By Dana Harris | Indiewire June 13, 2011 at 6:4AM
The International Documentary Assn. has formally announced its legal battle to protect the for-profit status of documentary filmmaking.
As Indiewire reported, the IDA and other organizations have filed an amicus brief urging "the United States Tax Court to recognize that documentary films are overwhelmingly undertaken in pursuit of profit." Entertainment attorney Michael C. Donaldson is handling the case pro bono.
Said Donaldson: “We recognize that this issue, if left un-thwarted, could have devastating consequences to those artists whose livelihood hinges on enlightening the world at large on significant social subjects.”
The IDA announcement also reveals some new details in the case, which stemmed from an IRS audit of documentary filmmaker and attorney Lee Storey, director of "Smile 'Til It Hurts: The Up With People Story." The IRS challenged three years' worth of her business deductions that, with interest and penalties, total more than $311,000.
Under IRS statutes, an activity must pass a nine-factor test in order to qualify as for profit. The judge at the March 9 trial said while she believed Storey satisfied several factors, she also questioned "whether a documentary, in general, could be for profit since by its nature it is designed 'to educate and expose.'"
That assertion is what turned the nine-factor test into a nine-alarm fire for the IDA and is what lies at the heart of the amicus brief prepared by Donaldson and his team. What the brief doesn't do, however, is comment specifically on the facts in Storey's case. (Read full brief here.)
Donaldson and the IDA previously worked together on matters that include free speech, fair use, the ability to depict animal cruelty without fear of criminal prosecution and, most recently, supporting “Crude” director Joe Berlinger’s battle to prevent turning the entirety of his film’s dailies over to oil company Chevron.
Full release is on the jump.
Los Angeles, CA (June 13, 2011) – The International Documentary Association (IDA), along with Film Independent (FIND), National Association of Latino Independent Producers (NALIP), Women Make Movies, National Alliance for Media Art and Culture (NAMAC) and the University Film and Video Association (UFVA), have joined forces by lending their names to an amicus brief filed on their behalf on a pro bono basis by entertainment attorney Michael C. Donaldson in support of the documentary film community in which it urged the United States Tax Court to recognize that documentary films are overwhelmingly undertaken in pursuit of profit. “We recognize that this issue, if left un-thwarted,” said Donaldson, “could have devastating consequences to those artists whose livelihood hinges on enlightening the world at large on significant social subjects.” The brief was prepared by Michael C. Donaldson and Christopher Perez with assistance from Sara Heum and Flora Rostami of Donaldson & Callif.
The amicus brief was filed in a case examining the IRS’s 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 Kroupa expressed her inclination to hold that Storey 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. 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.
An "amicus" is a "friend of the Court" that submits a legal brief documenting why the court should rule one way or the other. The brief being filed by Donaldson on behalf of IDA and its sister filmmaking organizations does not comment on the facts of Storey's case but rather confronts Judge Kroupa's statement by asking the court to recognize that documentaries are overwhelmingly made for profit (rather than non-profit) and that the production of a documentary film involves a great amount of time and money in the early stages of making a film prior to any revenue being generated from the film. The brief contains statements from several documentary filmmakers and other industry professionals to support these contentions.
Academy Award-nominated documentary filmmaker Eddie Schmidt further affirms the notion that educational intent and profit are not mutually exclusive targets. Since 2009, Schmidt has served as President of the Board of Directors of the International Documentary Association (IDA), and is best known for producing the documentaries Twist of Faith, Troubadours, and This Film is Not Yet Rated. As Schmidt states, “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,” states director/producer Robert Kenner – Academy Award-nominee for the documentary Food, Inc., which grossed approximately $4.5 million during its U.S. 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; The Celluloid Closet) 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. 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.” Epstein currently serves as the Chair of the Board of Governors of the Academy of Motion Picture Arts and Sciences Documentary Branch.
A new documentary film by Morgan Spurlock of Super Size Me fame exemplifies the very idea of a profit-seeking documentary film that addresses important societal issues. Spurlock’s Pom Wonderful Presents: The Greatest Movie Ever Sold follows the director as he approaches brands, and advertising and marketing experts, to obtain financing for his film through product placement. Spurlock has said that one of the film’s goals was to “become a documentary blockbuster, or ‘docbuster.’” In fact, in order for Spurlock to receive the full $1 million funding from juice company Pom Wonderful, he contractually stipulated that “the movie must gross $10 million at the box office (high for a documentary), sell 500,000 DVDs and downloads, and generate 600 million “media impressions.” However, Spurlock has also stated that he wants the film to explore “the impact of marketing and advertising on society” and where the lines should be drawn. Thus, the film simultaneously explores the overlap and relationship between the dual goals of making money and providing social commentary.
In the words of International Documentary Association Executive Director Michael Lumpkin, “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 sole 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.