Tax Credits Help Georgia Lure Film Productions

The law's economic impact has been huge: According to the Georgia Department of Economic Development, the entertainment industry's spending in the state increased from $262.1 million in 2007 to $770.2 million in 2009.

Atlanta has hosted filming of both Super Psycho movies. The movies are irreverent take-offs on the MTV reality show My Super Sweet 16, which focuses on the party habits of over-privileged teens. POPfilms' producer Alexander Motlagh owns the company with director Jacob Gentry, who met Motlagh while at the University of Georgia. Motlagh made movies in Georgia long before the 2008 tax credits, but the law is a major reason the Super Psycho makers came back to make the second one in Georgia, he said. Of the 80 or so people Motlagh says are working on the set, only one isn't local ' the cinematographer.

Andrew J. Velcoff, an entertainment lawyer at Greenberg Traurig in Atlanta whose practice focuses almost exclusively on television, film, intellectual property and marketing, has done work related to a number of movies filmed in Georgia, including serving as local counsel for Disney on the Miley Cyrus film, The Last Song. Velcoff says the state first enacted an entertainment-related tax credit law in 2005, but it offered lower incentives and was so complicated it was rarely used. The 2008 law, by contrast, is simpler to interpret and offers companies that spend at least $500,000 in the state a base tax credit of 20%. An additional 10%, he says, is available for any producer who includes an animated Georgia peach logo.

Tax Credits for Sale

Velcoff says the original production company earning the credits may use them to pay state income taxes or payroll taxes. But most of the big Hollywood-based companies lured here by the law don't have significant Georgia tax liability, he explains, so the law allows them to sell their credits.

Atlanta-based Peter G. Stathopoulos, a shareholder with accounting firm Bennett Thrasher and a tax attorney who's of counsel at Macey, Wilensky, Kessler & Hennings, explains how the process works. Bennett Thrasher, says Stathopoulos, essentially audits the credits prior to the sale, issuing what are colloquially called “comfort letters” that certify what the credit is worth in the market. Then, he says, Macey Wilensky handles the transfer agreement and legal closing of the credit sale.

Credits usually are sold either by the company that generates them or through a broker at a roughly 15% discount. The buyers tend to be consortia of high-net-worth individuals or companies who pay taxes here. The purchasers may use the credits to defray their own Georgia income taxes. Production companies also can pre-sell their credits and then borrow against them, although the discount for pre-sold credits may rise to 20%.

“It's a good deal, because let's say you have $100,000 Georgia tax liability. You can buy these credits for between 82 cents and 89 cents on the dollar and get an immediate discount on your taxes,” says Stathopoulos, whose clients also include producers The Weinstein Co.

Stathopoulos says client Warner Bros. has generated about $15 million in tax credits so far in 2010; in 2009, the company generated about $29 million in credits. To create those credits, Warner Bros. invested roughly $75 million in film and television productions in Georgia last year ' more than any other company, Stathopoulos says. Projects include the feature films Life as We Know It, starring Katherine Heigl; Hall Pass, starring Owen Wilson and Jenna Fischer; and TV shows The Vampire Diaries and Past Life. Bob Fisher, Warner Bros. Pictures' Burbank-based executive vice president for financial investments, says that the studio has sold some of its credits and is looking to sell more.

Tax Credits in Other States

At least 44 states now offer some kind of incentives for film and television productions ' up from five in 2002 ' and 28 of them offer tax credits, according to The Tax Foundation, a Washington-based, non-partisan tax research group. But not all incentives ' or states ' are created equal. Stathopoulos, Velcoff and Weizenecker say Louisiana and Michigan offer incentives competitive with Georgia's.

According to the Louisiana Economic Development Film Office, that state offers 30% transferable tax credits, plus an additional 5% for local residents employed by the production. The Michigan Film Office reports a tax credit of up to 42%, plus additional incentives for labor and crew employment. “What really sets us apart is our infrastructure,” says Weizenecker, citing Georgia post-production facilities such as Magick Lantern, LAB 601 and Crawford Communications and the local colleges and universities that supply technical talent to staff them. Georgia's weather helps lure movie production companies too, because it allows for year-round filming in scenic cities such as Atlanta and Savannah, in the mountains or at the beach.

Velcoff mentions the large number of daily flights between Atlanta and Los Angeles. “You can't underestimate the airport,” he says. “You can put the airfare as a Georgia spend, you just have to buy [tickets] from a Georgia travel agent or a Georgia-headquartered airline.”

As his client prepares to set a woman on fire, attorney Stephen G. Weizenecker assesses the legal situation. Sending someone up in flames is, after all, inherently dangerous. But it's clear that this buff woman in a tight red T-shirt and jeans, her long hair bound into twist braids, is aware of the risk. She stands on the sidewalk, watching intently as two men and a fire marshal set blaze after blaze in a metal pan and then see how quickly they can douse the flames.

Weizenecker says he's here today to monitor safety procedures, make sure medics are on hand and see that there's someone to put out the fire before it actually burns the woman. The movie set is in Roswell, GA, where the Lewis Brisbois Bisgaard & Smith law partner stands sweating in a poorly air-conditioned commercial space that serves as the setting for a teen horror flick, My Super Psycho Sweet Sixteen, Part II. On this production, Weizenecker represents production company POPfilms and Viacom MTV.

In Georgia, the glamorous world of entertainment law has gotten a boost because of tax credits created by the 2008 Georgia Entertainment Industry Investment Act. The law provides tax credits of up to 30% for money spent on production and post-production work done here on films, TV shows, commercials, music videos and even video game development and animation. Weizenecker says his entertainment work has grown from 85% of his practice before the law's enactment to about 99%. Other local attorneys say the Act fuels their entertainment practices because companies even get credit for employing Georgia lawyers.

The law's economic impact has been huge: According to the Georgia Department of Economic Development, the entertainment industry's spending in the state increased from $262.1 million in 2007 to $770.2 million in 2009.

Atlanta has hosted filming of both Super Psycho movies. The movies are irreverent take-offs on the MTV reality show My Super Sweet 16, which focuses on the party habits of over-privileged teens. POPfilms' producer Alexander Motlagh owns the company with director Jacob Gentry, who met Motlagh while at the University of Georgia. Motlagh made movies in Georgia long before the 2008 tax credits, but the law is a major reason the Super Psycho makers came back to make the second one in Georgia, he said. Of the 80 or so people Motlagh says are working on the set, only one isn't local ' the cinematographer.

Andrew J. Velcoff, an entertainment lawyer at Greenberg Traurig in Atlanta whose practice focuses almost exclusively on television, film, intellectual property and marketing, has done work related to a number of movies filmed in Georgia, including serving as local counsel for Disney on the Miley Cyrus film, The Last Song. Velcoff says the state first enacted an entertainment-related tax credit law in 2005, but it offered lower incentives and was so complicated it was rarely used. The 2008 law, by contrast, is simpler to interpret and offers companies that spend at least $500,000 in the state a base tax credit of 20%. An additional 10%, he says, is available for any producer who includes an animated Georgia peach logo.

Tax Credits for Sale

Velcoff says the original production company earning the credits may use them to pay state income taxes or payroll taxes. But most of the big Hollywood-based companies lured here by the law don't have significant Georgia tax liability, he explains, so the law allows them to sell their credits.

Atlanta-based Peter G. Stathopoulos, a shareholder with accounting firm Bennett Thrasher and a tax attorney who's of counsel at Macey, Wilensky, Kessler & Hennings, explains how the process works. Bennett Thrasher, says Stathopoulos, essentially audits the credits prior to the sale, issuing what are colloquially called “comfort letters” that certify what the credit is worth in the market. Then, he says, Macey Wilensky handles the transfer agreement and legal closing of the credit sale.

Credits usually are sold either by the company that generates them or through a broker at a roughly 15% discount. The buyers tend to be consortia of high-net-worth individuals or companies who pay taxes here. The purchasers may use the credits to defray their own Georgia income taxes. Production companies also can pre-sell their credits and then borrow against them, although the discount for pre-sold credits may rise to 20%.

“It's a good deal, because let's say you have $100,000 Georgia tax liability. You can buy these credits for between 82 cents and 89 cents on the dollar and get an immediate discount on your taxes,” says Stathopoulos, whose clients also include producers The Weinstein Co.

Stathopoulos says client Warner Bros. has generated about $15 million in tax credits so far in 2010; in 2009, the company generated about $29 million in credits. To create those credits, Warner Bros. invested roughly $75 million in film and television productions in Georgia last year ' more than any other company, Stathopoulos says. Projects include the feature films Life as We Know It, starring Katherine Heigl; Hall Pass, starring Owen Wilson and Jenna Fischer; and TV shows The Vampire Diaries and Past Life. Bob Fisher, Warner Bros. Pictures' Burbank-based executive vice president for financial investments, says that the studio has sold some of its credits and is looking to sell more.

Tax Credits in Other States

At least 44 states now offer some kind of incentives for film and television productions ' up from five in 2002 ' and 28 of them offer tax credits, according to The Tax Foundation, a Washington-based, non-partisan tax research group. But not all incentives ' or states ' are created equal. Stathopoulos, Velcoff and Weizenecker say Louisiana and Michigan offer incentives competitive with Georgia's.

According to the Louisiana Economic Development Film Office, that state offers 30% transferable tax credits, plus an additional 5% for local residents employed by the production. The Michigan Film Office reports a tax credit of up to 42%, plus additional incentives for labor and crew employment. “What really sets us apart is our infrastructure,” says Weizenecker, citing Georgia post-production facilities such as Magick Lantern, LAB 601 and Crawford Communications and the local colleges and universities that supply technical talent to staff them. Georgia's weather helps lure movie production companies too, because it allows for year-round filming in scenic cities such as Atlanta and Savannah, in the mountains or at the beach.

Velcoff mentions the large number of daily flights between Atlanta and Los Angeles. “You can't underestimate the airport,” he says. “You can put the airfare as a Georgia spend, you just have to buy [tickets] from a Georgia travel agent or a Georgia-headquartered airline.”