Southern comfort: Georgia ‘deals’ out $25M in tax breaks to game developers

The United States is not the manufacturing powerhouse that it once was, but video games are one thing that Americans make that people all over the world still buy.

This week, Georgia Gov. Nathan Deal (R) signed a bill into law that will provide $25 million in tax breaks to game developers in an effort to encourage economic development in the southern state. The law, previously known as House Bill 958, passed the Georgia state House and Senate earlier this year. It also includes a number of other tax-related legislation including sales-tax holidays and exemptions from sales taxes for qualifying food banks. Georgia-based developers that may benefit from the law include Cartoon Network Games, Red Orchestra developer Tripwire Interactive, and Smite developer Hi-Rez Studios.

To take advantage of the tax incentives, developers will have to maintain offices within Georgia. Studios must have a total payroll that amounts to more than $500,000 for in-state employees and gross no more than $100 million in taxable income. Georgia’s Department of Economic Development must also approve that any developer attempting to claim the credit is primarily in the interactive-entertainment business.

This will enable qualifying developers in Georgia to deduct a significant portion of the taxes they may owe to the state. Studios would still have to pay their full federal taxes to the Internal Revenue Service, and employees would have to pay both federal and state income tax on their earnings.

This is the second time that Deal has signed a bill into law that benefits the state’s game-development industry. In 2012, Georgia passed House Bill 1027 that let studios keep up to 30 percent of their state taxes due in credits.

“Since the adoption of the current tax incentive program, the economic impact of the entertainment industry has increased more than 1,000 percent,” Deal said at that time. “This 30 percent tax credit is essential to the continued growth of the industry, and I will fight to make sure it stays in place for as long as I am governor.”