Proposed tax law change may cost Alliance $3.8 mil

Co. says alteration will nix tax-assisted, private sector-structured financing

TORONTO — Alliance Atlantis could take a hit of C$6 million ($3.8 million) next year if tax changes proposed by the federal government on Friday go into affect.

According to Alliance Atlantis, these changes will nix tax-assisted, private sector-structured filmed entertainment financing, a move some fear could curb U.S. film production in the country and have serious financial consequences for domestic entertainment companies.

At the moment, private sector financing “middlemen” use the tax shelter loophole to draw investors in various industries.

Under the loophole, investors finance a production partnership that initially loses money because of startup costs. The losses flow back to investors, which they deduct from their tax bills, often allowing them to save more than they put in.

American studios can save as much as 6% of their film budgets using this loophole.

Other film and television subsidies, such as those from the public sector and federal and provincial tax credits and grants, will not be affected.

Alliance Atlantis has an interest in Sentinel Hill Alliance Atlantis Equicap Ltd. Partnership, which arranges tax-assisted, private-sector production financing around the world.

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