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17 • 2015

Qualifying To Do Business In A State As Required To Receive A Film Tax Credit Or Rebate

Many states offer significant financial incentives for companies to film movies, television shows, and other productions such as music videos or commercials in their states. For example, under the Georgia Entertainment Industry Investment Act, a production company can receive a transferable tax credit of up to 30% on qualified productions in Georgia, up to a total of $12.5 million in tax credits for each taxable year (at least through 2018).[1] Louisiana also offers a transferable tax credit of up to 30% on qualified in-state production expenditures, plus another 5% payroll tax credit if Louisiana residents are employed.[2] North Carolina used to offer a refundable tax credit of 25% but has now switched to a grant program that rebates productions up to 25% of qualified expenses, up to a total of $5 million for a feature-length film, $9 million for a single season of a television series, and $250,000 for a commercial.[3] Oregon offers a similar cash-rebate program that it touts as being superior to tax credits. In particular, projects that spend a minimum of $1 million in the state can combine two programs—the Oregon Production Investment Fund and the Greenlight Oregon Labor Rebate—for an effective rebate of 20% on goods and services purchased in the state and 16.2% on Oregon-based payroll.[4]

Each of these programs requires a significant presence in the state in order to qualify for the tax credits or rebates. In Georgia, for example, to be a “qualified interactive entertainment production company,” the company must, among other things, maintain a business location physically located in Georgia and have a total aggregate payroll of $500,000 or more for employees working in the state.[5] To qualify for the tax credit in Louisiana, the company must be “domiciled and headquartered” in Louisiana and have in-state production expenditures of greater than $300,000.[6] Rebates are available in North Carolina only to companies that have in-state qualifying expenses for goods and services of at least $5 million for a feature-length film, $1 million per episode for a video or television series, and $250,000 for a commercial.[7] To qualify for reimbursement in Oregon, the total actual in-state expenses for a single project or season of a series must be at least $1 million.[8]

All states, including Georgia, Louisiana, North Carolina, and Oregon, require that a company transacting enough intrastate business in the state be authorized or qualified to do business there.[9] Given the relatively large amount of in-state goods and services that must be purchased by a company to qualify to receive film tax credits or rebates in each of those states, it is inevitable that a company must obtain a certificate of authority to transact business in the state, regardless of whether or not such authorization is explicitly required to receive the film tax credits or rebates.[10]

[1]Ga. Code Ann. § 48-7-40.26.

[2]La. Rev. Stat. Ann. § 47:6007; La. Admin. Code tit. 61, § 1603.

[3]N.C. Gen. Stat. § 143B-437.02A.

[4]Or. Rev. Stat. § 284.368; 2005 Or. Laws ch. 559.

[5]Ga. Code Ann. § 48-7-40.26(b)(7)(A), (B).

[6]La. Rev. Stat. Ann. § 47:6007(B)(4), (B)(16), (C)(1)(c)(i); La. Admin. Code tit. 61, §§ 1605(B), 1607(A)(1)(b)(i)(e), (f).

[7]N.C. Gen. Stat. § 143B-437.02A(a)(1).

[8]Or. Rev. Stat. § 284.368(2)(c).

[9]See Ga. Code Ann. § 14-2-1501; La. Rev. Stat. Ann. § 12:301; N.C. Gen. Stat. § 55-15-01; Or. Rev. Stat. § 60.701.

[10]Louisiana specifically requires that the company applying for a tax credit be domiciled and headquartered in the state, but the company does not necessarily have to be formed under Louisiana law. See La. Rev. Stat. Ann. § 47:6007(B)(4), (16). Companies seeking a rebate in Oregon also do not need to be formed under Oregon law, but it appears that they are specifically required to be authorized to do business in Oregon as part of the application process. See Or. Admin. R. 951-002-0005; Oregon Film, Frequently Asked Questions Regarding Incentives, http://www.oregonfilm.org/docs/ incentives/incentivefaq.pdf (last accessed Nov. 3, 2015).