The rich may not necessarily be getting richer -- at least when it comes to Hollywood swag.
The Internal Revenue Service launched a campaign Thursday aimed at clarifying the tax consequences of the gift-jammed goody bags and luxury giveaway suites that surround awards ceremonies and film festivals. The bad news for every A-lister and low-level minion alike who ever pockets a freebie: It's taxable income.
The Academy of Motion Picture Arts and Sciences, in a related announcement, said it would eliminate the luxurious gift baskets it customarily offers to Oscar presenters such as Jennifer Aniston, Tom Hanks and Will Ferrell, starting with next year's show.
Without specifying whether any money changed hands, the academy and the IRS also said they have settled any tax obligations presenters may have owed the government from gift baskets received through 2005. Recipients of the Oscar gift baskets in this year's ceremony will soon receive a tax form from the academy detailing the fair market value of its contents.
It goes beyond the Oscars. Next week, an array of Emmy-timed swag suites are scheduled to open for business ahead of the Aug. 27 awards show. The Academy of Television Arts & Sciences said it has also informed this year's Emmy presenters (among them Heidi Klum, James Gandolfini and Eva Longoria) that their gift bags are taxable, but would not say whether it planned on eliminating the bags altogether.
Gift bags and swag suites have exploded in recent years, as clothing companies, hotels, cellphone manufacturers and the makers of seemingly every imaginable kind of consumer goods (chocolates, lingerie, cufflinks, sunglasses, luggage, etc.) dole out items to celebrities in the hopes of garnering free advertising when those celebrities are photographed wearing those shoes or chatting into that cellphone.
The value of the Oscar gift basket, a tradition that dates to the 1970s, has approached $100,000 in recent years. Top celebrities at this year's Sundance Film Festival -- such as Steve Carell and Terrence Howard -- had the opportunity to come home with plasma televisions, vouchers for weeklong vacations at posh resorts and even $10,000 discounts on Las Vegas condos for sale.
Around awards shows as diverse as the MTV Movie Awards and the ESPYs, swag suites are erected to give celebrities free shopping sprees.
The IRS couldn't help but notice.
"There was an awful lot of publicity about the ever-increasing value of these baskets," IRS Commissioner Mark V. Everson said. "And somebody said, 'Why don't we do something about this?' It was just so clearly taxable we felt we had to step in."
The IRS reminded Oscar presenters before this year's ceremony that noncash compensation was just as taxable as a paycheck. Everson said the effort was linked to his drive to bring "a sense of fairness that resonates throughout the system. You can't let the rich get away with something."
Sid Ganis, the academy's president, said the gift baskets had outlived their usefulness. "I don't think a presenter says, 'I am going to present an Academy Award because I am going to get a gift basket.' They do it because they want to be a part of the show."
What may be the IRS' gain is a potential loss to the hundreds of swag purveyors.
"Wow -- this is insane," J. Dubb, the marketing director for Five Four Clothing, the maker of high-end urban apparel, said when informed of the IRS announcement. (At this year's Sundance Film Festival in Park City, Utah, Five Four was handing out cartloads of clothing in its crowded freebie suite.)
"It's hard to say what the impact will be, but it will definitely be a hit," Dubb said. "But we think [celebrities] like our stuff enough that they'd be willing to pay tax."
Britt Johnson, whose Los Angeles events company Mediaplacement organized a freebie suite at last year's Golden Globe Awards, said past recipients of swag may soon hesitate when offered ostensibly free products. "You are going to see a lot of people turning things down," Johnson said, "and a lot more people donating to charity."
One such donor was actor George Clooney, who gave his Oscar gift bag to the United Way Hurricane Response and Relief Recovery Fund, which auctioned it for $45,100.