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Hollywood Gets the Freebie-Jeebies

The IRS wants its cut of the swag, which might make celebrities think twice.

August 19, 2006|Rachel Abramowitz and John Horn | Times Staff Writers

Next week, nominees for this year's Emmy awards can expect the usual "gift basket" full of award season freebies: lavish jewelry, plasma TVs, Celine Dion backstage passes, gold-plated cellphones. But there will be a lump of coal at the bottom of each one: an IRS tax form.

Tax forms will be available at the Emmy "swag suites" too. "We'll be giving them the necessary paperwork for what it's valued at," said Gavin Keilly of GBK Productions, who put together a suite at the Sofitel Los Angeles hotel where, starting Wednesday, selected celebrities can "shop" for free stuff, including special goggles for watching movies on an iPod, Lasik eye surgery and a $22,000 Caribbean cruise.

But after Thursday's announcement by the IRS that it will seek out taxes on the swag that increasingly rains down on celebrities during awards season and at film festivals, merchandise valued at $100,000 will cost an A-list actor in the top tax bracket some $40,000 in taxes.

That's a lot of change, even for multimillionaires.

Though marketers like Keilly are jumping to make compliance as easy as possible for their celebrity beneficiaries, the industry's chattering class was split on whether the development would deal a fatal blow to Hollywood's freebie mania. Many in Hollywood, meanwhile, expressed relief that a practice seen as part of an unsavory culture of greed would, if not fade out, at least diminish.

The swag machine works this way: High-end companies press free goods and services on stars with the hope of creating buzz, and ideally generating pictures in magazines such as Us Weekly or People, which will in turn spark sales. It's hard to tell how many millions of dollars' worth of product corporations actually shell out on celebrities, but one company estimates that the value of its gift bags for this year's Emmy's nominees will total $2 million -- and that's just one purveyor at one awards show.

Giving out gifts to celebrities isn't new in Hollywood, but competitive swag -- in which marketers compete to create increasingly outlandish gift baskets -- is a product of the last five years, as corporations desperately try to ride the public's all-consuming interest in all things celebrity.

"I think it's going to have a cataclysmic effect on a certain segment of the entertainment industry," said veteran publicist Ken Sunshine, who represents Leonardo DiCaprio and Ben Affleck. Sunshine is advising all his clients to confer with their tax attorneys before accepting any more free gifts from marketers.

Already, the Academy of Motion Picture Arts and Sciences has announced that it is canceling the ultra-luxurious gift bags for Oscar presenters that have been a staple since the 1970s. Without saying whether money exchanged hands, the academy acknowledged that it settled any tax obligations its membership might have owed the government for bags received through 2005.

At the Sundance Institute, which puts on the annual Sundance Film Festival in Utah, Elizabeth Daly, the director of strategic development, was heartened by the news.

"People here are all happy," she said. The festival in recent years has become a mecca for corporations looking to deck out young stars in their jeans and sunglasses, and swag suites are often assumed to be "part of the institute and part of the festival," Daly said. "They are not."

She said the IRS campaign "is one element in helping to change the tide." A more difficult tipping point will come when celebrities are too ashamed to be seen making off with so much free merchandise.

"It's become a joke already," Daly said. "If celebrities become embarrassed by this, and it's perceived to be not good for their careers, it will go away."

One of Sundance's main sponsors, Volkswagen, already has decided not to host a swag suite at the 2007 festival, Daly said. "They think it's gotten to the point where it's disgusting," she said.

Corporate sponsors often outnumber films at the festival, and their logos dominate Main Street in Park City. Some celebrities skip the films altogether and just trek from swag suite to swag suite on special corporate shuttles.

Flacks often joke about the rich-and-famous swag-aholics, and part of the game is to make sure the media know who's been shopping in the suites. In news accounts from 2005, "Desperate Housewife" Nicolette Sheridan took her dog, Oliver, browsing for diamonds at an Oscar gifting suite sponsored by the Platinum Guild, had a diamond healing massage performed at the Diamond Aquifer Oscar suite, and got her hair done at the Biolage/Glamour Golden Globes suite.

Of course, there are those in the industry who have begun to say no to the ostentatious gifting of the already rich. This year, George Clooney created a splash when he gave his Oscar presenter gift bag, often the most valuable booty of all, to charity.

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