Current through Rules and Regulations filed through September 23, 2024
(1)
Purpose. This regulation provides guidance concerning the implementation and administration of the postproduction film tax credit under O.C.G.A. §
48-7-40.26A.
(2)
Definitions. As used in this regulation, the terms "affiliates", "multimarket commercial distribution", "qualified postproduction activities", "qualified production", and "total aggregate payroll" have the same meaning as in O.C.G.A. §
48-7-40.26A.
(a) "Postproduction Company" means a company that:
1. Maintains a business location physically located in Georgia;
2. Has total aggregate payroll of $250,000 or more for employees working within the state in the taxable year that the postproduction company claims the postproduction film tax credit; or for a postproduction company that has incurred at least $100,000 but less than $500,000 in qualified postproduction expenditures, has a total aggregate payroll of at least $100,000 but less than $500,000 for employees working within the state in the taxable year that the postproduction company claims the postproduction film tax credit.
3. Is engaged in qualified postproduction activities; and
4. Has been certified by the Department as provided in paragraph (3) of this regulation.
This term shall not mean or include any form of business owned, affiliated, or controlled, in whole or in part, by any company or person which is in default on any tax obligation of the state, or a loan made by the state or a loan guaranteed by the state. In the instance of a work for hire in which one postproduction company hires another postproduction company to engage in qualified postproduction activities for pay, the hired postproduction company shall be considered a service provider for the hiring postproduction company and the hiring postproduction company shall be entitled to the postproduction film tax credit for postproduction expenditures related to the hired postproduction company only if the Department certifies that the hired postproduction company is a Georgia company employing workers in this state and that the work on the postproduction expenditures is solely in this state. In order to make such certification, the postproduction company must certify on Form IT-PC that the hired postproduction company is a Georgia company employing workers in this state and that the work on the postproduction expenditures is solely in this state. If the Department determines at any time that the certification is not valid, then the Department shall disallow the postproduction expenditures related to the hired postproduction company. In the event that the hiring postproduction company does not qualify for the postproduction film tax credit, because the hiring postproduction company does not meet the definition of a postproduction company under O.C.G.A. §
48-7-40.26A and this paragraph, then the hired postproduction company would be entitled to the postproduction film tax credit forits qualified postproduction expenditures provided it otherwise qualifies.
(b) "Work for hire" means an arrangement whereby one postproduction company contracts with another postproduction company to engage in qualified postproduction activities pursuant to a production services agreement. Merely financing or providing funding to a postproduction company does not make the financing/funding company the "hiring" postproduction company for purposes of the postproduction film tax credit. In the instance of co-productions, the claiming company must attach a written agreement to Form IT-PFC when the credit is claimed as to which party will be entitled to earn and claim the tax credit. Failure to execute and attach such agreement shall result in the loss of the postproduction film tax credit.
(3)
Certification for a Postproduction Company.
(a) The postproduction company must electronically certify on Form IT-PC to the Department of Revenue through the Georgia Tax Center that:
1. The postproduction company maintains a business location physically located in this state; and
2. The postproduction company has expended or intends to expend a total aggregate payroll of $250,000 or more for employees working within this state in the taxable year that the postproduction company claims the postproduction film tax credit; or if the postproduction company has incurred at least $100,000 but less than $500,000 in qualified postproduction expenditures, that the postproduction company has expended or intends to expend a total aggregate of at least $100,000 but less than $500,000 for employees working within this state in the taxable year that the postproduction company claims the postproduction film tax credit.
(b) If the postproduction company is a disregarded entity then such information should be submitted in the name of the owner of the disregarded entity.
(4)
Qualified Postproduction Expenditures. Qualified postproduction expenditures include postproduction expenditures incurred in this state that are directly used in qualified postproduction activities, including without limitation the following: costs associated with photography and sound synchronization, expenditures (excluding license fees) incurred with Georgia companies for sound recordings and musical compositions, lighting, and related services and materials; editing and related services; rental of facilities and equipment; leasing of vehicles; costs of food and lodging; digital or tape editing, film processing, transfers of film to tape or digital format, sound mixing, computer graphics services, special effects services, and animation services; total aggregate payroll; airfare, if purchased through a Georgia travel agency or travel company; insurance costs and bonding, if purchased through a Georgia insurance agency; and other direct postproduction costs for the project in accordance with generally accepted entertainment industry practices. This term includes postproduction expenditures for footage shot inside or outside of Georgia.
(a) Depreciation, amortization, or other expense on qualified postproduction expenditures with a useful life of more than one year. The costs of qualified postproduction expenditures with a useful life of more than one year are considered "other direct costs of the qualified postproduction activities in accordance with generally accepted entertainment industry practices." Such costs shall be included in the computation of the postproduction film tax credit for the taxable year based upon the depreciation, amortization, or other expense included in the computation of Georgia taxable income of the postproduction company for the applicable taxable year. Such depreciation, amortization, or other expense shall be prorated based upon the time the asset is used in qualified postproduction activities in this state. Depreciation, amortization, or other expense on expenditures incurred before the postproduction period shall not be included in the computation of the postproduction film tax credit. In order to claim depreciation, amortization, or other expense, the qualified postproduction expenditure for the asset that generated the depreciation, amortization, or other expense, must have been incurred in this state as provided in subparagraph (4)(b) of this regulation.
(b) Qualified postproduction expenditures incurred in this state. In order to be considered to have been incurred in this state, the following rules shall apply:
1. Qualified postproduction expenditures, which are attributable to the performance of services by individuals and companies directly at the postproduction site in Georgia who were not employees of the postproduction company, shall be attributed to Georgia in the same manner as salaries as provided in subparagraph (4)(c) of this regulation.
2. Except as otherwise provided in this regulation, expenditures for services which are not performed at the postproduction site (such as insurance, service fees paid to a payroll company including workers compensation if the service fees include such, editing and related services, digital or tape editing, film processing, transfers of film to tape or digital format, sound mixing, computer graphics services, special effects services, animation services, etc.) will be allowed if the vendor is a Georgia vendor and will be attributed to Georgia if and only to the extent the service is rendered in Georgia. If the postproduction company is unable to track the cost of services rendered in Georgia, then some other reasonable method which approximates the cost of services rendered in Georgia may be used to determine the amount attributable to Georgia but such approximation will be subject to adjustment by the Department. In the event the services are subcontracted to a company that would not otherwise qualify and/or such subcontracted company renders the services outside Georgia, the expenditure for such services shall not be considered to have been incurred in this state.
3. Purchases and rentals of property. In order to include qualified postproduction expenditures for purchases and rentals of property, the property must have been used in Georgia and purchased or rented from a Georgia vendor. Purchase receipts, invoices, contracts, or other documentation shall be used to determine this.
4. Georgia Vendor. For purposes of this regulation, a Georgia vendor is a vendor that:
(i) Sells or rents property, which is regularly kept in their inventory, or provides a service not performed at the postproduction site, which is the subject of the qualified postproduction expenditure, in their ordinary course of business; and
(ii) Has a physical location in Georgia with at least one individual working at such location on a regular basis. Registering with the Georgia Secretary of State or appointing a registered agent in Georgia does not establish a physical location in Georgia.
However, a vendor that acts as a conduit to enable purchases and rentals to qualify that would not otherwise qualify shall not be considered a Georgia vendor with respect to such purchases and rentals.
(c) Salaries. Total aggregate payroll, as such term is used in this regulation, includes bonuses, incentive pay, and other compensation paid to an employee which is included in the employees Form W-2 "Wage and Tax Statement". Reimbursed expenses, per diems, or employer paid benefits and taxes are not included in aggregate payroll unless such amounts are included as wages, tips, or other compensation in the employee's Form W-2 "Wage and Tax Statement". For purposes of this regulation, the term "employee" means any officer of a corporation or any individual who, under the Internal Revenue Service rules applicable in determining the employer-employee relationship, has the status of an employee. Guaranteed payments to partners do not qualify for the postproduction film tax credit and are not included in total aggregate payroll. Except as otherwise provided in this paragraph, if the postproduction company is unable to track the actual time spent by an employee in Georgia, the postproduction company may calculate the total aggregate payroll in Georgia by some other reasonable method which approximates the actual time spent in Georgia but such approximation will be subject to adjustment by the Department. For all individuals who are paid a separate amount for postproduction, the amount that is incurred in Georgia shall be based on the amount paid for such period and prorated based on the actual time spent in Georgia by the employee in such period. If the postproduction company is unable to track the actual time spent by the individual in Georgia, the postproduction company may calculate the total aggregate payroll in Georgia by some other reasonable method which approximates the actual time spent in Georgia for such period but such approximation will be subject to adjustment by the Department.
(d) Fringe Benefits. The following benefits are attributed to Georgia in the same manner as salaries as provided in subparagraph (4)(c) of this regulation:
1. SUI (state unemployment insurance);
2. FUI (federal unemployment insurance);
3. FICA (employer portion);
4. Pension and welfare if the amounts are paid as part of pension, health, and welfare plans (these would not be required to be paid to a Georgia vendor);
5. Health insurance premiums if these amounts are paid as part of pension, health, and welfare plans (these would not be required to be paid to a Georgia vendor);
(i) Other Fringe Benefits. The following fringe benefits are attributed to Georgia as follows:
1. Meal per diems, as set forth by United States General Services Administration, if incurred in Georgia; and
2. Hotel per diems, as set forth by United States General Services Administration, if incurred in Georgia.
(e) Direct use. A postproduction company may only claim qualified postproduction expenditures that are directly used in a qualified postproduction activity. In determining whether a postproduction expenditure is directly used in a qualified postproduction activity, the Department of Revenue will consider the proximity of the expenditure to the activity as well as the causal relationship between the expenditure and the activity.
(5)
Credit Amount. Except as provided in paragraph (6) of this regulation, a postproduction company that meets or exceeds $500,000 in qualified postproduction expenditures in a taxable year as provided in O.C.G.A. §
48-7-40.26A and this regulation, shall be allowed a tax credit of 20 percent of the qualified postproduction expenditures; and an additional tax credit of 10 percent of the qualified postproduction expenditures shall be allowed if the qualified production expenditures under O.C.G.A. §
48-7-40.26 and upon which the qualified postproduction expenditures were incurred, were filmed in this state; an additional 5 percent of the qualified postproduction expenditures shall be allowed if the qualified postproduction expenditures were incurred in a tier 1 or tier 2 county as designated by the Commissioner of Community Affairs under O.C.G.A. §
48-7-40.
(6)
Credit amount for small postproduction companies. A postproduction company that has incurred at least $100,000 but less than $500,000 in qualified postproduction expenditures and has a total aggregate payroll in this state of at least $100,000 but less than $500,000 in a taxable year shall be allowed a tax credit of 20 percent of the qualified postproduction expenditures in a taxable year.
(7)
Credit Amount Limitation. A postproduction company's credit amount shall not exceed the amounts in paragraph (5) or (6) of this regulation, and for any single tax year shall not exceed the postproduction company's total aggregate payroll expended to employees working within this state for the taxable year that the postproduction company claims the postproduction film tax credit. Any amount in excess of this credit limit shall not be eligible for carry forward to succeeding years' tax liability, nor shall such excess amount be eligible for use against the postproduction company's quarterly or monthly payment under O.C.G.A. §
48-7-103, nor shall such excess amount be assigned, sold, or transferred to any other taxpayer.
(8)
Credit Cap (not applicable to small postproduction companies under paragraph (10) of this regulation). For taxable years beginning on or after January 1, 2018 and before January 1, 2023, in no event shall the aggregate amount of tax credits allowed under O.C.G.A. §
48-7-40.26A for a postproduction company exceed $10 million per tax year.
(a) The postproduction film tax credit shall not be available for taxable years beginning on or after January 1, 2023.
(b) If the aggregate amount of tax credits claimed, under paragraph (8) of this regulation, by postproduction companies during a year is less than the aggregate annual cap applicable to such year, the unclaimed portion of the aggregate annual cap shall be added to the aggregate annual cap applicable to the next succeeding year or years until it is fully claimed. Since a postproduction company can apply for preapproval and claim the credit until the end of the three year period provided in O.C.G.A. §
48-2-35, the Department will add the unclaimed portion after such three year period.
1. For example, for the 2018 preapproval year the preapproval and claiming can occur as late as September 15, 2023 (a corporation with a taxable year that begins on December 1, 2018 and ends on November 15, 2019 with an original return due date of September 15, 2020). The Department will add the unclaimed portion to the 2019 preapproval year as soon after that date as practical.
(9)
Maximum Credit Amount per Postproduction Company and Its Affiliates which are Postproduction Companies. The maximum credit amount allowed under paragraph (8) of this regulation for any postproduction company and its affiliates which are postproduction companies shall not exceed 20 percent of the aggregate amount of postproduction film tax credits available for such taxable year under paragraph (8) of this regulation.
(10)
Credit Cap for small postproduction companies. For taxable years beginning on or after January 1, 2018 and before January 1, 2023, in no event shall the aggregate amount of tax credits allowed for postproduction companies that have incurred at least $100,000 but less than $500,000 in qualified postproduction expenditures and have a total aggregate payroll in this state of at least $100,000 but less than $500,000 in a taxable year, exceed $1 million per taxable year. The credit cap under this paragraph is separate from and shall not be included in the aggregate credit cap under paragraph (8) of this regulation.
(a) The postproduction film tax credit for small postproduction companies shall not be available for taxable years beginning on or after January 1, 2023.
(11)
Preapproval for Postproduction Companies (not applicable to Small Postproduction Companies under Paragraph (12) of this Regulation). Any postproduction company seeking preapproval to claim tax credits under paragraph (8) of this regulation, must submit the appropriate forms to the Department through the Georgia Tax Center as provided in this subparagraph.
(a) Application. A postproduction company seeking preapproval to claim the tax credits under paragraph (8) of this regulation must electronically submit Form IT-PC-AP through the Georgia Tax Center. A postproduction company that has submitted its Form IT-PC for certification by the Department or that submits Form IT-PC on the same day as Form IT-PC-AP is submitted may request preapproval from the Department before meeting the requirements of the postproduction film tax credit. Such postproduction company must estimate their credit amounts on Form IT-PC-AP. The amount of tax credit claimed by the postproduction company on the postproduction company's applicable Georgia income tax return must be based on the actual postproduction film tax credit earned under O.C.G.A. §
48-7-40.26A and this regulation and cannot exceed the amount preapproved. If the postproduction company is preapproved for an amount that exceeds the amount that is calculated using the actual numbers when the return is filed, the excess preapproved amount cannot be claimed by the postproduction company nor shall such excess preapproved amount be assigned, sold, or transferred to any other taxpayer or added to the paragraph (8) credit cap. If the postproduction company is a disregarded entity then such information should be submitted in the name of the owner of the disregarded entity.
(b) Notification. The Department will notify each postproduction company of the tax credits preapproved or denied to such postproduction company.
(c) Allocation of Tax Credit. The Commissioner shall allow the tax credits on a first-come, first-served basis. The date the Form IT-PC-AP is electronically submitted shall be used to determine such first-come, first-served basis.
(d) Applications received on the day the maximum credit amount is reached. In the event that the credit amounts on applications received by the Commissioner exceed the maximum aggregate limit in paragraph (8) of this regulation, then the tax credits shall be allocated among the postproduction companies who submitted Form IT-PC-AP on the day the maximum aggregate limit was exceeded on a pro rata basis based upon amounts otherwise allowed under O.C.G.A. §
48-7-40.26A, and this regulation. Only credit amounts on applications received on the day the aggregate credit cap was exceeded will be allocated on a pro rata basis.
(e) Once the credit cap is reached for a taxable year, postproduction companies who meet the requirements of the postproduction film tax credit during such taxable year shall no longer be eligible for a credit under O.C.G.A. §
48-7-40.26A. If any Form IT-PC-AP is received after the taxable year preapproval limit has been reached, then it shall be denied and not be reconsidered for preapproval at any later date.
(f) In the event it is determined that the postproduction company has not met all the requirements of O.C.G.A. §
48-7-40.26A and this regulation, then the amount of credits shall not be preapproved or the preapproved credits shall be retroactively denied. With respect to such denied credits, tax, interest, and penalties shall be due if the credits have already been claimed.
(12)
Preapproval for Small Postproduction Companies. Any postproduction company seeking preapproval to claim tax credits under paragraphs (10) of this regulation, must submit the appropriate forms to the Department through the Georgia Tax Center as provided in this subparagraph.
(a) Application. A postproduction company seeking preapproval to claim the tax credits under paragraph (10) of this regulation must electronically submit Form IT-SPC-AP through the Georgia Tax Center. A postproduction company that has submitted its Form IT-PC for certification by the Department or that submits Form IT-PC on the same day as Form IT-SPC-AP is submitted may request preapproval from the Department before meeting the requirements of the postproduction film tax credit. Such postproduction company must estimate their credit amounts on Form IT-SPC-AP. The amount of tax credit claimed by the postproduction company on the postproduction company's applicable Georgia income tax return must be based on the actual postproduction film tax credit earned under O.C.G.A. §
48-7-40.26A and this regulation and cannot exceed the amount preapproved. If the postproduction company is preapproved for an amount that exceeds the amount that is calculated using the actual numbers when the return is filed, the excess preapproved amount cannot be claimed by the postproduction company nor shall such excess preapproved amount be assigned, sold, or transferred to any other taxpayer or added to the paragraph (10) credit cap. If the postproduction company is a disregarded entity then such information should be submitted in the name of the owner of the disregarded entity.
(b) Notification. The Department will notify each postproduction company of the tax credits preapproved or denied to such postproduction company.
(c) Allocation of Tax Credit. The Commissioner shall allow the tax credits on a first-come, first-served basis. The date the Form IT-SPC-AP is electronically submitted shall be used to determine such first-come, first-served basis.
(d) Applications received on the day the maximum credit amount is reached. In the event that the credit amounts on applications received by the Commissioner exceed the maximum aggregate limit in paragraph (10) of this regulation, then the tax credits shall be allocated among the postproduction companies who submitted Form IT-SPC-AP on the day the maximum aggregate limit was exceeded on a pro rata basis based upon amounts otherwise allowed under O.C.G.A. §
48-7-40.26A, and this regulation. Only credit amounts on applications received on the day the aggregate credit cap was exceeded will be allocated on a pro rata basis.
(e) Once the credit cap is reached for a taxable year, postproduction companies who meet the requirements of the postproduction film tax credit during such taxable year shall no longer be eligible for a credit under O.C.G.A. §
48-7-40.26A. If any Form IT-SPC-AP is received after the taxable year preapproval limit has been reached, then it shall be denied and not be reconsidered for preapproval at any later date.
(f) In the event it is determined that the small postproduction company has not met all the requirements of O.C.G.A. §
48-7-40.26A and this regulation, then the amount of credits shall not be preapproved or the preapproved credits shall be retroactively denied. With respect to such denied credits, tax, interest, and penalties shall be due if the credits have already been claimed.
(13)
Qualified Postproduction Expenditures Not Eligible for the Postproduction Film Tax Credit. Any qualified postproduction expenditures for which a production company claims the tax credit under O.C.G.A. §
48-7-40.26 are not eligible for the postproduction film tax credit under O.C.G.A. §
48-7-40.26A and this regulation.
(14)
Claiming the Postproduction Film Tax Credit. A postproduction company claiming tax credits under paragraph (8) or (10) of this regulation must attach Form IT-PFC to its Georgia income tax return for each tax year in which the credit is claimed.
(a) Withholding Tax. The postproduction company may claim any excess postproduction film tax credit against its withholding tax liability or the withholding tax liability of its payroll service providers provided such withholding tax liability is with respect to the employees of the postproduction company and is attributable to withholding for such employees for withholding periods approved in subparagraph (14)(a)3. of this regulation. The withholding tax benefit may only be applied against the withholding tax account used by the postproduction company or its payroll service provider for payroll purposes. In the event the postproduction company is a single member limited liability company that is disregarded for income tax purposes, the withholding tax benefit may only be applied against the withholding tax liability that is attributable to wages paid by the single member limited liability company or against the withholding tax liability of its payroll service providers provided such withholding tax liability is attributable to wages paid by its payroll service provider with respect to the individuals providing services to the single member limited liability company and is attributable to withholding for such employees for withholding periods approved in subparagraph (14)(a)3. of this regulation. Any postproduction company that qualifies to take all or a part of the postproduction film tax credit against withholding tax otherwise due the Department of Revenue, must make an irrevocable election to do so as a part of its notification to the Commissioner required under this subparagraph. When this election is made, the excess postproduction film tax credit will not pass through to the shareholders, partners, or members of the postproduction company if the postproduction company or is a pass-through entity.
1. Notice of Intent. To claim any excess postproduction film tax credit not used on the income tax return against the postproduction company's withholding tax liability, the postproduction company must file Revenue Form IT-WH Notice of Intent through the Georgia Tax Center within (30) days after the due date of the Georgia income tax return (including extensions) or within thirty (30) days after the filing of a timely filed Georgia income tax return, whichever occurs first. Failure to file this form as provided in this subparagraph will result in disallowance of the withholding tax benefit. However, in the case of a credit which is earned in more than one taxable year, the election to claim the withholding credit will be available for the credit earned in such subsequent year.
2. Review Period. The Department of Revenue has one hundred twenty (120) days from the date the applicable Form IT-WH under subparagraph (14)(a)1. of this regulation is received to review the credit and make a determination of the amount eligible to be used against withholding tax.
3. Letter of Eligibility. Once the review is completed, a letter will be sent to the postproduction company stating the postproduction film tax credit amount which may be applied against withholding and when the postproduction company or its payroll service provider may begin to claim the postproduction film tax credit against withholding tax. The Department of Revenue shall treat this amount as a credit against future withholding tax payments and will not refund any previous withholding payments made by the postproduction company or its payroll service provider.
(b) Use of Other Tax Credits. Postproduction companies claiming the postproduction film tax credit may not claim the job tax credit, headquarters tax credit, or quality jobs tax credit for employees whose wages are used to calculate the postproduction film tax credit.
(c) Assignment of Credit to Affiliates. Once the postproduction company establishes the amount of the postproduction film tax credit by filing the tax return for the taxable year in which the credit was earned, the credit may then be assigned to the postproduction company's affiliates under the provisions of O.C.G.A. §
48-7-42. When a postproduction film tax credit is assigned to an affiliated entity, the affiliated entity may apply the credit solely against its own income tax liability. The affiliated entity may not sell or transfer the credit pursuant to paragraph (18) of this regulation and may not claim any excess postproduction film tax credit against its withholding tax. Any unused credit may be carried forward by such affiliated entity until the credit is used or it expires, whichever occurs first.
(15)
Carry Forward. Any credit that is claimed but not used in a taxable year may be carried forward for five years from the close of the taxable year in which the qualified postproduction expenditures were made and the postproduction company established the amount of the postproduction film tax credit for that taxable year.
(a) Postproduction film tax credits may not be carried back and applied against a prior year's income tax liability.
(16)
Audits. Any Department of Revenue audit triggered by a postproduction company's use or transfer of a postproduction film tax credit will require the postproduction company to reimburse the Department of Revenue for all costs associated with the audit. The Department of Revenue will inform the postproduction company that the audit is a postproduction film tax credit audit and thus subject to this clause prior to the commencement of the audit. Routine audits of the taxpayer's activity in Georgia are not subject to this provision.
(17)
Pass-Through Entities. When a postproduction company generating a postproduction film tax credit is a pass-through entity, and has no income tax liability of its own, the postproduction film tax credit will pass to its members, shareholders, or partners based on the year ending profit/loss percentage. The credit forms will initially be filed with the tax return of the postproduction company that incurred the qualifying postproduction expenditures to establish the amount of the postproduction film tax credit available for pass through. The credit will then pass through to its shareholders, members, or partners to be applied against the tax liability on their income tax returns. The shareholders, members, or partners may not claim any excess postproduction film tax credit against their withholding tax liabilities or against the withholding tax liabilities of their payroll service providers. The credits are available for use as a credit by the shareholders, members, or partners for their tax year in which the income tax year of the pass-through entity ends. For example: A partnership earns the credit for its tax year ending January 31, 2019. The partnership passes the credit to a calendar year partner. The credit is available for use by the partner beginning with the calendar 2019 tax year.
(18)
Selling or Transferring the Postproduction Film Tax Credit. The postproduction company may sell or transfer in whole or in part any postproduction film tax credit, previously claimed but not used by such postproduction company against its income tax, to another Georgia taxpayer subject to the following conditions:
(a) The taxpayer may only make a one-time sale or transfer of postproduction film tax credits earned in each taxable year. However, the sale or transfer may involve more than one transferee and more than one sale date. The sale may occur in a year or years after the postproduction film tax credit is earned but must occur before the expiration of the carry forward period of such credit. For example, a postproduction company earns a $500,000 credit in year 1. In year 2 the postproduction company sells $200,000 of the credit to taxpayer 2 and $50,000 to taxpayer 3. In year 3 the postproduction company sells the remaining $250,000 of the credit to taxpayer 4. However, taxpayer 2, taxpayer 3, and taxpayer 4 are not allowed to resell the credit since the credit can only be sold one-time.
(b) The postproduction film tax credit may be transferred before the tax return is filed by the postproduction company provided the postproduction film tax credit has been earned. Preapproval for the credit by itself does not qualify as earning the credit. The amount transferred cannot exceed the amount of the credit which will be claimed and not used on the income tax return of the postproduction company.
(c) The postproduction company must file Form IT-TRANS "Notice of Tax Credit Transfer" with both the Department of Economic Development and Department of Revenue within 30 days after each transfer or sale of the postproduction film tax credit. Form IT-TRANS must be submitted electronically to the Department of Revenue through the Georgia Tax Center or alternatively as provided in subparagraph (18)(c)1. of this regulation. The Department of Revenue will not process any Form IT-TRANS submitted or filed in any other manner. If the postproduction company is a disregarded entity then Form IT-TRANS should be filed in the name of the owner of the disregarded entity but the Form IT-PFC should be in the name of the disregarded entity.
1. The web-based portal on the Georgia Tax Center. The postproduction company may provide selective information to a representative for the purpose of allowing the representative to submit Form IT-TRANS on their behalf on the Georgia Tax Center outside of a login. The provision of such information shall authorize the representative to submit such Form IT-TRANS. The representative must provide all information required by the web-based portal on the Georgia Tax Center to submit Form IT-TRANS.
(d) The postproduction company must provide all required postproduction film tax credit detail and transfer information to the Department of Revenue. Failure to do so will result in the postproduction film tax credit being disallowed until the postproduction company complies with such requirements.
(e) The carry forward period of the postproduction film tax credit for the transferee will be the same as it was for the postproduction company. This credit may be carried forward for five years from the end of the tax year in which the qualifying postproduction expenditures were incurred. For example: The postproduction company sells a postproduction film tax credit on September 15, 2019. This credit is based on qualifying expenditures from the calendar 2018 tax year. The credit may be claimed by the transferee on the 2018, 2019, 2020, 2021, 2022, or 2023 return and the carry forward period for this credit will expire on December 31, 2023. This carry forward treatment applies regardless of whether it is being claimed by the postproduction company or the transferee.
(f) A transferee shall have only such rights to claim and use the postproduction film tax credit that were available to the postproduction company at the time of the transfer excluding the withholding tax benefit which is not available to the transferee. Thus, a transferee shall not have the right to subsequently transfer such credit since that right has been utilized by the transferor.
(19)
How to Sell or Transfer the Tax Credit.
(a) Direct Sale. The postproduction company may sell or transfer the postproduction film tax credit directly to a Georgia taxpayer (or multiple Georgia taxpayers as provided in subparagraph (18)(a) of this regulation). A pass-through entity may make an election to sell or transfer the unused postproduction film tax credit earned in a taxable year at the entity level. If the pass-through entity makes the election to sell the postproduction film tax credit at the entity level, the credit does not pass through to the shareholders, members, or partners. In all cases, the effect of the sale of the credit on the income of the seller and buyer of the credit will be the same as provided in the Internal Revenue Code.
(b) Pass-Through Entity. The postproduction company may be structured as a pass-through entity. If a pass-through entity does not make an election to sell or transfer the tax credit at the entity level as provided in subparagraph (19)(a) of this regulation, the tax credit will pass through to the shareholders, partners or members of the entity based on their year ending profit/loss percentage. The shareholders, members, or partners may then sell their respective postproduction film tax credit to a Georgia taxpayer.
(c) Transferee Pass-Through Entity. The postproduction company, or its shareholders, members or partners, may sell or transfer the tax credit to a pass-through entity. The pass-through entity shall elect on behalf of its shareholders, members or partners which year the credit shall be passed through to its shareholders, members or partners (either its tax year in which the income tax year of the postproduction company, which claims the postproduction film tax credit ends; or during any later tax year before the five year carry forward period associated with the tax credit ends as provided in subparagraph (19)(d) of this regulation). If the pass-through entity has no income tax liability of its own, the pass-through entity may then pass the credit through to its shareholders, members, or partners based on the pass-through entity's year ending profit/loss percentage for such elected year. For example, if a calendar year partnership is buying the credit earned by a postproduction company in the calendar 2019 tax year and elects to use the credit for such year, then all of the partners receiving the credit must have been a partner in the partnership no later than the end of the 2019 tax year in which the credit was established. Only partners who have a profit/loss percentage as of the end of the applicable tax year may receive their respective amount of the postproduction film tax credit.
(d) The credits are available for use by the transferee, provided the time has not expired for filing a claim for refund of a tax or fee erroneously or illegally assessed and collected pursuant to O.C.G.A. §
48-2-35:
1. In the transferee's tax year in which the income tax year of the postproduction company, which claims the postproduction film tax credit ends; or
2. During any later tax year before the five year carry forward period associated with the tax credit ends.
(i) Example: A postproduction company reaches the $500,000 in qualified postproduction expenditures in a taxable year, receives preapproval, and claims the postproduction film tax credit in calendar 2019 tax year. The postproduction company sells the postproduction film tax credit to a calendar year Georgia taxpayer in calendar year 2020. The transferee Georgia taxpayer may claim the purchased postproduction film tax credit on either their 2019 return (transferee's tax year in which the income tax year of the postproduction company ends) or their 2020, 2021, 2022, 2023, or 2024 return (during any later tax year before the five year carry forward associated with the tax credit ends).
(ii) Example: A postproduction company reaches the $500,000 base investment threshold and claims the postproduction film tax credit in its fiscal year end June 30, 2019. The postproduction company sells the postproduction film tax credit to a calendar year Georgia taxpayer in calendar year 2020. The transferee Georgia taxpayer may claim the purchased postproduction film tax credit on either their 2019 return (transferee's tax year in which the income tax year of the postproduction company ends) or their 2020, 2021, 2022, 2023, or 2024 return (during any later tax year before the five year carry forward associated with the tax credit ends).
(20)
Required Reporting. For taxable years beginning on or after January 1, 2018, and before January 1, 2023, the postproduction company shall electronically report to the Department of Revenue through the Georgia Tax Center on Form IT-PC-RPT the monthly average number of full-time employees subject to Georgia income tax withholding for the taxable year. Such report shall be filed on the date the postproduction company files its Georgia income tax return. For purposes of this paragraph, a full-time employee shall mean a person who performs a job that requires a minimum of 35 hours a week, and pays at or above the average wage earned in the county with the lowest average wage earned in this state, as reported in the most recently available annual issue of the Georgia Employment and Wages Averages Report of the Department of Labor.
(a) Notwithstanding Code Sections 48-2-15, 48-7-60, and 48-7-61, for such taxable years, the commissioner shall report yearly to the House Committee on Ways and Means and the Senate Finance Committee. The report shall include the name, tax year beginning, and monthly average number of full-time employees for each postproduction company. The first report shall be submitted by June 30, 2018, and each year thereafter by June 30.
(21)
Effective Date. This regulation shall be applicable to taxable years beginning on or after January 1, 2018.
O.C.G.A. §§
48-2-12, 48-7-40.26A.
