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Georgia Music Investment Act Provides Tax Credits to Boost State Music Industry

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Georgia Music Investment Act Provides Tax Credits to Boost State Music Industry

People around the world tap their feet, clap their hands and nod their heads to the beat of Georgia musicians. Composers and performers with roots in the Peach State span genres, from hip-hop artists such as Outkast, Ludacris and Young Jeezy to country performers like Sugarland, Lady Antebellum and the Zac Brown Band.

Georgia gave the world the Allman Brothers and the Black Crowes, Gladys Knight and Little Richard, R.E.M. and the B-52s. It boasts James Brown, Ray Charles and Johnny Mercer as well as contemporary Christian and gospel superstars like Casting Crowns and Third Day, not to mention opera star Jessy Norman and the Atlanta Symphony Orchestra.

The music industry is big business in Georgia, generating $3.8 billion in revenues and employing nearly 20,000 people, according to a 2011 report commissioned by Georgia Music Partners, an industry advocacy group. The state has dozens of music festivals and an array of venues, from dive bars to amphitheaters.

But in recent years, some key players have drifted to places with more established music industries, such as Nashville, New York and Los Angeles, said Shachar Oren, president of Georgia Music Partners.

For about seven years, his group lobbied Georgia legislators for a state tax credit to help the music industry. Last year, the state legislature created just such an incentive by passing the Georgia Music Investment Act, which took effect Jan. 1, 2018. It provides a tax credit of up to 15 percent of a company’s qualified expenses in Georgia related to musical production and performance — and up to 20 percent for expenditures in certain counties designated as economically distressed.

Proponents of the music tax credit were inspired by similar credits for companies that spend money in Georgia to produce feature films and TV shows and develop digital entertainment, such as video games.

“(The music credit) rounds out our support of the entertainment industry in Georgia,” said Steve Weizenecker, a partner at the Barnes & Thornburg law firm in Atlanta and a former member of the Georgia Film, Music and Digital Entertainment Advisory Commission.

Following the Success of Film and TV Tax Credits

Legislators acted on behalf of the music industry after passing a law 10 years ago that led to a boom in film and TV production in Georgia.

The legislature passed the Georgia Entertainment Industry Investment Act in 2008. It provides a state tax credit for up to 30 percent for qualified expenses that production companies incur in Georgia – everything from hiring camera operators, lighting technicians and actors to renting warehouses to store equipment.

Since then, Hollywood studios and TV production companies have found their way to Georgia to shoot feature films and television shows. They are attracted by the tax credit as well as the Atlanta airport – the world’s busiest, providing easy access within a few hours to most of the United States – and Georgia’s moderate climate and range of landscapes, from mountains and coast to cities, suburbs and countryside.

The film and TV industry’s contribution to Georgia’s economy soared from $241 million a year before the tax credits to $9.5 billion in 2017, a state report says.

Inspired by that growth, advocates for the music industry pushed legislators for several years to take similar steps for record labels, concert promoters, theatrical companies and other companies that spend money all over Georgia. Even so, some were caught off guard when the legislator passed the bill in 2017.

“The fact that the bill became a reality … that was a surprise,” Oren said.

Now he and others are focused on spreading the word.

What it Does and How it Works

The Georgia Music Investment Act provides tax credits to touring musical or theatrical performances (e.g., concerts, ballets and operas) that originate and are developed in Georgia and that have their debut in the state. The law also provides credits for recorded musical performances. Read more about state guidelines here.

To claim the credit, companies must meet certain thresholds. Production companies focused on musical or theatrical productions, for example, must spend $500,000.

Recorded musical performances that are incorporated into a film, television program or digital interactive entertainment must spend at least $250,000 to qualify.

The film and TV tax credit already provides a more generous tax credit – up to 30 percent – for costs associated with music used in films and TV programs shot in Georgia. The new music tax credit typically will come into play for film scores in the case of music recorded in Georgia for use in a film or TV production shot outside the state.

To qualify for the third category – any other kind of recorded musical performance – a person or company must spend $100,000. Groups that spend less than that – a garage band that rents a recording studio, say – can with an accountant’s help combine their expenditures with other groups to meet the $100,000 a year threshold and receive a share of the credit, Oren said.

The law caps the total amount of music tax credits at $5 million in 2018, $10 million in 2019 and $15 million after that. In addition, businesses must request pre-approval for the tax credit from the Department of Revenue, with the cap allocated on a first-come, first-served basis.

Record labels, companies that organize concerts and other organizations can claim as eligible expenses the costs of hiring musicians, producers and sound engineers as well as support staff such as caterers, carpenters, electricians, accountants and lawyers, Oren and Weizenecker said.

Hope for the Future

Kevin Leahy has more than a passing interest in the tax incentives.

He has played drums for 14 years for the Atlanta Pops Orchestra, a nonprofit orchestra that performs in Georgia and other states. Leahy supplements his salary as a drummer by working as a digital marketing consultant.

On a personal level, he said, he hopes the Georgia Music Investment Act encourages more artists and production companies to record music in Georgia. That could translate into more work for him and his colleagues. The Atlanta Pops Orchestra collaborated with artists on recordings in the last few years, a Christmas album with John Driskell Hopkins of the Zac Brown Band, recorded in Atlanta and released in 2015, and “Mountain Overture” with bluegrass band Balsam Range, recorded in Marietta and released this year.

More broadly, though, Leahy said he hopes the law will mean more professional opportunities for musicians around the state, no matter their genre or affiliation.

“I think everyone is optimistic,” he said, “but there is also a little bit of the unknown.”

Weizenecker noted that the size of the film tax credit has grown since legislators passed it 10 years ago. That buoys his hopes that the legislature also may increase the music tax credit in future years from its current level of 15 percent.

“We all have great hopes that (the Georgia Music Investment Act) will have the same impact on Georgia” as the film and TV tax credit, he said.

Craig Miller shares that optimism. He owns Craig Miller Productions, a film production company, and is the immediate past chairman of the Georgia Film, Music and Digital Entertainment Advisory Commission.

He noted the dramatic and relatively sudden growth in the film, TV and video game industries, creating jobs in the state where few existed before.

“What all those industries need to be sustainable is Georgians creating that content,” he said.

In the 10 years since the state legislature passed the film and TV credit, thousands of students have expressed an interest in pursuing careers in that industry. In response, the state opened the Georgia Film Academy in 2016, helping to encourage growth of an industry that has mushroomed largely as a result of state tax credits.

“The bottom line,” Miller said, “is that this is all about jobs.”

Summary

As of January 2018, the Georgia Music Investment Act creates a tax incentive to promote Georgia’s music industry.

Patterned after a state tax incentive for the film, TV and digital entertainment industries, the law provides a tax credit of up to 15 percent of a company’s qualified expenses in Georgia related to musical production and performance.

The goal is to keep musicians, producers and sound engineers in Georgia, where their work also means work for caterers, carpenters, lawyers and many others.

It’s part of a broader state strategy to nurture and sustain a growing entertainment industry in Georgia, covering everything from sitcoms and documentaries to feature films, live music and video games.

Learn more about our film and entertainment industry tax credits services.

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