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.


Continue Reading

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.


Continue Reading

Individuals working in the entertainment and media industries will feel the pinch in home-states like California and New York.

Last month, a federal judge dismissed a lawsuit against the Treasury Department brought by New York, Connecticut, Maryland, and New Jersey that challenged the constitutionality of the Tax Cuts and Jobs Act’s limitation on the federal deduction for state and local taxes paid. The TCJA imposed a $10,000 upper limit, known as the SALT Cap, to the amount individuals can deduct on their federal tax return for state and local taxes. The SALT Cap applies for tax years 2018 through 2025.

Residents of states with higher state individual income tax rates, such as California and New York, have felt the brunt of this change. Consequently, the industries predominantly based in these states such as entertainment and media have been particularly hit. Moreover, the SALT Cap limits both state tax and property tax deductions to $10,000 combined, compounding the issue for California residents, where real estate prices have increased dramatically. Not surprisingly, California saw the largest outflow of domestic residents of all states in 2018. New York came in at third. And in case we were unsure whether tax considerations caused the exodus, Florida, a state with no state income tax, received the most movers.


Continue Reading