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[Johnny B]

Got your attention didn't I?

Now if there were a way to write off 15 to 20 million dollars you might want to hear about it, am I right?

Well it seems that the US Congress may have helped some creative people when it passed Internal Revenue Code Section 181.

IRC 181 allows a 100 percent write-off for the cost of certain AUDIO-visual works regardless of the target...DVD, theatre, or TV. And that should mean that music recorded as part of a music video would be completely subject to a 100 percent write-off. The total cost of the AV work cannot exceed 15 million dollars unless it is produced in certain low-income areas, in which case, it cannot exceed 20 million dollars.

It might even mean that music-only with just a single still picture delivered on a DVD could qualify. Think about that, aye?

The literal wording of the law seems to include participations and resididuals as costs for purposes of the cost ceiling, (That could mean that very successful works could be disqualified retro-actively, but think what it means for all the other marginal productions!)

It looks like the deduction applies to all AV costs, not just compensation for services performed in the United States. It might apply to the entire costs of producing something like Monday Night Football. It's an all or nothing test...exceed the 15 million dollar cost and you're out of the Section 181 program.

75 percent of the total compensation relating to the AV work must be paid for service performed within the USA. For a TV series, only the first 44 episodes qualify.
Porn is also not qualified. (Oh well, can't everything. Sometimes these Revenuers spoil all the fun.)

The owner is the one who gets the deduction. But with an AV work financed on a leveraged basis which complies with the at-risk rules and using a pass-through entity, investors could immediately deduct the entire costs. If they deferred the income by using licenses, they could eventually set the whole deal up to qualify for a long-term capital gain treatment at a maximum federal rate of 15 percent.

Think about that for a moment, aye!

So, this Internal Revenue Code Section 181 may be well be worth looking into with your tax accountants and tax attorneys as it could mean additional business for some of the people who come here. Perhaps, with a little creativity some major recording studios could stay afloat and keep their doors open. That's be good, aye?


Disclaimer: Always remember, Johnny B knows nothing and is uncertain about everything.    

Thus, you should always consult with YOUR expert lawyers and accountants. Your tax lawyers and tax accountants might find that IRC Section 181 could make a big difference to you.

I hope this helps.

[Level]

Shhhhhhhhhhhhhhhhhhhhhust.


Now the States will pick up the slack for sure.

[Johnny B]

Nah, tell everybody you know in the biz about this, it might save some lives.

[djui5]

Awesome!
Thanks for the heads up

[Johnny B]

Randy,

You're quite welcome. I hope it helps.

Try this goofy idea on for size---Buy up a major recording facility in conjuction with a film production and write the enitre cost off!

There are more creative possibilites with IRC 181...but..of couse...you have to have creative-minded people around to come up with this stuff...unless you are one of those creative types of thinkers...

Just make sure you run your creative ideas by YOUR experts, the tax lawyers and tax accountants..

Internal Revenue Code Section 181---Who knew?
 

[Johnny B]

Today may be a good day to give IRC 181 some thought as to how you might creatively use it.

Today may be a good day to call your tax accountant or tax lawyer about IRC 181.

Today may be a good day to buy or build a major studio bacuse of IRC 181.

Today may be a good day to dream about the possibilites of how you might use IRC 181.

IRC 181...Hmmm...the possibilities...

[henchman]

This wwould make record companies owning studio's sensible again, I would think. 100% tax write off of the recording budget.

[wireline]

I knew about this...and after the euphoria wore off of thinking I could have anything I wanted, the reality hit me:

In order to take advantage of the write-off, one must buy the included items/facilities...

And in order to buy them, one must have the cash up front/financial strength to withstand the costs...

But what the heck? I write off everything I can think of, including the cost of CDs when I burn an occassional coaster...as long as there's some sort of picture on it...

[Johnny B]

Ah, but Ken. People can also bring in investors or do leveraged money deals too.

There is no requirement that all the cash come from any particular source AFAIK.

Still, it's best to run any creative fincancing mechanisms past the tax experts, the tax accountants and tax lawyers.

In fact, by talking to some really good tax experts, you might find they also have some good ideas of what you can do with IRC 181.

IRC 181 could be a very good thing for the industry in general. I heard a guy from RIAA say there were somewhere in the neighborhood of 5.5 million people working to produce entertainment, and that it is around 6.5 percent of the GNP. That's a significant chunk of the economy and a hellva lot of jobs, anything the gov't can do to keep people working should be welcome.

IRC 181 could be good for everyone.

[J.J. Blair]

Johnny, are you saying that the mic that I bought which was used in the recording for a movie score can potentially be written off?  I happen to have one client who is a big Hollywood tax attorney.  Of course I will be running this by him!

[Johnny B]

I think it only applies to the owner of the AV work, but you never know how a good lawyer might interpret the word "owner." So, I have to say, I dunno.

Maybe, best to ask you own tax expert.