The Georgia state Senate has dropped a proposal to cap the state’s film and TV tax credit, after facing industry pushback and opposition from the state House of Representatives.

The Senate Finance Committee passed a measure on Monday that would have capped the credit at $900 million per year. The bill would also have made the credit non-transferable, meaning that studios could not sell their credits to other taxpayers.

The bill was initially scheduled for a vote on the Senate floor on Wednesday, but was withdrawn. At a hearing of the Senate Rules Committee on Thursday, the provisions relating to the film credit were removed from the legislation.

“All references to the film industry have been eliminated from this bill,” said Sen. Jeff Mullis, the chair of the Rules Committee.

The film credit soared to a record $1.2 billion in 2021, making it by far the largest film credit in the country. Sen. Chuck Hufstetler, the chair of the Finance Committee, argued at Monday’s hearing that the credit “needs limitations.”

“It just keeps growing,” Hufstetler said.

The state auditor’s office estimated that capping the credit at $900 million would save the state about $1.7 billion over the next five years. Making the credit non-transferable likely would have reduced the amount of the credit even further, though the auditor’s office was unable to estimate the effect.

House Speaker David Ralston defended the credit at a press conference on Wednesday.

“I’m not prepared to run that industry out of Georgia,” he said.

The debate over the film credit came about as part of a broader proposal to slash the state’s income tax.

The House passed a measure earlier this month to establish a flat income tax of 5.25% — down from a top rate of 5.75% — and eliminate many deductions. The Senate Finance Committee proposed retaining the deductions, and lowering the rate to 4.99%, though the rate reductions would be phased in over several years, and would be dependent on revenue triggers. The Senate version also added an earned income tax credit for low-income Georgians.

Without the savings from the cap on the film credit, the Senate version of the bill becomes significantly costlier, and it is not clear how the two versions of the bill will be reconciled.

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