Georgia’s entertainment industry has enjoyed explosive growth, in large part due to our state’s generous tax credits and incentives. Those tax advantages did not spill over into the music side of the performing arts until the Georgia Music Investment Act (HB 155) was passed in January 2018. While the goal was to bring investment and music production to Georgia, there were weaknesses in the original legislation that kept it from being the boon to the local economy that it could be.
On February 19, 2019, several Georgia legislators proposed an amendment to the Georgia Music Investment Act, HB 347. If passed, it will provide a welcome boost for the industry – and the state.
Highlights of the amendment include:
- Transferability and salability of credits
- Increase in percentage of production expenditures considered for tax credits (from 15% to 30%)
- Lowering of thresholds
- Removal of the 12-month period from the definition of “performance”
- Change in limitation of origination and debut
- Ability to aggregate expenditures
Significant work went into educating legislators on the specifics needed to make the Act more robust and effective. Among those actively promoting changes to the original act was Doug Shipman, President and CEO of The Woodruff Arts Center. Just two days after the amendment was proposed, we spoke with Shipman about the features of the amendment and potential benefits that passage could bring to Georgia.
Giving Georgia a Competitive Advantage
While arts organizations form a nationwide community, they are often competitive. For instance, theaters around the country compete for original shows that will be Broadway-bound. The Alliance is in competition for these productions with other theaters around the country, including those in New Haven, Seattle, D.C. and La Jolla, according to Shipman. All performing arts – whether theater, ballet or opera – require layers of talent and local resources to reach an opening curtain. Set design and construction, costume production, residences for actors, hotels and more are all involved in a production premiere. Shipman says that having the music tax credit (as amended) as part of the package for those looking for the best place to produce these Broadway-bound musicals for the first time would actually “give us a huge competitive advantage on the national landscape. And it would do exactly what it’s supposed to do – bring folks here that would potentially go elsewhere.”
The Biggest Wins from the Amended Act
According to Shipman, two elements of the amendment stand out: transferability of tax credits and the increase in percentage from 15 to 30%.
Nonprofits are unable to directly take advantage of the original act to offset taxes. Most of the people who invest and produce Broadway-bound shows are not creating Georgia income tax, since they’re based in other states, such as New York or California. The ability for them to create credits and transfer or sell them to someone in Georgia is the “key that has been unlocked.” According to Shipman, though this can obviously be very beneficial to the Alliance or even the Atlanta Symphony Orchestra, there are “others who are making similar kinds of work: Kenny Leon comes to mind, as well as the ballet and opera – any genres could make musical type of work that could be done here that might otherwise be done elsewhere. Literally, if transferability were adopted, we believe we could immediately put it to good use and attract the kind of shows that create jobs and activity for Georgia- based businesses.”
Increase in percentage considered for tax credits:
The original Georgia Music Investment Act provided a tax credit of up to 15% of qualified expenses in Georgia related to musical production and performance. The proposed amendment doubles that percentage, putting it at the same level as the credit allowed film and entertainment. The percentage can be increased by another 5% if the qualified expenditures occur in a county designated as Tier 1 or Tier 2 (view 2019 tier listings here; updated each January). In any case, the impact stands to be significant.
Qualified expenses include such things as set construction and operation; wardrobe, makeup; photography and sound synchronization, expenditures incurred with Georgia companies for sound recordings and musical compositions; rental of facilities and equipment; leasing of vehicles; costs of food and lodging; total aggregate payroll; talent and producer fees; technical fees; crew fees; per diem costs paid to employees; airfare, if purchased through a Georgia travel agency or travel company; insurance costs and bonding, if purchased through a Georgia insurance agency.
Caps and Sunset Date
The tax credits are capped as follows with the law sunsetting January 2023.
|Taxable year:||Maximum aggregate amount of tax credits:|
|Beginning 1/1/18 and before 1/1/19||$5 million|
|On or after 1/1/19 and before 1/1/20||$10 million|
|On or after 1/1/20 and before 1/1/23||$15 million|
How to Apply
Until the state legislature votes on the amendment, the application – and qualifications – follow the original Georgia Music Investment Act. The application can be downloaded here. Stayed tuned to this page and we will update the application link if the amendment passes.
Though the sunset date for the act is four years away, Shipman is very conscious of the time it takes to affect legislation and the need for ongoing support for these types of credits – both music and film. “From our vantage point, we have TV and movies that film on The Woodruff campus. We get rental income and other benefits. Also, the impact of film and TV on actors, costume designers, writers, directors and set builders has been enormous. The state’s entire performing arts community has benefited greatly from the film and TV tax credit. The people here working on those projects end up in your theaters. Continuing to ensure the industry thrives is important to our world.”
If you have any questions regarding the Georgia Music Investment Act, please contact a member of our nonprofit team by completing the contact form on this page or call 404-874-6244.