Industry is concerned as California changes wage rules for Loan Out Corps

The state of California has warned entertainment industry payroll providers and others that it is making policy changes that could have significant tax and retirement planning implications for those in Hollywood’s creative community who use loan companies to manage their business affairs.

The California Employment Development Department has reportedly notified payroll administration Cast & Crew, IATSE and others of the plan to tighten regulations on the use of loan companies. Many creatives in the industry use this type of business structure to manage various forms of payments that come in from different employers throughout the year. This is becoming increasingly common in modern times, where actors, writers, producers and directors often work on multiple TV shows or films in a calendar year.

The reported change would mean that Hollywood employers would be required to pay wages for creative talent as individuals and not as contractually obligated fees owned by a standalone corporate entity, like a lending company is a structure. A shift to treating wage income as wages would require “full withholding of income taxes and payment of employee and employer taxes on all income.” [loan-out company] owners deserve,” IATSE Local 695 told its members earlier this month. “This would fundamentally change the way department heads and above-the-line employees do business in the entertainment industry.”

Cast & Crew sent a bulletin to the industry’s many workers Friday afternoon about the change, urging them to participate in efforts to appeal California EDD’s decisions on the status of several lending companies. IATSE also warned members that the state plans to assess unemployment insurance and other payroll taxes on past income, suggesting members could ultimately owe money to the state. IATSE and Cast & Crew both noted that the state EDD has an appeals process for ratings that members must pursue.

“IATSE members who receive these notices that their lending companies MUST file a petition in response to the EDD notice within 30 days of the date on the notice in order to timely appeal the EDD determination,” IATSE Local 695 warned in a message dated May 21 to the members. .

Cast & Crew’s message led to a lot of talk in the sector on Friday evening and Saturday – via text messages and WhatsApp messages – about the fate of loaned companies.

The change to the loan structure is consistent with California’s labor-friendly policy agenda under Democratic Gov. Gavin Newsom. Three years ago, the state introduced new rules that tightened the length of time during which freelancers can work for the same company without being treated as a full employee from a salary perspective. That change, largely aimed at helping gig economy workers like Lyft and Uber drivers, proved so burdensome for show business workers and other professionals who routinely work on a freelance basis that the rules were gradually relaxed.

Representatives from California’s EDD and IATSE did not immediately respond Saturday to requests for comment on the policy change regarding lending companies.