Georgia Gov. Brian Kemp has signed a bill that mandates audits for productions claiming the film and TV tax credit, following a state report finding lax controls in the program.

Georgia has by far the largest tax credit for film production in the United States, awarding a record $860 million in credits last year. But it was one of only three states — along with Arkansas and Maine — that did not require state or third-party audits to claim the tax credit.

Kemp signed HB 1037 on Tuesday, and it will go into effect on Jan. 1.

Georgia offers a 30% transferable credit on production costs incurred in the state. That includes 10% for showing the Georgia peach logo in the closing credits, which is intended to promote the state’s image. A state audit released in January found that many productions received the 10% bonus even though the projects were never distributed, or were shown only at film festivals.

The new law requires that productions must first be “commercially distributed” in “multiple markets” to receive the bonus.The state Department of Audits and Accounts found numerous other abuses, including productions claiming credits for out-of-state expenditures or expenses not directly tied to production. Only 12% of projects were audited in 2016, but even those audits did not uncover about $4 million in ineligible expenditures in eight projects, according to the DOAA.

Under the new law, the Department of Revenue will be required to adopt new audit standards and to maintain a list of independent auditors eligible to complete the work.

“We do expect it to be quite a bit more work for us,” said Charli Traylor, a CPA who specializes in entertainment at the Atlanta-based accounting firm Frazier & Deeter. She said the new regulations would provide “much needed clarity” for her clients as to what expenses qualify for the credit.

“There is a little ambiguity in the statute,” she said. “All my clients just want to get it right.”

The Georgia film tax credit grew nearly tenfold over the last decade, from $89 million in 2009 to $860 million last year, according to Department of Economic Development reports. The DOAA found that the lax controls made the program “ideal for fraud,” and recommended following other states’ example and putting a cap on the program.

Several state senators floated that idea during budget discussions in June, though the credit retains strong support from the state House of Representatives and the governor’s office. Still, a cap or other restrictions are likely to resurface when the legislature reconvenes in January.

“It’s going to be studied in the off-session,” Senate Finance Chairman Chuck Hufstetler said in an interview. “There’s no discussion about a cap at this point. If there was one, it would be in the $300-$500 million range. But that’s just me speculating on the future.”

The DOAA noted that much of the benefit of the credit goes out of state. In 2016, 37% of the credit went to subsidize non-resident income, including salaries of top-earning actors and directors. The DOAA suggested changes in the program that would reduce the amount awarded to out-of-state labor. The auditors also recommended greater transparency for the program, as current law keeps the recipients and amount awarded confidential.

To read the original article on Variety, click HERE.