Variety: Congress likely to repeal tax break for indie films

[villager]

This is how they "correct" the tax code -- attempting to shut down indie film production it the U.S!


Congress likely to take back indie pix tax break

Staff members claim 'oversights' need to be 'corrected'

By WILLIAM TRIPLETT

WASHINGTON -- Possibly as soon as next month, Congress will consider dramatically reducing two key provisions that independent film producers hailed as major victories in last year's corporate tax bill.

After years of lobbying, indies rejoiced upon learning in October that President Bush had signed the bill, which included a sweeping tax break for filmmakers and an incentive for financiers to invest in indie films. But congressional staff members now say the two provisions appear to be "oversights" that should be "corrected."

As written, the provisions allow producers of films with budgets under $15 million and their investors to deduct their costs or investment in a single year -- as opposed to depreciating it over several, which the tax code previously required. If the film is eventually sold, the provisions also allow investors to be taxed on profits at the capital gains tax rate, which is significantly lower than the personal income tax rate.

Because of these allowances, investors were guaranteed to make a profit even if the film sale only broke even. For example, a $10 million investment, deducted in one year, yields a $3.5 million savings on taxes (based on a 35% tax rate). The net outlay is thus $6.5 million. If the film is later sold for $10 million, breaking even, the investor pays only a capital gains tax rate of 15% (vs. the normal 35%), walking away with $8.5 million -- $2 million more than his $6.5 million outlay. And if the film is sold for a higher amount, the investor would still be taxed at the capital gains rate.

"This was a bona-fide tax subsidy to encourage film financing in the U.S.," said Schuyler Moore, an entertainment industry tax expert. "It's very hard to raise money for these films, and this is just what was needed." But Moore said he recently learned that Congress' Joint Committee on Taxation believes the provision was unintended, and that profits should be taxed at 35%, the normal income tax rate for million-dollar sums. "If that happens, they will eliminate the tax-savings incentive for raising money," Moore said.

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More at www.variety.com (subscription site)

[rogue_bandit]

1. A slam on Michael's success

This must be retaliation for Michael Moore's success. They don't want another filem like Farenheit 911.

[aquart]

2. Ain't they clever?

How much money has Moore made on his films? For his backers? So, no tax breaks. Uh huh. Michael Moore still gets investors.

But new filmmakers get slammed in the teeth.

Yeah. It's a plan of genius. Let's cede the film industry now, too. Do those brain dead idiots have any idea that film-making is on the great remaining American industries? And they want to ship that overseas, too?

[sidpleasant]

6. It's not just about Moore

Ol' DDT Delay is still pissed at the film industry because the Motion Picture Association of America (the industry's trade group) defied him by selecting a Democrat to replace retiring president Jack Valenti. Part of the GOP's scheme for a one party nation is to destroy institutions that support the Democratic party such as lobbying firms affiliated with the party. Companies have been told that they must hire GOP lobbyists if they want any access to Congress. Delay already whacked the major studios with a $1 billion tax hike last fall.

[villager]

9. good points, but the studios, like the one Murdoch owns...

...don't want to see too many indies flourish, either. Might divert some box office away from the "sequel" business!

This is another GOP attempt at homogenizing the culture...

[okieinpain]

11. yeah, but will dems return the favor when we get control. or will

or god old dlc boys just slap them on the back and say all is forgiven.

[newyawker99]

13. Hi rogue_bandit!!

Welcome to DU!! :toast:

[James T. Kirk]

3. They should either keep the tax low or give a low rate for everyone!

Raise taxes on small businesses? No way!

Also, they should either keep the tax low or allow the same deal for other projects. Is making an independent film somehow more economically valuable than writing an indie book, making indie software or opening an indie restaurant?

[okieinpain]

10. that's what the dems should start screaming loud and clear,

the repugs want to raise taxes on small business.

[SoCalDem]

4. The indy film-makers will just get more creative..

There are patrons of the arts in Europe, and there is always a way to get a good idea "out there"..

Congress-Just a bunch of greedy piggies...running scared..

[Matilda]

5. They don't seem to realise

that some wonderful books, plays and films came out of Communist
Europe during the years of Soviet control. They were created in
secret and often had to be smuggled out, but when you push people
too far, they just become more desperate to get their message out.

[Bono71]

7. That's true...Master and Marguerita by Bulgakov is one

of my favorite books (very anti-communist) in the world.

Too bad, they "fixed" Bulgakov in the end.

[w4rma]

8. So Bush is RAISING taxes on small buisness. Again. Propagandists. (nt)

[villager]

12. small businesses don't really count

unless they're bought up by corporations

[struggle4progress]

14. Not gonna repeal the tax breaks for Hummers? eom