ACT III: THE PURCHASING PROCESS
Buyers of Georgia Entertainment Tax Credits should be aware that these credits are fully authorized by the State of Georgia.
Still, you should perform appropriate due diligence before any and all purchases, as well as consult with your personal tax preparer, CPA, or CFP. Your risk and exposure can be mitigated through proper due diligence.
Your acquisition of tax credits will be at a discounted rate against full face value. Discounted rates may vary depending on the volume purchased, time of entry to market and credit availability. The credit worthiness of the seller is also important, but only if the seller does NOT elect to have a GDOR audit performed.
i.e. If you purchase $100K in Entertainment Tax Credits at a discount of 12%, you will pay $88K, or $0.88 on the dollar, for $100K worth of credits. A check for $88K will be paid direct to the production company or a transactional escrow account, and you will save the difference as a dollar-for-dollar reduction against your Georgia Income Tax liability.
Capital Gains & Federal Deductions
Using the example presented above, your $12K benefit will likely be treated as a Short Term Capital Gain. However, you may deduct the entirety of your purchase, $100K, on your federal tax form, which should offset the capital gain.
It is important that you consult with your personal tax preparer, CPA or CFP to further understand and optimize the tax opportunities presented by The Act.
Carefully review the history of the seller and broker. Request the 3rd Party CPA Letter of Comfort, if available, the GA IT-FC associated with the sale, and all Film Office certifications relating to the sale.
Once you have performed your due diligence and are satisfied with the background, terms and conditions of a Georgia Entertainment Tax Credit offer, request a Term Sheet confirming your understanding of the deal.
Sales and Transfer Agreement
Using the information outlined in the Term Sheet, the seller is required to provide a Sales and Transfer Agreement at its own expense. Have your personal attorney review the Agreement to be sure the language is to your satisfaction.
Once all parties sign the contract, the buyer will transfer purchase funds via check or wire directly to the seller, or through a transactional escrow account. Be sure to request confirmation of receipt.
Finally, the broker or agent for transfer will issue a GA IT-TRANS Form to all parties, including the GDOR and GDEcD. With the exception of the GDOR copy and your own copy, GA IT-TRANS Forms should have your personal EIN or SSN redacted for privacy purposes.
As a buyer, a copy of the GA IT–TRANS Form needs to be affixed to your tax filing. The redundant circulation of forms will help the GDOR reconcile the Entertainment Tax Credit transaction.
GA IT-TRANS FORM LINK
Production Partnership Tax Credits
Investor participation in entertainment productions or companies may create opportunities in which the Georgia investor(s) may claim Georgia Entertainment Tax Credits direct for the highest return, rather than sell them on the open market at a discount.
The GEC has experience in organizing production and investment partnerships in order to optimize tax credit returns from The Act. Be sure to ask us about this opportunity.
On the surface, this process may look complex, but it was structured for the protection of sellers, buyers and the State of Georgia for the long term.
The Act is a wonderfully aggressive and competitive blueprint for Georgia Entertainment Tax Credit opportunities, and measures are continually being taken by the principal GEC partners and other key members of the Georgia film community to perfect The Act. Just remember, whenever changes or special rulings occur, you need look no further than the GEC for the most up-to-date information.
Don’t Leave Money on the Table!
Be sure to call us with your questions. We’ll be happy to guide you down the path to real tax savings.
|Georgia Entertainment Credits Home * The Players * The Act * Act I * Act II * Act III * Contact|