On March 27, 2020, President Trump signed into law the Coronavirus Aid, Relief, and Economic Security Act (“CARES Act” or the “Act”).  The Act is a $2.2 trillion swiss army knife of economic relief provisions meant to reduce the impact of the COVID-19 pandemic on various parts of the U.S. economy.  Among these provisions is the $349 billion Paycheck Protection Program (the “PPP”), an expansion of the Small Business Administration Economic Injury Disaster Loan program (the “SBA”).  The purpose of the PPP is to help small and middle market businesses pay their employees and otherwise keep the lights on during the economic slowdown.  As entertainment productions grind to a halt worldwide as a result of COVID-19, the PPP may be a welcome boon for entertainment businesses trying to stay afloat during this challenging time.

Before addressing the rules, it should be emphasized that taxpayers should file their PPP loan applications ASAP.  It is anticipated that the $349 billion allocation to the PPP will be quickly absorbed and accounted for by applications submitted by this Friday (April 3), which means that applications filed next week may be out of luck unless Congress elects to expand the size of the PPP fund.  With that as our background, we continue with a general description of the PPP.


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As the coronavirus pandemic yells “Cut!” across the world, the entertainment industry will feel the economic impact, with theaters closing their doors, lower attendance at film festivals, delayed productions, and the like.  Business managers and entertainment businesses, however, may feel some relief as Treasury called in sick and postponed Tax Day for 91 days.  The news first broke via tweet on March 20, 2020, when Treasury Secretary Steven Mnuchin announced on Twitter that Tax Day will be moved from April 15 to July 15.  A few hours later, the IRS fleshed out Mr. Mnuchin’s announcement by publishing Notice 2020-18, which provided more details regarding the taxes covered and the taxpayers affected by the new deadline.  The move is one of several recent measures taken by the federal government as it attempts to relieve the immense economic strain being put on Americans by the COVID-19 pandemic.

This announcement comes just two days after—and supersedes—Notice 2020-17, which postponed until July 15 the payment but not the filing of federal income taxes and imposed limits of $1 million for individuals and $10 million for corporations with respect to such postponement.  Notice 2020-18 restates and expands upon Notice 2020-17 by eliminating the distinction between payment and filing of taxes for purposes of the new deadline and by doing away with any pecuniary limits on the amount of tax that may be postponed.


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As quickly as cameras flash at the Oscars, Congress passed the Tax Cuts and Jobs Act (“TCJA”) and left taxpayers holding the bag in some areas.  Unlike in the movies, taxpayers cannot do a reshoot if the first take is not perfect.  After almost two years, Congress may again pass additional legislation within a 48-hour period, which may resolve certain issues that have arisen in Hollywood since the TCJA.

On December 18, 2019, the House passed tax legislation as part of an omnibus package that included, among other things, extending Internal Revenue Code Section 181 (“Section 181”) retroactively from 2018 through 2020, which ultimately means that taxpayers may be able to elect Section 181 treatment for the 2019 and 2020 tax years.  The Senate is expected to pass this legislation on December 19, 2019.  Many taxpayers may wonder, “why do we need Section 181 if qualified U.S. film/TV productions (and live theatrical productions) already are eligible for bonus depreciation under the TCJA?”

For those who have already forgotten about Section 181, prior to the TCJA production companies were eligible to elect to deduct production expenses of certain qualified U.S. film/TV productions (and live theatrical productions) as and when incurred (subject to a $15m cap) in lieu of recovering such costs over a 10-year period.  While Congress did not renew Section 181 beyond December 31, 2017, the TCJA included such qualified productions as property eligible for bonus depreciation.


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This Article is part of a series monitoring developments with regard to California Assembly Bill 5 and its impact on the entertainment industry.

California Governor Gavin Newsom recently signed into law Assembly Bill 5 (“AB5” or the “Bill”), which redefines the distinction between an employee and an independent contractor. AB5 is primarily targeted at gig economy companies such as Uber and Grubhub, whose workers had been classified as independent contractors up to this point. Proponents of AB5 argued that many gig economy workers worked full time but received none of the benefits commonly associated with full time employment—including overtime, minimum wage, and workers’ compensation. Consequently, AB5 was touted as providing increased benefits and rights to a growing gig economy workforce. An additional impetus for AB5 was the legislature’s desire to stem financial losses to the state as a result of worker misclassification, including the loss of tax revenues.


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