There is no question that taxes affect behavior, with some seeing the Tax Code as nothing more than a patchwork of incentives and disincentives for activity a legislative body wishes to encourage or discourage – and the idea of special tax breaks to encourage certain industries is nothing new, and has been employed not only by the federal government but by hundreds of localities over the years.

Take, for instance, Georgia, which has been boosting its film industry with tax breaks, and beginning in 2018 will employ a special tax break to encourage the growth of its music industry.

For years, Georgia has been losing artists to states with larger and more supportive infrastructures for the music industry, according to Peter Stathopoulos, a partner at Top 100 Firm Bennett Thrasher in Atlanta. But Georgia lawmakers believe that this is past history, if the recently-passed Georgia Music Investment Act does what they hope.

“Georgia has a long and vibrant history in the music industry,” he noted. “We’re home to artists like Ray Charles, the Allman Brothers, REM, the B-52s, Ludacris, Travis Tritt and the Zac Brown Band. Although we have a great music tradition, in recent years we’ve been losing ground to Nashville, Los Angeles and New York. This will stop or reverse the trend.”

Ray Charles in concert
Georgia-born Ray Charles in concert. Victor Diaz Lamich

The new law creates tax credits for Georgia musicians and music producers. It is meant to replicate the success of the similar tax break program that helped make Georgia’s film industry one of the most profitable in the nation.

Stathopoulos was on the team responsible for drafting regulations to implement the new music tax credits law – the Georgia Entertainment Industry Investment Act.

The law, which goes into effect Jan. 1, 2018, offers 15 to 20 percent tax credits to qualified productions, including feature films, television movies or series, commercials, music videos, interactive entertainment, and animated projects. For live productions to qualify, production companies must spend $500,000 to rehearse, and start tours in the state. These costs would include crew, staff, technicians, equipment, hotels and restaurants. Scoring projects must spend a minimum of $250,000, and recorded music projects must spend a minimum of $100,000 to qualify for the same tax credits.

An additional 10 percent tax credit is available for feature films, television projects, music videos and interactive entertainment for including an embedded Georgia Entertainment Promotion Logo in the end credits of the finished product, with a link to tourgeorgiafilm.com on the landing page of their promotional Web site. Both resident and nonresident workers’ payrolls and FICA (social security and Medicare taxes), state unemployment insurance, and federal unemployment insurance qualify. And the Georgia Department of Revenue will offer producers a review and verification of transactions that are eligible for the credit.

“The new law, a cousin of the film tax credit law, was passed with the hope that it would produce similar results in the music industry,” Stathopoulos said. That law was very effective in shifting production to Georgia, he indicated. “We went from less than $32 million in entertainment production expenditures in 2007 to an excess of $2.3 billion in fiscal 2016, It can ramp up fairly quickly.”

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Roger Russell

Roger Russell

Roger Russell is senior editor for tax with Accounting Today, and a tax attorney and a legal and accounting journalist.