To amend the Internal Revenue Code of 1986 to allow a loss for development costs of certain creative property.

Amends the Internal Revenue Code to treat certain development costs related to cinematic properties as current year loss deductions.

[Congressional Bills 109th Congress]
[From the U.S. Government Publishing Office]
[H.R. 6284 Introduced in House (IH)]








109th CONGRESS
  2d Session
                                H. R. 6284

    To amend the Internal Revenue Code of 1986 to allow a loss for 
            development costs of certain creative property.


_______________________________________________________________________


                    IN THE HOUSE OF REPRESENTATIVES

                           September 29, 2006

 Mr. Becerra introduced the following bill; which was referred to the 
                      Committee on Ways and Means

_______________________________________________________________________

                                 A BILL


 
    To amend the Internal Revenue Code of 1986 to allow a loss for 
            development costs of certain creative property.

    Be it enacted by the Senate and House of Representatives of the 
United States of America in Congress assembled,

SECTION 1. ALLOWANCE OF LOSS DEDUCTION FOR DEVELOPMENT COSTS OF CERTAIN 
              CREATIVE PROPERTY.

    (a) Film Development Costs.--Section 165 of the Internal Revenue 
Code of 1986 (relating to loss deductions) is amended by redesignating 
subsection (m) as subsection (n) and inserting the following new 
subsection:
    ``(m) Film Development Costs.--For purposes of this section--
            ``(1) In general.--If a creative property is not set for 
        production within the 3-year period beginning on the date on 
        which the taxpayer first incurs development costs with respect 
        to the property--
                    ``(A) the costs of developing such property shall 
                be treated as an expense which is not chargeable to 
                capital account,
                    ``(B) any cost so treated shall be allowed as a 
                deduction, and
                    ``(C) such deduction shall be treated as a loss 
                allowable under subsection (a) for the first taxable 
                year beginning after the end of such 3-year period 
                unless it is established that the taxpayer did not 
                intend to dispose of the property.
            ``(2) Recapture.--The Secretary shall, by regulations, 
        provide for recapturing the benefit of any loss allowable under 
        this subsection if--
                    ``(A) the taxpayer begins principal photography 
                with respect to the creative property in any subsequent 
                taxable year, or
                    ``(B) the taxpayer derives income from the 
                disposition of the creative property (including 
                settlement funds resulting from copyright 
                infringement).
        The taxpayer shall pay interest, computed by determining the 
        underpayment of tax which would result solely from disallowance 
        of such loss in the taxable year in which the loss was claimed 
        under paragraph (1), using the adjusted overpayment rate (as 
        defined in section 460(b)(7)), compounded daily, on the 
        underpayment so determined. The preceding sentence shall not 
        apply where the loss claimed under paragraph (1) was $100,000 
        or less.
            ``(3) Definitions and special rules.--For purposes of this 
        subsection--
                    ``(A) Creative property.--The term `creative 
                property' means the intangible right to exploit a 
                screenplay, script, story outline, or motion picture 
                production right to a book, play, or other similar 
                creative property for purposes of potential future film 
                development, production and exploitation.
                    ``(B) Film.--The term `film' means a feature film, 
                television special, television series, or similar 
                product (including animated films and television 
                programming) that is sold, licensed or exhibited, 
                whether produced on film, videotape, digital, or other 
                video recording format. Such term shall not include any 
                production for which records are required to be 
                maintained under section 2257 of title 18, United 
                States Code, with respect to any performer in such 
                production.
                    ``(C) Development costs.--The term `development 
                costs' means costs that are incurred to acquire, 
                develop, or evaluate whether to exploit creative 
                property.
                    ``(D) Set for production.--A creative property 
                shall not be treated as set for production until a 
                commitment to fund production is made and active pre-
                production has begun.''.
    (b) Effective Date.--
            (1) In general.--The amendment made by subsection (a) shall 
        apply to taxable years ending after the date of the enactment 
        of this Act.
            (2) Change in method of accounting.--In the case of any 
        taxpayer required by the amendment made by subsection (a) to 
        change its method of accounting for its first taxable year 
        ending after the date of the enactment of this Act--
                    (A) such change shall be treated as initiated by 
                the taxpayer, and
                    (B) such change shall be treated as made with the 
                consent of the Secretary of the Treasury.
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