It was a couple days after Christmas. 2017 was days away. I was having lunch with my friend Steve. Steve is a community-spirited fellow with a heart of gold and the kind of integrity you'd wish our public officials exhibited. The sort of person you can admire, but not successfully emulate.
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"I'm writing to let you know that FilmL.A. is unable to fill your request for...ZIP codes 91001 and 91104. Our permit system is not set up to generate filming reports with complex geographic boundaries..." |
In a previous posting, I had estimated that, in LA County, perhaps as much as $200 million a year was paid out as untaxed rental income. It was an 'iffy' estimate. It relied on very incomplete data and a lot of assumptions. I had made numerous requests for additional data, but FilmL.A. turned them all down. I had long since given up.
"Just think," I told Steve, "a 10% tax on $200 million might raise $20 million a year for an underfunded government program -- like something for the homeless."
"What if that estimate was right?" He asked. "What then?"
"Maybe somebody tries to get a tax measure on the ballot," I hypothesized.
"I think we should do it," he replied.
"And what if that estimate is wrong? There are a lot of assumptions."
"Let's find out. Let's get the actual data," he said.
That's how the saga of our endeavor to acquire FilmL.A. filming-permit data began.
The relevant loophole language appears in IRS Publication 527. The text gets right to the point:
"If you use a dwelling unit as a home and you rent it less than 15 days during the year, its primary function isn’t considered to be rental and it shouldn’t be reported on Schedule E (Form 1040). You aren’t required to report the rental income and rental expenses from this activity."Simple enough. Rent your home for less that 15 days and you do not need to report or pay tax on that rental income.1 So, in order to calculate a credible estimate of of the rental-income that zooms through the loophole in Los Angeles every year, we only needed the total number of annual days that film companies rented from each home owner. As luck would have it, the FilmL.A. permits include all the information we needed to arrive at that figure.
Each FilmL.A. permit provides the location address as well as the dates approved for production2. The permit also includes a designation for a "location type." Applicants are asked to choose from 159 different location types: banks and bakeshops, parks and parking lots, tattoo shops and tennis clubs to name a few. Fortunately, one of the listed location types is "Private Residence." Put it together and there is precisely the information required to match the IRS tax-free film-rental requirement. Once we had the number of days, we could produce an credible estimate for the size of the tax loophole by simply multiplying by typical location-rental fees.
Shortly after 2016 holiday season, Steve wrote a letter requesting the data. The letter was sent to Anthony Nyivih, the LA County Official listed as the manager of the FilmL.A. contract. Steve requested three years of data that included the location address, location type and a few other data points so we could disambiguate any duplicate street names. He asked for it in an electronic format. And, believing that he could appeal to Mr. Nyivih's better nature by telling him about our worthy cause, Steve wrote:
"We believe that the tax rules may provide an opportunity to realize a source of badly needed funds to address the homeless problem. The filming permit data is necessary to confirm the benefits of this opportunity."The letter was sent on January 12th. A week later Mr. Nyivih, called. He wanted to help, but did not fully understand our request. He suggested we discuss our request with FilmL.A. — that way, they could accurately respond. He offered to set up a meeting. I could hardly believe my ears; FilmL.A. was going to help.
That meeting never happened.
On February 2nd, Steve received an email from the County with three pdf attachments. Each file was a printout of a spreadsheet that held a year's worth of permit data.
The email was a a serious disappointment. Pdf files can not be loaded into a statistics program. We had no easy way to analyze the data. There was a bigger problem. The data was incomplete. They had only included figures for the unincorporated areas of LA County -- about 10% of the what we needed. Worse, the data did not include all the production dates or location type. On top of that, nearly all the zip codes had been removed for the location addresses. We had data, but we could not use it to generate an estimate the size of the loophole. It was as if someone in the County wanted to stymie our attempt to calculate an estimate.
Steve, who is not easily deterred, reached out to Mr. Nyivih and requested the spreadsheets and the additional data. On February 6th, Steve received the requested spreadsheets and the following memo from David Howard, Assistant Chief Executive Officer for LA County.
Mr. Howard wrote:
"As you are aware, FiImLA is the County’s contractor coordinating the issuance of film permits. At our request, FiImLA has undertaken a review of their database and has provided responsive documentation in an electronic format...Note that FiImLA does not have an electronic record of the location manager, or prep dates and strike dates. Additionally, the term “location type” is unclear..."In time we learned that, for the past ten-years, every filming permit issued by FilmL.A. was assigned a location type and all but a small fraction of a percent included a zip code. However, we did not need all that data to know someone at the County or FilmL.A were shading the truth. A cursory glance at any FilmL.A permit by was proof enough that they had the data we had asked for. We were being stonewalled.
For the next few weeks Steve made repeated attempts to reach Mr. Howard and renew our request. He never received a reply.
In retrospect, we had made several mistakes. The request for data in an electronic form was not specific enough. We should have asked for the data in a form that could be loaded into a spreadsheet application. We did not understand that our request for LA County data would only produce data for unincorporated areas of the County. We needed data for the entire County. We did not think to specifically request that the location addresses include a zip code. Finally, we did not say that our request was based on information that appeared on approved filming permits. If anyone had looked, the meaning of "location type" would have been abundantly clear. Live and learn.
A month passed. I was having lunch at our usual Deli with my retired friends Bill and Gary. They understood how government bureaucracies and special interests operated. They had made their living offering guidance to left-leaning politicians.
Our conversation drifted over every gloomy topic coming out of Washington. In spirit of gloomy topics, I delivered a play-by-play of how the County had rebuffed our efforts to get the data needed to estimate the tax loophole.
Bill shook his head and gestured with disbelief. "Didn't you try a the Freedom of Information Act Request?"
I shrugged. It never occurred to me.
"Well you should," he said.
Neither Steve nor I had known it, but we had already made our first public records act request. We knew nothing of Freedom of Information Act. We were about to learn.
—— To be continued ——
1 Important note to filming hosts: be sure your 1099 lists your income in the "rents" box.
2 Filming permits include the type of production days: prep days, filming days and strike days. Each type of production days represents a potential IRS rental day.
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