THIS IS A DRAFT OF A PROPOSED CHANGE TO TAX WRITE OFF LAWS FOR CREATIVE WORKS CREATIVE Act of 2028
(Creative Restoration and Equitable Access to Treasured Intellectual and Visual Entertainment Act of 2028)
Introduction:
The CREATIVE Act of 2028 seeks to address a significant gap in the current U.S. copyright and tax write-off framework as it relates to creative works, particularly media properties. When companies write off intellectual property (IP) for tax purposes, those works often become locked behind legal and financial barriers, depriving the public and the creative community of the opportunity to benefit from them. The CREATIVE Act introduces new provisions that encourage timely licensing, incentivize public access, and ensure that written-off media properties contribute to cultural and creative enrichment.
In recognition of the value creative works bring to both the economy and society at large, this legislation establishes a framework that balances corporate rights with public interest. By creating mechanisms that allow for licensing, public domain release, and educational use, the CREATIVE Act ensures that creative works continue to serve a broader cultural and economic purpose, even after being written off for tax purposes.
Purpose:
The purpose of the CREATIVE Act of 2028 is to:
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Ensure that written-off creative works are not indefinitely shelved or blocked from public use.
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Encourage the early licensing of these works to smaller creators, independent studios, and educational institutions.
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Provide pathways for cultural and educational organizations to access and preserve these works.
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Establish a clear, enforceable timeline for when creative works must enter the public domain if unused.
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Balance corporate tax benefits with public access to valuable intellectual property, ensuring a public benefit from tax write-offs.
Key Provisions:
- Mandatory Licensing of Written-Off Creative Works:
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Scope: The CREATIVE Act applies to all written-off creative works, including but not limited to film, television, video games, books, and music.
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Licensing Requirement: Companies must offer licensing for creative works within 1-2 years of writing off the property. Licensing should be offered under reasonable, fair-use terms to allow access to a broader range of potential users, including independent creators and smaller entities.
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Fair Licensing Terms: Licensing fees should be structured in a manner that encourages third-party use without imposing prohibitive costs, particularly for independent creators and non-commercial entities.
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Objective: This provision ensures that written-off works remain available for creative use and adaptation, preventing valuable properties from being indefinitely shuttered.
- Definition of “Significant Profit” and Encouraging Early Licensing:
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Significant Profit Definition: For the purposes of determining tax recapture, “significant profit” is defined as gross profits exceeding 20% of the original production costs of the creative work. Profits below this threshold are exempt from tax recapture, allowing companies to license or sell properties early without triggering repayment of tax benefits. Example: For a film with a production cost of $10 million, gross profits from licensing exceeding $2 million would trigger tax recapture.
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Encouragement for Early Licensing: The act ensures that companies are incentivized to license written-off properties promptly by allowing smaller-scale licensing to occur without triggering tax recapture. This approach facilitates wider dissemination and use of creative works in the market.
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Objective: This provision balances the need for companies to profit from their IP while ensuring that the public benefits from these works early on.
- Tax-Neutral Licensing for Public and Educational Use:
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Scope: This provision allows non-profit, educational, and public interest institutions to license written-off media properties at minimal cost, without triggering tax recapture for the rights holder.
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Tax-Neutral Licensing: Companies that license written-off properties to universities, cultural institutions, or other public-interest organizations for non-commercial purposes retain the full benefit of the tax write-off, even if they collect a small licensing fee.
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Public Benefit: This pathway ensures that culturally or educationally significant works are accessible to institutions that preserve, archive, and use these works for the public good.
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Objective: This ensures that written-off creative works can serve important educational and cultural purposes, extending their value beyond commercial viability.
- Sliding-Scale Tax Recapture for Profitable Licensing:
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Sliding Scale: If companies generate significant profit from licensing or selling a written-off property within a set period, they are required to repay a portion of the tax benefit on a sliding scale: Within 1 year: 80% of the tax benefit must be repaid. Within 3 years: 50% must be repaid. Within 5 years: 20% must be repaid. Beyond 5 years: No tax recapture is triggered.
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Threshold for Tax Recapture: Only profits exceeding the “significant profit” threshold (20% of production costs) trigger tax recapture, ensuring that small-scale or early licensing does not result in penalties.
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Objective: This system encourages companies to release creative works to the market without undue delay while maintaining the tax benefits for early licensing and smaller profits.
- Forced Public Domain Release for Unused Properties:
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Public Domain Timeline: If a company does not license or use a written-off creative property within 5-7 years, the property automatically enters the public domain.
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Escrow System: Upon writing off a property, the rights are placed into an escrow account managed by a third party. During the escrow period, companies can still license or develop the property. If no action is taken by the end of the period, the property is released to the public domain.
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Objective: This ensures that no creative work is permanently lost to legal or financial barriers, allowing future generations of creators to access and build upon works that would otherwise be inaccessible.
- Public Fund Revenue Split for High-Value Properties:
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Revenue Contribution: For high-value creative works (e.g., blockbuster films, major franchises), if a company generates significant licensing revenue from a written-off property, a portion (10-20%) of the profits is directed to a public fund supporting arts, culture, and education.
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Objective: This provision ensures that highly profitable properties still contribute to the public good, particularly when the company benefits from the write-off and subsequent profits.
Implementation and Oversight:
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Governing Body: The act will be overseen by a newly established division within the U.S. Copyright Office, working in coordination with the IRS. This body will monitor compliance, manage the escrow system for written-off properties, and oversee public domain releases.
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Enforcement Mechanisms: Non-compliance with licensing requirements, failure to place properties into escrow, or other violations of the act will result in penalties, including fines and immediate public domain transfer of the affected creative work.
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Annual Reporting: Companies that write off creative properties will be required to submit annual reports detailing the status of written-off works, including licensing activities and revenues generated.
Conclusion:
The CREATIVE Act of 2028 establishes a comprehensive framework for ensuring that written-off creative works provide meaningful public benefit while still preserving the rights of companies to profit from their intellectual property. By balancing early licensing incentives, public access, and forced public domain releases, the act encourages the continued flow of creative works into the public sphere, fostering cultural enrichment, education, and innovation.
This act responds to the growing concern that valuable creative works are being locked away and forgotten, offering a balanced solution that benefits both corporate entities and society at large.
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