August 17, 2006

IRS goes after Hollywood ‘goodie bags’

By Steve Gorman

LOS ANGELES (Reuters) - The Internal Revenue Service has
set its sights on Hollywood "goodie bags" -- the increasingly
extravagant gift baskets that stars receive for presenting
awards, including the Oscars.

The IRS on Thursday unveiled a new "outreach campaign" to
remind the entertainment industry that the troves of goods and
services celebrities receive in exchange for appearing on
awards shows are taxable as income.

Typically, the gift bags are worth between $40,000 and
$100,000 when presented at major award shows.

At the same time, the IRS announced a deal with the Academy
of Motion Picture Arts and Sciences settling the tax
obligations of past Oscar gift-basket recipients through 2005,
essentially letting those stars off the hook.

But Academy Award presenters and performers from this
year's show, held on March 5, will be responsible for reporting
their goodies and "will be issued appropriate informational tax
forms by the Academy," the IRS said in a statement.

Next year's Oscar talent won't have to think about it. The
academy's governing board quietly voted in April to discontinue
its gift baskets starting in 2007 after the IRS issued an
earlier notice warning of a crackdown on "swag" bags.

"We thought that a gift basket that carried with it an
obligation was no longer appropriate," academy spokeswoman
Leslie Unger told Reuters.

The IRS's Oscar campaign, part of a larger effort to boost
tax collections from high-income earners, is likely to have
ripple effects throughout Hollywood, where lavish gifts and
perks have become increasingly embedded in the unofficial
compensation structure.

"We've been watching the general growth of this in recent
years, and it was a concern to us," IRS spokesman Terry Lemons
told Reuters. "Everybody has an obligation to pay their taxes."


As IRS Commissioner Mark Everson put it in a statement,
"There's no special red-carpet tax loophole for the stars."

It was not immediately clear how other major industry award
shows would react to Thursday's developments.

A spokeswoman for the Academy of Television Arts &
Sciences, which is due to present the Primetime Emmy Awards on
August 27, said it was "premature to comment" on whether her
organization would seek its own deal with the IRS.

But she said Emmy organizers recently sent notices to its
presenters informing them they would go without a gift bag
unless they had signed and returned a form acknowledging
personal responsibility for paying taxes on the goodies.

The spokeswoman, Pam Golum, said there was "no accounting
yet of how many have come back since the letters are in the
process of being sent."

Representatives of the Hollywood Foreign Press Association,
which presents the Golden Globes Awards, were not immediately
available for comment. Nor were officials at Grammy-sponsoring
National Academy of Recording Arts and Sciences.

According to the motion picture academy, the tradition of
Oscar gift baskets became well established by the early 1970s
as a way of thanking stars who served as presenters without pay
and those who received "only the minimum union payment" for
performing on the show.

The gifts have grown more extravagant over the years as
hotels, resorts, fashion lines and even consumer electronics
makers clamor to link their brand names with the film
industry's highest honors.

According to Daily Variety, this year's Oscar swag included
a BlackBerry 8700c, a Canon DC10 camcorder and a six-night stay
in Marriott Ihilani Resort & Spa in Hawaii.