Paul L. Caron
Dean




Sunday, February 28, 2016

A Taxing Oscars:  $232,000 Swag Bags (40% Increase Over Last Year's), Tax Incentives For Best Picture Nominees

IRS, Gift Bag Questions and Answers:

Q: What are the federal income tax consequences to a person who accepts a gift bag in recognition of involvement in an awards show?
A: In general, the person has received taxable income equal to the fair market value of the bag and its contents and must report that amount on his or her federal income tax return. ...

Q:  If these are gifts, why do they have to be treated as income?
A:  These gift bags are not gifts for federal income tax purposes because the organizations and merchants who participate in giving the gifts bags do not do so solely out of affection, respect, or similar impulses for the recipients of the gift bags.

Q: Can the recipient take a charitable contribution deduction if he or she contributes the gift bag to charity? 
A: If the gift bag is donated to a qualified charitable organization, the recipient may be able to take a tax deduction for his or her charitable contribution, subject to applicable limitations and requirements. But this does not change the taxability of the value of the items.  The fair market value must still be reported on the celebrity recipient’s federal income tax return.

Reason, No Matter Who Wins at the Oscars, Taxpayers Lose on Film Subsidies:

Sunday night brings the 89th Academy Awards, and many are wondering what film will take home the Oscar for Best Picture. No matter what film wins, one group of people should be thanked during the acceptance speech—taxpayers

Film is a heavily subsidized industry, and the majority of states have tax incentive programs that lower the cost of production. These tax credits are determined by production costs, not profits, and many credits are transferrable or refundable. When a film’s tax liabilities are below its allotted refundable credits, taxpayers end up directly paying film companies the difference.

The Big Short, one of this year’s nominees, cost $28 million to produce and was filmed in California, Nevada, and Louisiana. All three states have film tax credit programs, but Louisiana’s 40 percent partially-transferable credit is the largest. The film's producers made a movie about Wall Street greed, but they clearly had no problem making taxpayers pay for their production costs.

New York’s fully-refundable 30 percent film tax credit is the most generous in the nation, with an annual limit of $420 million. Brooklyn and Bridge of Spies, two of this year’s nominees, were filmed in New York, and their budgets were $12 million and $40 million, respectively.

States are starting to realize that the economic benefits of film tax credits are pure fantasy, like some movie plots. In 2012, 40 states offered tax incentives, at a total cost of $1.4 billion, but since then some states have decided that maintaining roads, funding schools, staffing police departments, and letting residents keep more income are better uses of funds. Since last year’s Oscars, Alaska, Michigan, and Illinois all ended their film tax credit programs

https://taxprof.typepad.com/taxprof_blog/2016/02/a-taxing-oscars232000-swag-bags-40-increase-over-last-years-tax-incentives-for-best-picture-nominees.html

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