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Videogame Manufacturers Benefit From Big Tax Breaks

Posted On: 9/16/2011

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NEW YORK CITY -- The videogame manufacturing business is "one of the most highly subsidized businesses" in the U.S. because it benefits from multiple special deductions, deferred revenue options, write-offs and credits that were mainly intended for other industries in other decades.

According to a recent story in The New York Times, game makers take advantage of tax breaks that Congress originally created to support software development, the entertainment industry and online retailing. The paper cited research by a former U.S. Treasury official, Calvin H. Johnson, who is now a tax professor at the University of Texas.

The paper reported that Electronic Arts generated $1.2 billion in global profits from 2005 to 2010, but showed a net loss for the period, paying $98 million in cash for taxes globally during the half-decade.

Videogame makers also enjoy special tax breaks on R&D that Congress approved in 1981 to protect U.S. coin-op game factories from the perceived threat of Japanese competition.