Originally published at: Rep. Joaquin Castro asks Justice Dept. to review Warner Bros.' practice of permanently shelving movies for tax breaks | Boing Boing
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Yeah, you would think this would qualify as fraud somehow. They really need to also look at the tax code and determine how exactly this is creating a tax break and maybe close that loophole to remove the incentive. Of course, it’s also entirely possible that some MBA executive at Warner completely misunderstands the tax code and is just flat out wrong about this practice creating a tax break. We’re not seeing an epidemic of other studios doing the same thing, are we? Maybe they are, I don’t know. Either way, I’m glad someone is wanting to dig into this. If nothing else, it’s not fair to the creatives involved that they put in all this time and energy into a thing just for it to be shelved.
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If WB would like to pay me huge sums of money to make a film they will never release, I’m fine with that.
I’m sure it would be a terrible film nobody would want to see anyway, so that would be a win/win. /s
Did I read it right that they may release the Coyote film through other distributors? And that would still qualify for a tax break? The US tax code is nuts. Maybe they need a film with the IRS as the coyote and WB as the roadrunner - it could be a documentary!
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For the record, Scoob! was released, into theaters even. IT was awful, discarded the majority of the Scooby-Doo voice cast, and likely SHOULD have been shelved. The movie that was used for a tax break was Scooby-Doo and Krypto Too, which eventually leaked online.
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Does his business card give his title as “Super Genius”?
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It is definitely one perverse incentive. Hopefully all of the attention will cause them to release the others too.
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This statement is interesting because to me (not a US tax expert by any stretch) this implies that the tax break they receive is greater than the cost of producing the film.
In the burning down the house analogy, the house was built in 2019 for $150,000 but it’s current cost of replacement is $250,000. The bump from the insurance payout is $100,000.
Perhaps it’s some “this year’s cost” versus “last year’s cost” shenanigans by which the cost at the time of production can be adjusted upwards by some index / inflation value, in order to derive the current year’s tax deduction. If movie studios can do this and make marginal profits while simultaneously enriching themselves by paying huge tax deductible salaries straight into their pockets, then why would they even bother to release ANY movies? I must be missing something, or yes the US tax code is totally screwed up.
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It makes the plot of The Producers look upright. At least Springtime for Hitler was actually performed in front of a paying audience.
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Bialystok and Bloom would have had to find a different play for their surefire flop these days.
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There’s also the consideration of ‘shelved’ versus ‘destroyed’. I’m thinking that destruction of work should be a non-transferrable right. By letting a publisher recreate or share your work, you shouldn’t be forced to negotiate away its destruction.
Look at all those HBO animators who can’t find decent copy of their own work.
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Some streaming companies have been doing the same thing, purging already-released movies and shows from their libraries for tax breaks. The new Willow show was created specifically for Disney+ and now it’s already been removed.
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I’m guessing there would be a lot of classic films throughout Hollywood history that would have been destroyed by executives looking for a quick buck, if this was a financially viable practice.
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Hey, those entertainment giants lobbied hard (bribed congressmen) for those tax breaks, and we should respect that.
/s
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Instead they burned them, quite literally, when they needed a fire effect in a later movie. Sooo many movies are lost to us because of this (long-ago) practice.
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I think the last line of the OP gets to the crux of it. (Although I am also not a tax expert.) It’s not a bigger tax break, it’s a more immediate tax break.
I think revenue recognition rules are very complicated and as long as the film is generating revenue they need to apportion the costs of the film over time. If they shelve it as a total loss, they can deduct the full cost now.
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I’m sure it’s very complicated but I would guess it has something to do with them being allowed to use made-up numbers as long as there’s no actual sales figures available.
Once a movie’s a flop, it’s a flop; you just get the tax advantage of having wasted money that year. But if it’s never released, it can appear on your balance sheet as an asset worth $100m, and you can find a reason to write it down whenever you need to “lose” $20m for tax purposes.
That’s just my guess, but it makes sense that the less your accounts are bound to reality, the more scope you have for imaginative play.
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Umm…is there any way we could clue Sony into this shelving films for a tax break scheme? Because I think they really need to shelve Madame Web. Holy crap, the trailer is so bad.
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Oh… yikes…
Do you think it’s gonna be “morbin’ time” bad?
and if so, will there be a Matt Smith to save it by chewing up all the scenery?
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Honestly, I think it looks worse than Morbius.
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