The IDA joined forces with a coalition of media arts organizations and independent filmmakers to lend their names to an amicus brief filed on their behalf by entertainment attorney Michael C. Donaldson. The brief urges the United States Tax Court to recognize that documentary films are overwhelmingly undertaken in pursuit of profit.
To review the amicus brief in its entirety, click here.
The amicus brief was filed in a case examining the IRS' challenging of the deduction of business expenses from the production of Smile 'Til It Hurts: The Up With People Story by documentary filmmaker Lee Storey. Smile ‘Til It Hurts explores the history of the youth choir Up With People, from its founding in 1965 on conservative ideals and cult-like ideology to its present-day incarnation and departure from its origins.
Following an audit in the tax years 2006, 2007 and 2008, the IRS challenged the deductions Storey made for business expenses, which amounted to a purported $311,809.90 (applicable interest and penalties included). According to their test for determining whether an activity is engaged in a for-profit activity, the IRS argued that Storey could not deduct business expenses because her production of a documentary was not a trade or business and was not carried on for profit. The IRS also pointed out that eight years have passed without Storey making any income.
During the trial at the United States Tax Court on March 9, 2011, Judge Diane Kroupa expressed her inclination to hold that Storey had satisfied several factors in the nine-factor test. At the same time, however, she questioned whether a documentary, in general, could be for profit, since, by its nature, it is designed "to educate and expose." Donaldson and the IDA understood that this statement could create a dangerous precedent for filmmakers if confirmed in a ruling. "We recognize that this issue, if left un-thwarted," says Donaldson, "could have devastating consequences to those artists whose livelihood hinges on enlightening the world at large on significant social subjects."
The amicus brief states that a judicial pronouncement that documentary filmmakers are not engaged in a profit-making activity would have a chilling effect on the documentary filmmaking industry, as documentarians would no longer be able to claim deductions for their business expenses pursuant to the Internal Revenue Code. The brief argues that while filmmakers certainly do make films to educate and expose, they are for the most part engaging in a for-profit endeavor and that the production of a documentary film entails a significant investment of time and money prior to any revenue generated from the film. The brief includes statements from several documentary filmmakers and other industry professionals to support these contentions.
IDA Board President and Academy Award-nominated documentary filmmaker Eddie Schmidt (Twist of Faith; Troubadours; This Film is Not Yet Rated) further affirms the notion that educational intent and profit are not mutually exclusive targets: "The fact that documentaries are generally made to appeal to hearts and minds, rather than fists and loins, does not diminish the intent of their creators--which is to say, the very same intent as creators of any kind of mass entertainment reaching a maximum number of potential eyeballs. Paying customers, in other words."
"For over 25 years, I've been making documentary films and it never occurred to me that this was not a profit-making business," says director/producer Robert Kenner, Academy Award-nominee for the 2009 documentary Food, Inc., which grossed approximately $4.5 million during its US theatrical release. "I've been making a good living doing it since I entered the field. I've been able to put my kids through college on the money I've made, and am proud to say they both have decided to enter this profession."
Academy Award-winner Rob Epstein (The Times of Harvey Milk; Common Threads: Stories from the Quilt), who currently serves as the Chair of the Board of Governors of the Academy of Motion Picture Arts and Sciences Documentary Branch, reiterates that the twin goals of raising awareness and creating profit are complementary to each other. "Most of my documentary films have focused on issues intended to bring about change--to educate and expose injustices in our world, and to entertain, delight, inspire and inform, all at the same time," he maintains. "For that is the beauty of documentary. Those same films all made healthy profits for me and my partners, had long lives in theaters, on television and in the DVD market, and continue to serve both masters well--generating continued profit for us, many years after initial release, and serving as historical documents of movements in our collective history, which can be used to educate and inspire new generations. I have never experienced any conflict between these two goals. And I would not have been able to sustain a professional career in this industry for all these years, if it were any different."
As IDA's executive director, Michael Lumpkin, maintains, "We hope to ensure that all filmmakers receive the respect they deserve, and that the many sacrifices they make in the pursuit of their art and livelihood will not be made in vain."
The amicus brief filed in Lee Storey's case represents the most recent effort undertaken by Michael Donaldson at the behest of IDA in its role as a dedicated advocate for the rights of the documentary filmmaking community. Previous cases to which Donaldson and IDA have contributed include such topics as: freedom of speech, fair use, filmmaker exemptions to the DMCA (Digital Millennium Copyright Act), net neutrality, use of trademarks and copyrights, the ability to depict animal cruelty without fear of criminal prosecution, and supporting Crude director Joe Berlinger's battle to prevent turning the entirety of his film's dailies over to oil company Chevron.
The coalition of signatories to the amicus brief includes the following:
Organizations:
- International Documentary Association
- Film Independent
- National Association of Latino Independent Producers
- Women Make Movies
- National Alliance for Media Art and Culture
- University Film & Video Association
Individuals:
- Robert Kenner (Food, Inc.)
- Liz Garbus (Moxie Firecracker Films)
- Annie Roney (ro*co Films International)
- Meyer Shwarzstein (Brainstorm Media)
- Rob Epstein (Chair of the Board of Governors of the Academy of Motion Picture Arts and Sciences Documentary Branch)
- Eddie Schmidt (This Film Is Not Yet Rated)
- Jeffrey Blitz (Spellbound)
- Jaimie D'Cruz(Exit Through the Gift Shop)