Glitz hits the Santa Monica sands today when stars like Josh Hartnett, Christina Ricci, Tobey Maguire and Sharon Stone walk the paparazzi-lined red carpet into a giant beach-side tent for Film Independent's Spirit Awards.
Billed as the independent film community's biggest party, the 22nd annual gala will be televised on two cable channels, with a third offering a fashion-and-gossip preview. Nominees include best-feature entry "Little Miss Sunshine," actors Edward Norton ("The Painted Veil") and Aaron Eckhart ("Thank You for Smoking") and director Steven Soderbergh ("Bubble"). Comedian Sarah Silverman will host.
With its casual glamour and army of A-listers, the Film Independent bash is often described as an edgier warmup for the Academy Awards. But unlike the Oscars -- or the Golden Globes, for that matter -- the Spirit Awards ceremony is subsidized by taxpayers as a charitable service, much like American Red Cross shelters and skid row soup kitchens.
Film Independent, whose main mission is to nurture the careers of moviemakers who lack studio backing, is one of several cinema-related nonprofits that employ their tax-free status to stage awards shows and buzz-generating film festivals.
Some state on their tax returns that the televised awards themselves fulfill a charitable, tax-exempt purpose by educating the public about film.
But philanthropy watchdogs give the practice less-than-glowing reviews.
"How is that a public service?" asked Daniel Borochoff, president of the American Institute of Philanthropy.
"It's kind of a perverse use of the nonprofit designation," said Trent Stamp, president of Charity Navigator, which rates the spending practices of 5,000 nonprofits. It and other nonprofit evaluators have seen their influence grow as they post more of their findings on the Internet.
For fiscal 2004 and 2005, Film Independent, which also owns the Los Angeles Film Festival, received Charity Navigator's lowest score -- zero stars out of four.
The chief reason: Barely half of Film Independent's budget went to workshops, laboratories and other charitable services that directly benefit struggling auteurs. Its two single largest expenses were the June film festival and the Spirit Awards, its principal fundraiser.
Tickets to the festival's screenings are $10, but the Spirit Awards charges $15,000 to $40,000 for a table of 10.
After The Times questioned Film Independent's finances, the organization amended its two most recent tax returns to reclassify the festival and awards show as charitable services. They previously were listed as special events whose primary purpose was fundraising.
Charities -- known as 501c3 nonprofits, after their IRS designation -- must provide programs that are generally beneficial to the public, even if their specific services target a narrower segment of people. The 501c3 category includes educational and religious organizations, literary and scientific societies and groups that help the poor.
The changes in Film Independent's returns boosted its program-spending ratio -- the portion of its budget devoted to charitable services, a key measurement to nonprofit raters -- to about 75%.
"There's hardly anything we do that is not a service," said Dawn Hudson, Film Independent's executive director.
But Stamp, of Charity Navigator, panned the tax rewrite.
"All of a sudden, they decided their federal tax returns were false," he said. "It's a quick and dirty whitewashing of their financial forms."
In written comments to The Times, Film Independent's board president, actor-director Vondie Curtis Hall, dismissed Charity Navigator as an "inappropriate yardstick" for the nonprofit's accomplishments.
At the same time, however, Film Independent said the amended returns -- representatives termed them a correction of overly conservative accounting methods -- should warrant a Charity Navigator score of two or three stars.
The two organizations that produce the Academy Awards and Golden Globes need not worry about such ratings; they operate as a different type of nonprofit, a 501c6, rather than a so-called public charity. They are registered with the Internal Revenue Service as business associations.
The distinction is crucial. Unlike contributions to 501c3s, donations to business associations and many other types of nonprofits typically are not tax-deductible as charitable gifts. Tickets to the Oscars, for example, cannot be written off as a contribution to good works.
'It doesn't look good'
The Times examined the last two available tax returns for seven movie-related nonprofits, with a focus on the amount of money that they spend on program services, salaries and other administrative costs, as well as awards shows.