Tax writers on the House Ways & Means Committee have given Hollywood a reprieve of sorts: The panel has agreed to sock the industry with only $204 million in new taxes over seven years, rather than earlier estimates of $400 million.
The tax-raising proposal is part of a plan by Rep. Bill Archer (R-Texas) to close business tax loopholes that critics have labeled “corporate welfare.”
The bill includes a provision that forces movie studios to adjust the so-called “income forecast method” of accounting. That change will result in a slower depreciation of pics and TV shows, resulting in higher tax payments for the industry.
Archer’s original plan required studios to estimate upfront a film or TV show’s revenues from future ancillary markets. But under the proposal passed by the committee, Archer modified changes in the accounting method for TV shows. The reason: Program producers are unable to accurately forecast the revenue-raising potential of a TV show in early years, as it takes four years before a program can be syndicated and start generating sizable revenue.