Summary
In Twyman, the Supreme Court of Ohio included in the true value of movie film the cost of an intangible right to use the copyrighted film.
Summary of this case from Compuserve, Inc. v. LindleyOpinion
No. 77-1076
Decided May 3, 1978.
Taxation — Tangible personal property — Valuation of film library — Cost of license agreements includable.
APPEAL from the Board of Tax Appeals.
Appellant, Twyman Films, Inc., is an Ohio corporation which makes available sound motion pictures to non-theatrical users for a fee. Appellant acquired the films through license agreements with the major producers or distributors holding the copyrights, and the agreements include the cost for use of the copyright.
Appellant capitalizes the royalty fees and the cost of the films and any prints which it might make on its books, but did not, however, use these book values in its tangible personal property tax returns for the tax years 1972 and 1973.
The Tax Commissioner adjusted the value returned for the current film library to reflect the manner in which taxpayer carried such library on its books.
The Board of Tax Appeals, affirming the commissioner's determination, rejected appellant's method of valuing its film library, noting that "the minimum value for tax purposes must be the depreciated book value reflected upon Twyman's books of account for the years in question" because no written claim for deduction from depreciated book value was filed with the returns as required by RC. 5711.18. (Emphasis sic.) The board rejected appellant's argument that, in using the total acquisition cost as a starting point for value, the commissioner was taxing an intangible asset (the copyright and its use).
The cause is now before this court upon appeal as a matter of right.
Messrs. Gould, Reichert, Strauss, Mr. Howard Gould and Mr. Thomas M. Gould, for appellant.
Mr. William J. Brown, attorney general, and Mr. John C. Duffy, Jr., for appellee.
The principal controversy between the parties is the inclusion by the commissioner of the cost of the license agreements in determining the value of appellant's film library.
A case closely in point is Michael Todd Co. v. County of Los Angeles (1962), 57 Cal.2d 684, 371 P.2d 340, which concerned the valuation for property tax purposes of the negatives to the movie "Around The World In Eighty Days." The court stated at page 696:
"* * * But it does not follow * * * that as a matter of tax law the `market value' of the negatives — which cost some $5,000,000 to produce and had a potential earning power of many millions of dollars — was simply their salvage or scrap value of $1,000. The record established, rather, that for the purpose of determining `full cash value' there was no actual market for the negatives without plaintiff's copyright therein. The sole beneficial or productive use of the negative film of a motion picture is for making prints thereof for exhibition, whether such prints be sold or leased. * * *." (Emphasis sic.)
For tax purposes, appellant Twyman Films did not report in its tax returns the value of the film library at its "book value." Appellant in fact only reported a value calculated by its accountant on a basis unrelated to what appellant had paid for the right to use the copyrighted films in its business.
This court does not find the decision of the board to be either unreasonable or unlawful, and it is therefore affirmed.
Decision affirmed.
O'NEILL, C.J., HERBERT, CELEBREZZE, W. BROWN, COLE, COOK and LOCHER, JJ., concur.
COLE, J., of the Third Appellate District, sitting for P. BROWN, J.
COOK, J., of the Eleventh Appellate District, sitting for SWEENEY, J.