Loan Out Corporations Could End, IATSE Tells Members

EXCLUSIVE: The California Employment Development Department soon might stop recognizing loan out corporations.

Several IATSE locals informed their members Friday night that they’d received notice from payroll service Cast & Crew that, following an audit of the company, the EDD will instead require employers to pay for services directly to contracted employees.

“This would fundamentally change the way that… workers conduct business in the entertainment industry,” a memo sent to some IATSE locals read.

So far, there does not appear to be any regulation change or modification of the law. However, it still has the potential to severely impact workers in Hollywood.

“This will send an immediate chill through the industry, and companies will refuse to work with people who have loans outs because of the potential hassle,” one shocked IATSE member told Deadline following the notice being sent out last night.

According to the memo, the EDD will send notice to all impacted loan out corporation owners to audit the unemployment insurance and other taxes on the compensation that Cast & Crew paid to the loan out entities.

Loan out corporations will have the opportunity to appeal any proposed fines or additional amounts the EDD requests.

In a statement to Deadline, an IATSE spokesperson said: “We are aware of an EDD audit at Cast & Crew and are looking into it.”

It’s unclear how widespread the EDD’s edict will be and whether it would also apply to Entertainment Partners, which provides a majority of payroll services for productions in California nowadays.

Representatives of the state government did not respond to requests for comment or clarification on tbe policy move

Deadline has reached out to Entertainment Partners for comment, as well as the EDD. This post will be updated when they respond.

Loan out corporations are typically single-owner LLCs, allowing a contracted worker to provide services as an employee of their own corporation, rather than receive payment directly as an individual. They can then pay themselves a salary, and even contribute to a retirement account on their own behalf.

While loan outs aren’t exclusive to the entertainment industry, many film and television workers utilize loan out corporations as a way to protect them against liability and receive tax breaks on business expenses related to the job.

Deadline hears that all the Hollywood guilds have a pulse on the ongoing situation.

In a statement to Deadline, a spokesperson for the DGA said: “We are aware of the recent EDD statement to payroll providers on loan-out companies.  The DGA is monitoring the situation and working in collaboration with our fellow unions and guilds to investigate and respond in order to protect entertainment industry workers.”

If you are impacted by this change, please contact the Deadline tip line to tell us more.