What state and local tax incentives can my business claim?
Available when the activity and paperwork meet the program's rules
It depends on where and how you spend. States offer credits, abatements, and grants for activities such as film production, manufacturing, research, and job creation. For example, Georgia's film credit under O.C.G.A. §48-7-40.26 allows 20% of qualified in-state production spending, plus 10% for a qualified Georgia promotion, and credits can be sold once per year. Each program has its own certification, spending, and timing rules.
Reviewed by Ebot Mbi, CPA, EA · Last reviewed · Law and figures current as of September 17, 2026
Key takeaways
- Incentives follow the qualifying activity and the program's rules, not the company's state of formation.
- Georgia's film credit is 20% of qualified base investment, plus 10% with a qualified Georgia promotion, for certified productions.
- Transferable credits are usually sold at a discount to face value, and the sale has federal tax consequences.
- Programs change, run out of funding, or sunset, so confirm current terms before you budget.
- Documentation of qualifying spending is what turns an incentive into an allowed credit.
What it is
States and localities use tax incentives to attract investment and jobs. Common types include income or franchise tax credits, property tax abatements, sales tax exemptions, and cash grants. Many require an application before the spending occurs.
Some credits are transferable, which lets a business that has little tax liability in the state sell the credit to a taxpayer that can use it. Transferability adds value but also adds rules and a price discount.
What the law says
Georgia's Entertainment Industry Investment Act, O.C.G.A. §48-7-40.26, allows a production company a tax credit equal to 20% of its base investment in Georgia for qualified production activities, with an additional 10% if the production includes a qualified Georgia promotion. The statute requires certification, sets a minimum base investment, and allows a production company only a single transfer or sale of the credits earned in a taxable year, although that sale may involve more than one buyer.
Other states have their own programs with different rates, caps, and eligible activities. Texas, for example, offers grant programs and incentives administered by state agencies rather than a transferable film income tax credit, because Texas has no individual income tax.
Federal tax consequences are separate. Gross income under IRC §61 includes income from whatever source, and the federal treatment of state credits, grants, and credit sales depends on the program and the facts. Confirm that treatment before counting on the after-tax value.
Requirements and tests
Before you rely on an incentive, confirm:
- The program is currently in effect, funded, and accepting applications.
- Your activity is an eligible activity, and any pre-approval or certification is obtained on time.
- You meet minimum spending, job, or wage requirements, and any location requirements.
- Which costs count as qualified expenditures, and how they must be documented.
- Whether the credit is refundable, transferable, or only usable against your own liability, and any carryforward limit.
- Whether an audit or verification is required before the credit can be claimed or sold.
- What happens if you later fail job or investment commitments (clawbacks).
How it works
Incentive planning starts before the spending. You compare locations, confirm program status, and apply for certification. During the project, you track qualified spending by category and location. After the project, you complete any required audit, claim the credit on the state return, and, if the credit is transferable and you cannot use it, sell it.
Credit buyers generally pay less than face value. The price depends on the market, the credit's reliability, and timing, so treat any sale price as a negotiation, not a fixed number.
Record the federal tax treatment of any credit sale or grant on the business return, and consider state conformity if the business files in more than one state.
Local incentives work the same way. Counties, cities, and school districts may offer property tax abatements or value limitations in exchange for investment and job commitments, often through a written agreement approved before construction begins. These agreements usually include reporting duties and clawback provisions if the business does not meet its targets. When you compare locations, look at the total package, including utilities, workforce, and permitting timelines, not just the headline credit rate, and ask how long the program has operated and whether its funding is capped. A smaller incentive in a location that fits the business can be worth more than a larger one that requires moving operations the business does not otherwise need.
Assumptions: A certified Georgia production with $1,000,000 of qualified base investment (above the statute's $500,000 minimum) incurred in 2026.; Credit rates as published in the 2024 Georgia Code: 20% base plus 10% for a qualified Georgia promotion; confirm current terms.; The company has no Georgia tax liability and sells the credits; the 90-cent price per dollar is a hypothetical assumption, not a market quote.; Federal tax on the sale proceeds is not computed.
| Base credit ($1,000,000 × 20%) | $200,000 |
|---|---|
| Promotion uplift ($1,000,000 × 10%) | $100,000 |
| Total credit | $300,000 |
| Sale proceeds at a hypothetical $0.90 per $1.00 of credit | $270,000 |
A $300,000 credit could bring in about $270,000 at the assumed price, before federal tax, and only if certification, spending, and documentation requirements are met.
Illustration only; not a projection of your results.
Risks and IRS scrutiny
State revenue departments audit qualified spending, and some programs require third-party audits before credits are issued. Credits can be reduced or recaptured if spending is not documented or commitments are not met. Buyers of transferred credits often require indemnities, because a disallowed credit can fall on them.
Who it is not for
This is not for a business that spends first and asks about incentives afterward, since many programs require approval in advance. It is not for spending that happens outside the program's state. It is not for businesses that cannot document their qualifying costs. And it is not for budgets built on a program that has already been capped, delayed, or repealed.
How ebotCPA helps
We identify programs that fit your project, confirm their current terms, organize the documentation, and prepare the credit claims and the federal and state reporting. We coordinate with your attorney, who drafts the legal documents.
Book a $497 Case Analysis to have Ebot Mbi, CPA, EA review your facts before you act.
We coordinate with your attorney, who drafts the legal documents.
Frequently asked questions
How much is Georgia's film tax credit?
Under O.C.G.A. §48-7-40.26, 20% of qualified base investment in Georgia, plus 10% if the production includes a qualified Georgia promotion. Confirm current terms before budgeting.
Can a business sell a state tax credit?
Only if the program allows it. Georgia's film credit can be sold, but only in a single transfer or sale per taxable year, which may involve more than one buyer.
Are state tax credits taxable for federal purposes?
It depends on the program and whether the credit is used, refunded, or sold. Confirm the federal treatment before counting on the after-tax value.
Do I need approval before spending?
Often yes. Many programs require certification or pre-approval, and spending before approval may not qualify.
Have facts like these?
Book a $497 Case Analysis to have Ebot Mbi, CPA, EA review your facts before you act.