Producers Win Tax Credit Ruling; Networks Denied

In a victory for Hollywood, the U.S. Claims Court ruled Wednesday that producers of television programs, rather than the TV networks, were entitled to about $500 million in investment tax credits claimed during the last 25 years.

The decision won’t result in a windfall for either group because the tax credits, which have been claimed by producers on their federal tax returns, have been abolished under the tax reform measure that was signed into law in October, 1986, according to lawyers for the Motion Picture Assn. of America in Washington.

After the ruling in Washington, Julie Hoover, vice president of corporate projects at Capital Cities/ABC Inc., said the network is “in the process of reviewing the decision and our options.”

The dispute began in 1971, when NBC sought to amend its tax returns to claim the tax credits for itself. NBC was joined by ABC in 1982. Though both networks were rebuffed by the Internal Revenue Service, they filed suit to press their claims. NBC dropped out, but ABC persevered.

In response, 13 Hollywood production companies filed suit Feb. 28 in Los Angeles Superior Court against ABC seeking $1.5 billion in compensatory and punitive damages from the network for its alleged “unfair and unethical” practices in licensing programs.

It could not be determined how Wednesday’s U.S. Claims Court ruling might affect the Los Angeles litigation.