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Report: EA, Other Game Publishers Benefit From Creative Tax Incentive Combinations
Report: EA, Other Game Publishers Benefit From Creative Tax Incentive Combinations
September 12, 2011 | By Frank Cifaldi

U.S. video game publishers including Electronic Arts benefit from combining tax breaks that other industries can not, according to an investigation by the New York Times.

According to an article published over the weekend, because game makers "straddle the lines between software development, the entertainment industry and online retailing," they are able to combine several tax break incentives into benefits that most other industries can't touch.

EA's creative tax assistance is orchestrated by Glen A. Kohl, a tax lawyer who formerly served in the Treasury Department, who the company hired in 2004. Under Kohl's leadership, the company has successfully lobbied for tax breaks on its domestic products and has set up several subsidiaries in low-tax countries.

Neither the government nor any corporations (publicly traded or otherwise) disclose their tax return numbers, though we do know that the government gave $123 billion in tax incentives to corporations in 2010.

EA says it has no qualms about accepting tax breaks that may have been initiated with other uses in mind, with corporate communications representative Jeff Brown telling the Times that not accepting breaks would be the equivalent of a consumer "insisting on paying full price during a store sale."

According to the report, the $6 billion that EA has invested in development costs over the past five years had "all but a small amount" of those expenses deducted immediately -- by comparisons, other industries including film typically have to spread out their deduction costs over a number of years. The company also claims several million in savings from a research and development incentive first established in the early 1980s.

EA also paid $60,000 in 2005 to hire a Washington tax lobbying firm to convince the Treasury Department to include online game revenues in an incentive package designed to cut taxes on companies that export, the report says.

EA is of course not alone in accepting these incentives: according to the Times, "even EA's competitors acknowledge that its tax strategies aren't particularly aggressive" compared with other publishers.

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