LOS ANGELES: The ramifications of the Internal Revenue Service's effort to ensure taxation on celebrity gift baskets have yet to seriously impact the PR industry. But one thing is certain: Along with their swag, celebrities will now be taking home tax forms.
The IRS launched its booty-tax effort with an August 17 announcement that, among other concessions, the Academy of Motion Picture Arts and Sciences would pay back taxes on Oscar presenter and talent gift bags given through 2005. And though specifics are confidential, academy publicity coordinator Leslie Unger said that starting next year, the academy would put an end to its three-decade, gift-bag tradition. In 2006, the bags' estimated worth was more than $100,000 each.
The announcement that celebrities would be responsible for swag taxes has dominated talk in Tinseltown.
"Everyone is talking about it," said Kari Feinstein, whose eponymous PR firm organizes brand, charity, and Young Hollywood-melding "style lounges." "Even the guy at the car wash asked me about it."
General consensus among celebrity gift-oriented firms is that while there is reason to proceed with caution, the demise of swag may be greatly exaggerated.
Feinstein said brands want to be in touch with stars, and vice versa. "That [won't] stop," she added. "It's too beneficial."
"The whole intersection between Hollywood Boulevard and Madison Avenue isn't going away," added Lash Fary, founder of LA-based entertainment marketing firm Distinctive Assets. "It's too important to the brands I work with."
"It's premature" to decide on next steps, said Pam Golum, EVP at The Lippin Group. Her LA-based firm, AOR for the Academy of Television Arts and Sciences, went ahead with distributing Emmy Awards gift baskets, as well as a pre-show gifting suite sponsored by Hearts On Fire diamonds and featuring high-end Spa on Location treatments and Victoria's Secret makeup, Godiva chocolates, and LeSportsac totes.
Still, Golum said, prior to getting their goodies, Emmy participants were required to sign and return letters stating they'd be responsible for paying their own taxes.
Similarly, at the recent Teen Choice Awards, talent and presenters went home with Sanrio-Hello Kitty suitcases stuffed with My Scene/Fab Face Dolls, VTech electronics, SOOS jewelry, Geffen Records, and Hasbro games. Gifting retreat firm Backstage Creations included a letter documenting IRS regulations and personally reminded suite-attending celebrities they'd be taxed on their loot, said Karen Wood, president.
Wood added that while she was "obviously concerned," the "industry isn't going away." Instead, she speculated, adjustments could include the incorporation of more charitable aspects to the swag-suite experience, giving stars the chance to donate gift-bag items. Backstage has included a charity element in its suites for some time, she said. "It's a win-win for everyone."
Jim Dobson, president of LA-based Indie PR, is currently planning Sundance Film Festival "luxury lounge" experiences for clients including Blackberry, Prada, and Chanel. For the latter two brands, this marks the first foray into the festival-suite universe.
"Nobody's running scared," he said. "Free publicity is priceless."
If any organization is truly benefiting from this news, however, it's the IRS. Focusing on both recipient reporting and the filing of Form 1099 by merchandise providers, the IRS' outreach program includes letters to entertainment industry groups and tax professionals, an online FAQ, and plenty of media relations, according to Nancy Mathis, a DC-based public affairs specialist at the IRS.
"Any individual's requirement is to pay tax on income," she said. "You are not required to pay taxes on gifts, [but] our position is that these... are items given with the expectation of something in return, that use by a celebrity will enhance sales, and the products themselves serve as compensation."
LA corporate tax attorney Robert Briskin said the IRS "will always focus on high-profile people. This is just a confirmation of that."
Zeroing in on the academy was "a great opportunity for the IRS" to push its message "that even high-profile people are expected to pay their fair share," Briskin noted, adding that "if the goal was to generate publicity for the [taxation] enforcement issue," the IRS had accomplished its purpose.