IRS ruling stings film production

February 10, 2007 In a blow to the attempt to curtail runaway film production, an IRS ruling took effect Friday that threatens to severely undercut a tax credit designed to give financial incentives for movies made in the U.S. In its preliminary decision, the IRS decreed that participations and residuals must be counted as a production cost when film and TV show producers use a federal "runaway production" tax credit approved in 2004. For example, the statute specifically provides that participations and residuals are excluded from the definition of compensation for purposes of determining whether the production was a qualified film or television production.

Subscribe to the Hollywood Reporter and see the entertainment industry from its best angle: the inside looking out. Complete access to real-time news and exclusive analysis that goes behind the scenes from film to television, home video to digital media.

   Subscribe now.