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Documentary Makers Protest Tax Court Ruling

June 7, 2011

A group of documentary filmmakers has filed an amicus brief with the U.S. Tax Court in the hopes that documentaries won’t be automatically considered not-for-profit activities by the tax authorities.

The International Documentary Association filed an amicus brief in a case involving a documentary about the group “Up with People.” During a Tax Court trial in March, Judge Diane Kroupa questioned whether a documentary could be considered a “for profit” enterprise since it is designed “to educate and expose.”

Michael Lumpkin, executive director of the International Documentary Association, wrote to his members about the brief last week, warning about the repercussions of the Tax Court statement.

“Judge Kroupa’s speculation came in a case in which the IRS argued that filmmaker Lee Storey could not deduct business expenses pertaining to her film Smile ’Til It Hurts: The Up with People Story because the primary purpose of her film (and by inference all documentary films) is to educate and expose, not to make profit, and that therefore documentary filmmaking is a not-for-profit activity,” he wrote, according to IndieWire. “The IRS believes that if the person has no intent to make a profit, then the activity is a ‘hobby.’ Therefore, they claim that Storey owes hundreds of thousands of dollars in back taxes and penalties for the business deductions she took.”

Lumpkin worried that a potential affirmation of Judge Kroupa’s statement could have “a serious impact on documentary filmmaking in America by creating federal case law precedent that could be used against filmmakers, bringing about audits and demands for back taxes because of a characterization of documentary filmmaker as meriting nonprofit status.”

His organization filed an amicus brief in the case, urging the Tax Court to recognize that the production of a documentary film is a “for profit” business and that business expenses should be deductible for tax purposes. That would “ensure that all filmmakers receive the respect they deserve, and that the many sacrifices they make in the pursuit of their art and livelihood will not be made in vain.”

Here's hoping the Tax Court is Up with Documentary Makers.

Comments (1)
This may sound far out, but what about expenses related to preparation for CPE courses which are about teaching and exposing tax frauds to be careful about?

These courses are not free, i.e., for profit ventures.

And since we do know that the courts, and State legislatures for that matter, have ruled against accounts for years, but never against their own, i.e., lawyers (seen sales taxes on accounting services but never on legal services), it's obvious which CPE course producers will now get screwed.

Thank you IRS! And you have the audacity to ask for our cooperation.

Back to the point in question, numerous documentaries have made millions. Is this income now to be considered "Tax Free?" Let's be fair, why not?
Posted by | Wednesday, June 08 2011 at 1:21PM ET
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