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NY Times: Video Game Industry Takes Advantage Of Federal Tax System

by Matt Helgeson on Sep 12, 2011 at 07:35 AM

The New York Times just published an article that looks into the ways that the video game industry takes advantage of (and possibly exploits) a wide-range of corporate tax incentives to write-off development expenses and even executive stock options.

The article, which you can read in full at the NYT website, gives a well-researched picture of how the game industry takes advantage of the current tax system: "Because video game makers straddle the lines between software development, the entertainment industry and online retailing, they can combine tax breaks in ways that companies like Netflix and Adobe cannot. Video game developers receive such a rich assortment of incentives that even oil companies have questioned why the government should subsidize such a mature and profitable industry whose main contribution is to create amusing and sometimes antisocial entertainment."

The article frequently uses Electronic Arts as an example. By the company's own accounting methods, it has shown $1.2 billion in global profits in the last five years. However, the article states that "largely because of deferred revenue, deductions for executive stock options and a variety of accounting requirements, the company officially reports a net loss for the period."

For more, go read the original article, which examines this issue in extensive detail.