12 Colum.-VLA J.L. & Arts 307 (1987-1988)
The Effect of the Tax Reform Act of 1986 on Motion Picture Financing

handle is hein.journals/cjla12 and id is 319 raw text is: The Effect of the Tax Reform Act of 1986 on
Motion Picture Financing
by MARGARET-ANN F. HOWIE*
INTRODUCTION
In a civilized world, there would be no tax on the Arts.' If this
were indeed the case, then the effect of the Tax Reform Act of
19862 on film making would be barbarous. Although wealthy individ-
uals and struggling producers alike once received tax benefits from
investments in motion pictures,8 the latest amendments to the Inter-
nal Revenue Code4 have largely eliminated those incentives.
This Note analyzes the effect of the Tax Reform Act of 1986
(1986 Act) on the financing of feature-length films and television
programs. To this end, it examines the Internal Revenue Code
before and after the landmark 1976 amendments,5 which substan-
tially curtailed film tax shelters. Secondly, it explores the impact of
the 1986 Act on the film industry, notably, independent producers.6
While this Note considers whether the new law affords relief for
small producers, it also advances proposals for future policy concern-
ing the taxation of the film industry.
* J.D. Candidate 1988, Columbia University School of Law. M.A. 1985, Middlebury Col-
lege. B.A. 1984, The Johns Hopkins University. Associate with Piper & Marbury, Baltimore,
Md., beginning Autumn 1988. Copyright © Margaret-Ann F. Howie 1988.
1. Harbottle, U.K. Tax Laws, in Tax Policy and Private Support of the Arts in the
United States, Canada and Great Britain 30 (H. Sandison ed. 1981).
2. Pub. L. No. 99-514, 100 Stat. 2085 (1986) (codified as amended in scattered sections of
I.R.C.).
3. Between 1973 and 1976, one out of every five films was financed by private investors.
See Hoffman, Will the Next Robert Redford Have to Be a Canadian?, N.Y. Times, Oct. 23,
1977, at DI, col. 4.
4. I.R.C. §§ 1-7872 (West Supp. 1987).
5. Tax Reform Act of 1976, Pub. L. No. 94-455, 90 Stat. 1520 (codified at I.R.C. §§ 280,
465 (1982)) (§ 280 repealed 1986).
6. When using this term, this Note refers to producers who make films without the finan-
cial backing or control of the major Hollywood studios (the majors).

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