Film festivals hit with ‘swag tax’
Conan O’Brien joked about the tax during Sunday’s Emmy Awards and next January celebrities might be seen throwing Sundance Film Festival swag into Poison Creek in the spirit of the Boston Tea Party — to protest plans at the IRS to tax their gift baskets.
"There’s no special red-carpet tax loophole for the stars," Internal Revenue Service Commissioner Mark W. Everson said in a press release. "Whether you’re popping the popcorn, sitting in the audience or starring on the big screen, you need to respect the law and pay your taxes."
The federal government has settled its dispute with the Academy of Motion Picture Arts and Sciences over taxes incurred on gift baskets some reportedly worth more than $50,000 — given to movie stars at the Oscars.
"These items are potentially taxable and should be included in income," said Bill Brunson, a spokesman for the IRS.
But that decision won’t prevent swanky clothing companies like Chanel and Prada from adorning movie stars with gifts during the Sundance Film Festival in January, said Jim Dobson, president of Indie PR, a California firm that arranges gift baskets and so-called luxury lounges in Park City.
"Celebrities have so much money they don’t care about the tax," Dobson said. "It’s not going to prevent them from getting free stuff."
But from now on swag bags at Sundance that might include luxury trips and electronics could also come with the IRS’ Form 1099, according to Everson.
"The gift basket industry has exploded, and it’s important that the groups running these events keep in mind the tax consequences," Everson said.
Last year iPods were one of the gifts of choice, Dobson said, adding that gift baskets at Sundance that have included clothing and jewelry have been worth more than $50,000.
"Sundance is still going to be wall-to-wall gift baskets like it always has been," Dobson said, adding that sales spike on products placed in the hands of movie stars. "Potentially, because of this (publicity) you’re going to notice an even higher profile corporate presence."
Companies will likely begin prepaying the taxes for those who receive their gifts, Dobson said.
"It’ll be as crazy as it’s always been," he said, adding, "It’s all advertising, it’s just a different way to do it."
Stars at this year’s Sundance Film Festival, like Daryl Hannah, Maggie Gyllenhaal and Liz Phair, were persuaded to donate their gift baskets to a charity called Got Plenty?, said Mark Spellun, editor in chief of Plenty magazine.
The items were then auctioned to raise money for Global Green USA, an environmental charity, he said, adding, "It was a real gorilla marketing effort."
Celebrities who donate gifts to charity could receive tax deductions, according to the IRS.
Meanwhile, if the tax reduces the number of celebrities trolling Main St. for swag "it’s only going to be good news," said Elizabeth Daly, director of strategic development for the Sundance Film Festival.
"People will come to the festival regardless, because they have a personal attachment and a reason for being there," Daly said. "A certain level of celebrity that is coming there just for their own PR blitz and photo shoots, them going away is not going to hurt the festival."
"Your actors aren’t going to come unless they feel like they’re being taken care of Unfortunately, it’s a catch-22," he countered. "Park City has created this environment themselves. It has not been forced upon them."
Daly insists the corporate presence at Sundance should be limited to official festival sponsors.
"Everything that is ‘out of control’ about the festival is not anything that is under the guidelines of the actual festival and the Sundance Institute," she said. "It’s all the parasite marketers that are coming to town."
But Sundance officials pushing to do away with the gifts should rent out space on Main Street, Dobson countered.
"Then there wouldn’t be any room for gift boxes," he said.
Daly lauded the IRS crackdown.
"It’s bringing to light that this idea of gifting has gotten out of hand," she said. "We would love the focus of the film festival to be about the films and the filmmakers and to celebrate the official sponsors that make it possible."
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