The Georgia House has just approved HB1180, legislation closely followed by the entertainment industry since it alters a key element of the transferable tax credit that’s drawn film and television production to the Peach State — capping the amount that can be transferred in any one year.

The change would only impact companies or producers that don’t have Georgia tax liability. They can’t use the tax credits so sell (or transfer) them to local high-worth individuals or businesses in what’s become a booming market. The annual cap will not apply to Georgia-based producers like Tyler Perry, who can use the credits directly.

The bill now heads to the Senate, then to the governor’s desk. Prevailing wisdom sees it sailing through, as it did in the House, with a 131-34 vote, albeit with some opposition on the floor from members who highlighted the tax credit’s $4 billion of economic impact and standout record for job creation.

“There’s a saying, ‘If it’s not broke, don’t try to fix it.’ We have grown to the third in the word [in production] because we do not have a cap. Other states are looking at removing their caps. They are looking at what drives the industry, and they are trying to mirror that,” said Rep. Long Tran. “We are competing globally, and this industry is rapidly changing.”

“I worry that if we are not gentle and nuanced in how we work with the tax credit that the people we hurt are not the Bob Igers or the David Zaslavs of the world. We are going to hurt Georgians” – drivers, carpenters, caterers, “the small mom and pop vintage costume shop that … has grown three times in size to be able to serve film,” said Rep. Betsy Holland. “Don’t scare away the tremendous amount of business [behind] billions of dollars of impact for our community.”

The changes, which would take effect in 2026, limit annual tax credit transfers to 2.5% of the state budget, which would come to about $900 million currently. It’s first-come, first-served. Eligible transfers above the limit one year would be honored the next, so it’s not a hard cap.

Neither Hollywood nor Georgia sound stage-owners wanted this of course, preferring the no-cap status quo. Studio executives have been on the ground working closely in and with the state to end up with something palatable. Is it? Yes, says one studio insider. Georgia “will still be a desirable place” to film.

“We are confident Georgia will maintain its position as a top choice for film and television production. Throughout the legislative process, Georgia House legislators have shared their intent to support the film industry with a stable film tax incentive that is viable for the long term,” said Kelsey Moore, Executive Director of Georgia Screen Entertainment Coalition.

Advocates note that $900 million is a big number and will continue grow along with the budget, which has increased about 7% annually over the past five years. They say productions will continue to gravitate to Georgia’s infrastructure, developed in leaps and bounds over the past 15 years. That includes a skilled crew base, many trained locally by the Georgia Film Academy, which has launched programs at high schools and colleges around the state.

Opponents worry the bill could limit promised opportunities for the young people in these programs by discouraging production.

They also say it’s not a great for smaller productions and indie films, whose financing is often contingent on tax credits. The bill’s sponsors made it clear at House hearings that they’re mostly interested in attracting big-ticket projects.

The rational for the cap is that the state needs some predictability in revenue but can’t if its largest tax incentive has no annual limit. Legislators who back the cap insist they’re fully committed to the film industry, just want visibility. They promise the legislation will ensure the tax credit is sustainable long term, not scrutinized at the Georgia State House year after year.

“The credits catapulted our state to the forefront of the entertainment industry,” said Rep. Clint Crowe. “However, as the industry has flourished, so too have the costs to our state revenue.” He called the bill “a delicate balance between incentivizing production companies and safeguarding taxpayers interests.”

“The 2.5% is not a cap. What it is, is a limit against the state’s liability in any given year,” said Rep. Shaw Blackmon.

Based on numbers from the GA Department of Revenue for the past six years (2016-2022), the tax credit estimated by the Georgia Department of Economic Development, based on applications for certified productions, was an estimated $1.2 billion in 2021, and $1.3 billion in 2022. The official tax credit generated those years was considerably less, at $641 million and $410 million, respectively, due to a longer audit process that phased in for 2021. Before that, the numbers for estimated and official credits were closer since productions could apply for the credit and complete the audit in the same year, now they mostly can’t.

The highest annual credit total over the six years was $860 million in 2019 (from an $944-million estimate).

So it looks like $900 million is a fine number in terms of covering tax credit transfers in any one year — it’s just that neither the bill’s backers, nor its opponents, have much to gain strategically by trumpeting that as it heads to the Senate.

Still, change can create uncertainty.

“Typically, businesses’ response to uncertainty is to take their business elsewhere,” said bill opponent Rep. Derrick Jackso