed opportunities. Productions should also budget for administrative expenses, including audit fees and potential brokerage costs.
Both refundable and transferable models play a vital role in tax credits for film programs nationwide. Each supports job creation, local spending, and infrastructure investment. Staying informed through a National Update on Entertainment Incentives can help producers choose the right jurisdiction and structure for their projects.
Finally, working with experienced advisors ensures compliance and maximizes incentive value under every refundable entertainment incentive credit program. With proper planning and documentation, productions can unlock the full potential of these incentives while maintaining financial transparency and efficiency.
For more than four decades, Bennett Thrasher has provided businesses and individuals with strategic business guidance and solutions through professional tax, audit, advisory, and business process outsourcing services. Contact Nina Desai partner in charge of Bennett Thrasher’s Credits & Incentives Practice, or call us at 770.396.2200.
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