On June 1, the Industry-Wide Labor-Management Safety Committee Task Force (Task Force), composed of representatives of producers and the unions of the motion picture and television industries, submitted to the governors of California and New York a white paper proposing guidelines for the resumption of motion picture, television, and streaming production (White Paper). The White Paper presents the consensus of the Task Force regarding the circumstances under which content production can safely resume, with an emphasis on regular testing, sanitation, physical distancing, and education and training. The White Paper also addresses unique production-specific concerns, such as preventing infections from equipment that is commonly shared and not feasibly disinfected (e.g., lighting / electrical cables and certain props, costumes, accessories, wigs, and other specialty items), and special guidelines for casts that include minors or animals.
Continue Reading Industry Task Force Proposes Guidelines to Restart Production in California and New York

Recently, California Governor Gavin Newsom raised some eyebrows when he announced that state government officials anticipated publishing guidelines for the reopening of Hollywood production facilities by Memorial Day. The Governor’s announcement took many in the industry by surprise, given that producers and unions continue to wrestle with the legal obligations and operational complexities involved in

Employers of U.S. residents who are remaining in Europe while projects are shut down because of the COVID-19 pandemic might benefit from a new taxpayer-friendly approach. The new protocol forgives days spent abroad because of COVID-19 travel restrictions, as part of a foreign-country corporate residency analysis.

On March 23, 2020, the Irish Revenue Commissioners (Irish Revenue) issued Revenue eBrief No. 46/20, which announced Irish Revenue will adopt a taxpayer-friendly approach to corporate residency determinations for companies whose employees, directors, service providers, and/or agents are unable to travel as a result of recent government-imposed travel restrictions. This guidance came at the same time as similar announcements by the Organization for Economic Cooperation and Development (OECD) and several other countries. In particular, on May 20, 2020, and May 25, 2020, France and Germany, respectively, announced bilateral agreements with neighboring countries to ignore the presence of employees who must work outside of their country of employment due to government-imposed travel restrictions. Taken together, these policies suggest a universal willingness among international taxing authorities to quickly respond to the COVID-19 crisis and accommodate taxpayers as they navigate the evolving commercial realities of their businesses.
Continue Reading Working on a Production in Europe? Take Note of New Taxpayer-Friendly Residency Approaches in Light of the COVID-19 Crisis

On May 13, 2020, reality TV star Maurice “Mo” Fayne was arrested and charged with federal bank fraud by the U.S. Department of Justice in connection with his alleged misuse of loan proceeds obtained through the Paycheck Protection Program (PPP). Fayne submitted his PPP application in April, on which he claimed his company, Flame Trucking, had 107 employees and a monthly payroll of about $1.5 million. Fayne obtained over $2 million in funding from the program under the pretense of using the funds to support his trucking company. Instead, Fayne allegedly spent the money on $85,000 in jewelry, including a Rolex Presidential watch, a Rolls-Royce Wraith, and $40,000 in child support.
Continue Reading TV Star Arrested for Misuse of Stimulus Funds

With much of the entertainment industry currently at a standstill as a result of rampant production shutdowns, now may be a good time for those who are finding themselves idle to use this extra time to take stock of their financial situation and plan for the future.  Economic factors, such as the current depressed financial markets and historically low interest rates, have combined to impact and drive a variety of estate planning techniques.  While the current uncertain environment may – understandably – cause many to hesitate to engage in a substantial family gifting program, these economic conditions present a unique opportunity for families to pass a significant amount of wealth to younger generations with minimal transfer tax exposure.  We recommend contacting your Venable Wealth Planning counsel to discuss the techniques that may provide the most viable opportunity for your particular circumstances.

This post provides a high-level discussion of those estate planning techniques that present the greatest potential for an upside when implemented during a state of declining financial markets combined with historically low interest rates.
Continue Reading Finding the Silver Lining: Estate Planning Opportunities in a Low Interest Rate Environment

For many entertainment businesses, the recent congressional stimulus has proved to be a smash hit. The IRS, however, is a tough critic and is looking to claw back some of that money by disallowing deductions associated with such stimulus funds. On April 30, 2020, the IRS released Notice 2020-32 (the Notice), which provides some clarity regarding the tax treatment of loans received pursuant to the Paycheck Protection Program (PPP). Specifically, the Notice clarifies that any expenses paid with proceeds from forgiven PPP loans are not deductible for federal tax purposes. In an earlier post, we raised the question of whether such a deduction would be allowed; now the IRS has answered, but it may not get the last word on this issue.
Continue Reading No Deductions (Yet) for Business Expenses Paid with Paycheck Protection Loans

The Coronavirus Aid, Relief and Economic Security Act (the CARES Act) created the Paycheck Protection Program (PPP), pursuant to which certain taxpayers are eligible to obtain low-interest loans to enable continued operations during the coronavirus pandemic. If a taxpayer spends the PPP loan on certain enumerated expenses, including, among other things, payroll costs and rent, all or a substantial portion of the PPP loan will be forgiven. Participation in the PPP, however, has some critical tax impacts that should be considered. Below is a summary of some of such tax impacts:

Continue Reading Tax Impact of the Paycheck Protection Program

As the entertainment industry continues to adjust to a new normal, a largely forgotten provision of the Internal Revenue Code may provide welcome relief to both entertainment businesses and their employees during these uncertain times. The provision would allow individuals to receive tax-free payments from their employers while still giving employers the benefit of a deduction for such payments. The tax relief in question hearkens back to an earlier national crisis: following the September 11 terrorist attacks, Congress passed the Victims of Terrorism Tax Relief Act of 2001, which was intended to provide federal tax relief to victims of national disasters. Among the tax provisions to stem from this legislation was Internal Revenue Code Section 139 (Section 139).

Section 139 permits individuals to exclude from gross income for federal income tax purposes payments from any source (including an employer) that are qualified disaster relief payments. Qualified disaster relief payments include, among other things, payments and reimbursements for reasonable and necessary medical, personal, family, living, or funeral expenses that are incurred by an individual as a result of a qualified disaster[1] and not otherwise compensated (e.g., by insurance). Significantly, employers are able to deduct such payments for federal income tax purposes. Section 139 payments are also not subject to any federal withholding obligations and, therefore, do not need to be reported on a Form W-2 or 1099.


Continue Reading Take Two for an All-But-Forgotten Disaster Relief Provision of the Tax Code

The Coronavirus, Aid, Relief, and Economic Security Act (the CARES Act) provided the largest economic stimulus in American history in hopes of combating the economic effects of COVID-19. $349 billion was set aside for the Paycheck Protection Program (PPP), which provides loans, sometimes forgivable, to eligible small businesses. As we noted earlier, many production companies and other businesses in the entertainment industry will likely qualify to receive funds under the PPP.

But what if a company does not qualify for a PPP loan? For example, larger entities ultimately might be ineligible because of the 500-employee cap for eligible businesses. For these companies that cannot access PPP funds (or choose not to), the CARES Act provides alternative potential payroll tax relief.

The CARES Act creates a fully refundable payroll tax credit, the Employee Retention Credit (ERC), for eligible employers that do not receive a PPP loan. Companies entitled to an ERC will be able to use federal employment taxes, including withholdings, that such companies should have otherwise remitted to the IRS to fund “qualified wages” (defined below). Notably, if a company determines that its ERC will exceed qualified wages, it can request an advance of the credit from the Internal Revenue Service (IRS) through IRS Form 7200.


Continue Reading Not Entitled to a Paycheck Protection Program Loan? Payroll Tax Relief for the Entertainment Industry Is on the Way Under the CARES Act

On March 27, Congress passed H.R. 748 – the Coronavirus Aid, Relief, and Economic Security Act (the CARES Act).  The entertainment industry, like the rest of the country, now eagerly awaits the coming aid.  As production companies and other entities wade through the provisions of the bill to discover their share of the benefits, they might notice that some of the stimulus will arrive in the form of favorable changes to tax laws.

For example, one major piece of the CARES Act named the Paycheck Protection Program (the PPP) involves federally backed loans for qualifying “small” businesses that certify that the loan is necessary to support ongoing operations and will be used to retain workers and/or make defined overhead payments.  The PPP further provides loan forgiveness for borrowed funds used to pay eight weeks of payroll and other qualified expenses.  While businesses in the entertainment industry often do not conjure the words “small business” in our minds, many production companies, and other entities such as talent management firms, might ultimately qualify for these federally backed loans and subsequent forgiveness.  For a deeper dive into the PPP provisions and who qualifies, see our earlier post.

Normally, debt forgiveness gives rise to taxable income.  However, any loans forgiven through the PPP will be excluded from taxable income.  Essentially, for a production company that qualifies, the federal government is not only offering free money to pay for certain expenses – it is offering tax-free money.  It is unclear whether taxpayers can receive a double benefit by deducting expenses funded by a PPP forgiven loan.  And, on a related note, states have not yet conformed to this exclusion, so the question remains whether any PPP debt forgiveness will give rise to taxable income in states such as California or New York.  Production companies should stay tuned for the resolution of these issues.


Continue Reading The Federal Government Provides Production Companies Some Much-Needed Income Tax Relief