FROM THE OFFICE OF PUBLIC AFFAIRS
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May 27, 2004
JS-1693
Treasury Issues Guidance on Creative Properties in the
Film Production Industry
The Treasury Department and IRS issued guidance today to clarify when film producers may recover costs incurred in acquiring or developing screenplays, scripts, and other creative properties that are not scheduled for production.
“For many years, the industry accounted for these costs in the same way for both tax and financial reporting purposes,” stated Acting Assistant Secretary for Tax Policy Gregory Jenner. “After a change in the applicable financial reporting rules, the industry asked us to address the tax treatment of these costs as part of the Industry Issue Resolution (IIR) program.”
The revenue ruling issued today holds that a film producer may not claim an abandonment loss for the capitalized costs of acquiring or developing creative properties unless the producer establishes an intention to abandon the property and an affirmative act of abandonment occurs. The revenue ruling also holds that a film producer may not claim a deduction for worthlessness unless identifiable events evidencing a closed and completed transaction establishing worthlessness occur.
The revenue procedure issued today provides a safe harbor method of accounting that permits taxpayers to amortize over a fifteen-year period costs for creative properties that are not scheduled for production within three years of acquisition.
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