Last March, the first-ever tax incentive for Georgia’s music industry was passed by the state legislature. The Georgia Music Investment Act officially went into effect with the new year and now the state of Georgia is open for business. In the following editorial, Tammy Hurt, managing partner for Endeavor Sound and a national trustee for the Recording Academy/Atlanta, and Stephen Weizenecker, partner at Barnes & Thornburg, LLP, outline the Act’s provisions, the application process—and its game-changing benefits.
“Strong music economies add significant economic and employment paybacks beyond their long-acknowledged cultural and social benefits”, according to the World Intellectual Property Organization. As a result of the Recording Academy Atlanta Chapter and Georgia Music Partners’ joint advocacy efforts for over 7 years, the first-ever targeted incentive specifically for music in Georgia is now a reality. The Georgia Music Investment Act (the “Act”), which went into effect January 1, 2018, is designed to reward investment in the music industry through a refundable tax credit.
Most importantly, the incentive will create jobs in music for musicians, logistics consultants, caterers, lawyers, accountants, engineers, producers, stage designers, lighting designers, managers, promoters and booking agents This type of ecosystem can employ thousands in Georgia and most importantly, it’s scalable — more content begets more jobs and revenue.
As demonstrated by the success of Georgia’s film tax credit, well-crafted tax incentives can significantly affect the growth of selected industries. Georgia is now the #1 place in the world for feature film production according to an independent report by Film L.A. released earlier this month.
A number of other states and countries have adopted production incentives targeted at the music industry, including Louisiana, Ohio, New York, United States Virgin Islands, and Canada. Louisiana and Canada were early adopters of production incentives for the music industry. A 2011 Ontario Government report found that for every $1 invested through tax credits for the music industry, the Province received $1.27 in return as tax revenue generated from the stimulated economic activity.
Louisiana has a rich musical heritage and through its incentive it has played host to number productions including the restaging of Cirque Du Soleil. A 2017 report in New York City found that the music industry generated over 60,000 jobs, $5 billion in wages and $21 billion in economic impact. These numbers justify the creation of the Act to achieve these types of results in Georgia.
The Act: Governor Nathan Deal signed the Georgia Music Investment Act into law to preserve Georgia’s musical heritage and incentivize the composition, recording, production and performance of music, as well as the planning and rehearsal of music tours. The incentive is a 15% refundable tax credit granted for the following in-state expenditures:
- Musical Recording: An artist, record label or other production company that records or composes a musical recording with an aggregate spend of $100,000 annually that is publicly released and includes a qualified Georgia promotion.
- Musical Recording for Film, Television or Video Games: Writing, composing or recording of music for the purpose of inclusion into a film, television or interactive entertainment project not shot in the state, with an aggregate spend of $250,000 annually.
- Tour Origination and Rehearsals: The preparation, planning, staging and rehearsing of a musical or theatrical performance intended for viewing by a live audience in Georgia with an aggregate spend of $500,000 annually. This may include, but is not limited, to concerts, musical tours, ballet, dance, comedy revue, opera, or live variety entertainment, or a series of productions occurring over the course of a twelve-month period that originate, are developed, and have their initial public performance before an audience within Georgia, or that have their United States debut within Georgia.
To encourage production throughout the state, the Incentive includes an additional 5% credit if the project takes place in specified economically distressed areas. This tier system is administered through the Department of Community Affairs and are updated every year. The tiers can be found here.
Music History: The Georgia music scene goes back generations and includes all genres, from hip-hop and rock, to classical and rap, jazz and country, bluegrass and Christian music. The state has been the home of globally recognized artists like Ray Charles, James Brown, the Allman Brothers, REM, the B-52s, Alan Jackson, Usher, OutKast, Ludacris and many others. Georgia also boasts world class recording facilities and 48 music training and education programs and 15 professional orchestras, one of which, the Atlanta Symphony Orchestra, a 27-time GRAMMY® Award-winner.
If local talent, post-secondary music education programs and entertainment infrastructure are leveraged to their fullest extent, the Georgia Music Investment Act will be a game changer. The Act is targeted to create opportunities for all Georgians who want to work in and support the music industry. The drafters took the knowledge from the success of the film, television and videogame industry (through tax incentives) and crafted a solution to make this a competitive location for recording, production and performance of music. To support this industry and avoid the flight of jobs, locals worked to create an incentive which will retain the local base and create new jobs.
The Process: Applications are administered through the Georgia Department of Economic Development (“GDEcD”) and Georgia Department of Revenue (“GDOR”). Both GDEcD and GDOR issued their proposed rules under the Act late last year. These rules were finalized at the start of this year. Applications and credits are available on “first come, first served basis” which means that when enough entities have applied and been approved for credits then no more credits will be awarded for that year.
An applicant must first apply through GDEcD for pre-certification. Applications and GDEcD rules can be found here. GDOR maintains the electronic queue for successful precertification. Click here for GDOR rules. Upon approval and submission of the required materials, the project is certified for the returnable credit. The credit must be used by the applicant for the credit and cannot be transferred to another taxpayer. As these credits are limited, production companies should apply as soon as possible to avoid losing the opportunity to apply for the credit.
As Governor Deal frequently says, the State of Georgia is open for business. This year, Georgia welcomes the music industry through its latest incentive program.