For the last few years, Emily Salveson has been touting a new model for investing in film. In interviews and in public appearances, she has said that the model was able to “solve the problem of risk” for investors.
It’s a pitch that’s been heard before in the film industry, and it tends to end badly. But her company, Streamline Global, has nevertheless come from nowhere to help finance more than two dozen films in the last four years. She has done it thanks to provisions of the tax code that help wealthy clients defer their tax obligations.
“These massive tax cuts seem too good to be true,” Streamline said on its website, “but they are battle-tested by the Silicon Valley elite, many of whom are Streamline clients.”
One of her films was “Rust,” the Alec Baldwin production that has been shut down since Oct. 21, when the actor fired a prop gun and killed cinematographer Halyna Hutchins. Salveson, an executive producer on the film, and her business partner, Ryan Donnell Smith, have each been sued for allegedly failing to ensure a safe set. The tragedy has brought intense scrutiny on all aspects of the production, including Salveson’s proprietary financial model.
Financing films is hard, and even Oscar-winning producers and directors routinely struggle to scrounge up funding for their passion projects. So when someone appears to be raising money without breaking a sweat, it tends to raise eyebrows.
“Every few years somebody gets something that’s too good to be true, and people think they’ve discovered a pot of gold,” says Sky Moore, a veteran Hollywood attorney. “There’s no way it makes sense.”
Salveson is 36. As the Hollywood Reporter reported last month, she had a series of jobs before landing in film financing, including surf instructor, assistant at a rehab center, a job in the office of her father, tax attorney Kent Salveson, and host of a YouTube show called “Bath Time TV.”
Emily Hunter Salveson
Courtesy of Streamline Global Group Film
Kent Salveson, 71, is also a key figure in Streamline Global. He is formally identified as an adviser to the company, and he helped structure the company’s financial model for film investment, according to an attorney who helped launch the firm.
Salveson has also been accused by the IRS of promoting “abusive tax shelters,” which allowed clients to claim excessive deductions and tax credits for solar panel projects. Salveson has disputed that characterization.
The IRS has also accused Kent Salveson of civil tax fraud for failing to report income in 2015 and 2016. The revenue service ordered Salveson to pay $2 million, including back taxes, interest, late fees, and almost $600,000 in fraud penalties. Salveson is disputing the allegations in U.S. Tax Court, and claims he may be entitled to a refund.
Kent Salveson has been working for more than 30 years in businesses that rely on tax-incentivized financing. In the early 1990s, Salveson launched EEXCEL (Educational Excellence for Children with Environmental Limitations), which leveraged government-backed loans to build affordable housing in South L.A. Salveson partnered with USC to offer tutoring programs, an idea that generated nationwide publicity. But the tutoring program was suspended within a couple of years due to a property tax dispute, according to an L.A. Times report.
Salveson continued to work in real estate development. He filed for personal bankruptcy in 2003 and again in 2010, after his company, Campus Realty, collapsed and its homes were foreclosed upon. Salveson then turned to tax credits for renewable energy, launching Solar Energy Equities and Clear Sun Corp.
According to an IRS “explanation of items,” Salveson’s company would enter into a contract with a property owner, or a “host.” The property owner would allow Salveson to install solar panels and agree to buy the power from Salveson’s company at a discounted rate. Salveson would then sell the solar panel system to a client who needed a tax deduction.
The client would agree to a purchase price, and would agree to pay Salveson a 30% down payment. The client could use his or her federal tax credit – which also happened to be 30% – to cover the down payment. Salveson would consider the remaining 70% a loan, which would be slowly paid off as the host paid monthly power bills directly to Salveson.
The client had paid effectively nothing out of pocket, but could claim a tax deduction – spread over five years – worth 100% of the purchase price of the solar panels. At the end of five years, Salveson’s company would take ownership of the panels.
In 2019, the IRS assessed a $9,000 penalty against Salveson for promoting this deal. The IRS agents alleged that Salveson dramatically inflated the value of the solar projects, sometimes by double or triple their true cost.
“Using Salveson’s arrangement the customer/investor has no financial risk and in fact benefits from Salveson overvaluing the solar energy system,” the IRS concluded. “The greater value that Salveson could assign to a system the greater the tax benefits and the better it was for both Salveson and the customer. This approach gave the customer no reason to question the value or cost of the solar energy systems as they were effectively out of the business deal in five years.”
Salveson told agents that the total cost of materials, labor and permits for the panels was covered by the 30% down payment, according to the IRS document.
However, Salveson disputed the penalty, arguing that the solar projects were not overvalued.
“Taxpayer has not engaged in promotion of abusive tax shelters,” he argued, saying the valuations were reasonable and supported by independent appraisals. “The claim is abusive and retaliatory in nature.”
For support, Salveson pointed to an earlier tax court case, involving his clients Don and Sheila Golan. The Golans had acquired a solar project from Salveson in 2011 for a purported price of $300,000. But no money had changed hands. The transaction was financed with a $152,250 loan from Salveson, a deferred down payment, and a federal tax credit.
The Golans took a deduction for the investment. The IRS challenged it, and Salveson retained an attorney to defend them in tax court. The court reduced the Golans’ deduction, but allowed them to claim the $152,250 in debt as a legitimate expense. The court also ruled that the IRS had not shown that the solar equipment was overvalued.
Salveson took that as vindication. On his own taxes for that year, he had claimed a $368,215 deduction for the cost of installing the solar equipment. The IRS had disallowed that as well, and one IRS lawyer described his use of tax credits and bonus depreciation for solar projects as “bullshit,” according to a filing Salveson submitted in his bankruptcy case. After the Golan ruling in 2018, Salveson asked the bankruptcy court to reinstate his deduction. That motion was denied on procedural grounds.
The IRS imposed the $9,000 penalty for promoting abusive tax shelters the following year. The service cited four other Clear Sun clients, in addition to the Golans, who had also claimed inflated or improper credits and deductions. Salveson challenged the penalty in tax court, but the court dismissed his petition due to lack of jurisdiction.
Emily Salveson appeared on a panel at the Cannes Film Festival in July 2017, in which she touted her company’s new model for film investment.
“Looking at the entertainment industry, I thought it was baffling to me that people were losing so much money so frequently by investing in films,” she said. “So when I created this financial model, I thought, ‘Is there a way to make it so that the profits of the film are not what define whether the investor makes money or not?’”
She credited a team of accountants and attorneys for helping her get the company off the ground, including attorney Hal “Corky” Kessler, who was moderating the panel. Kessler is an expert in Section 181, a tax incentive for film investment.
She did not cite her father. But according to Kessler, it was Kent Salveson who had hired him to draft some documents. Kessler told Variety that he spoke with the elder Salveson several times on the phone about how to adapt his tax incentive model to the film business. He recalled Salveson saying that he “beat the IRS” in an earlier tax dispute.
Kessler also helped Emily Salveson get an interview with Variety and invited her to participate in the panel at Cannes, lending her credibility and career support. Kessler did several drafts of the documents, but ultimately Kent Salveson said he was dissatisfied with the work.
The whole experience left a sour taste, Kessler says.
“I did a lot of work, and he didn’t like it,” Kessler says.
Streamline’s spokesperson, Sallie Hofmeister, did not dispute Kessler’s account, but said that he “has violated his duty of confidentiality as an attorney and any statements by him should not be made public.”
In addition to its work in the film business, Streamline also promoted investments in renewable energy and low-income housing. In her IMDb bio, Emily Salveson said that the company has a “strategic partnership with Clear Sun Corporation and EEXCEL Communities” – her father’s companies. Hofmeister said that no Streamline clients have actually invested in those companies.
Kent Salveson has his own website – taxcreditattorney.com – which also touts investments in film, renewable energy, and low-income housing. His website contains language and graphics that match those found on Streamline’s website nearly word-for-word.
On its website, Streamline states that it “works within the tax code.”
“Nothing cannot be upheld in an audit,” the company states. “Should an audit occur, Streamline works with taxpayer & CPA & Expert Counsel to defend the client.”
Kent Salveson’s site makes the same assurances, with one change: the word “Streamline” is replaced with “TCA” – for Tax Credit Attorney.
In a statement to Variety, Kent Salveson said that he has worked as an outside legal counsel for Streamline, but that his daughter deserves the credit for building the company.
“I wish I could take credit for Streamline’s accomplishments, but I can’t,” he said. “This is all Emily. She may have learned about some of the tax concepts from working with me, but this idea was hers, and she is the one who built the company. My role has been as outside legal counsel for Streamline and not for any of Streamline’s investors. I am supportive but did not support her financially or provide capital to the business. I do not own any part of Streamline, nor am I an employee or officer. My motto has always been ‘Do well by doing good,’ so I am proud to see my daughter carrying on that tradition in the entertainment industry by increasing funds available to finance film projects.”
In a separate statement, Emily Salveson said that she appreciates her father’s mentorship.
“Addressing the needs of the film industry, and building a business that does that, is my passion,” she said. “My father continues to mentor and inspire me every day and I appreciate all of his fatherly advice. I was determined to build a business of my own and, as a businesswoman in Hollywood, grow prouder of my team with every Streamline achievement.”
They declined to address the allegations leveled by the IRS.
Todd Hein is an accountant who has worked closely with Streamline. He defends the company’s model, saying it is a legitimate way for wealthy individuals to defer paying taxes.
“There is so much money lying around with wealthy people, and they’re trying to find something to invest in,” Hein says. “There are a lot of people that are very pro-tax deferral. This is pretty common with the self-made wealthy individuals. They earned it. They don’t want to give it back. They’re constantly looking for vehicles they can invest in that would give them some tax deferral.”
Under Section 181, Streamline investors can write off the full cost of a film project as soon as a film goes into production. (Without that provision, they would have to wait to take the deduction until the film was actually distributed.) Congress created the incentive in 2004 as a way to keep film production from going overseas.
Just as with the solar energy investment, Streamline’s film investment model relies heavily on debt. A Streamline client might agree to purchase a film for $1 million. They can pay just a fraction of that as a down payment – say, $100,000 – and personally guarantee a loan for the remaining $900,000. That guarantee might never be exercised, but it can still be used to take a deduction for the full $1 million.
Under a provision of the CARES Act – passed in 2020 to help alleviate the pandemic – taxpayers can also carry that deduction back up to five years. So an investor could wipe out tax liability for the current year and get a sizable refund for taxes paid in prior years.
Hein says that once a project starts generating revenue, that income will be used to pay down the guarantee, and it will be taxable. But that might take a while. In the meantime, the investor will have enjoyed the use of their other income without paying taxes on it.
“There’s no magical way to not pay tax when the chickens come home to roost,” Hein says. “It’s a pure deferral play.”
Emily Salveson has said that some investors are so pleased that they invest again – meaning they could repeatedly defer their tax obligations.
“Usually they come back many times after the first time,” she said in an interview in June 2020.
Postponing taxation can be valuable, says another attorney who has worked for Streamline investors. “There’s a general adage,” he says, “as long as there’s inflation, tax deferred is tax forgiven.”
But others are skeptical that the model makes much sense for investors, at least in the way that it’s advertised. Warren Goz is a film producer who made use of Section 181 when he ran Grand Army Entertainment, which launched in 2006 and shut down amid the credit crisis a few years later.
“I’m very skeptical when people are promoting an investment in film based on 181,” Goz says, noting that investors might be able to write off their stake initially, but will end up owing tax sooner or later. “Whatever income comes through in that asset, you’ve got zero basis in it. You’re going to be taxed on every single bit of that.”
As a film production incentive, Goz says that Section 181 “is really not a difference maker at all.”
In theory at least, the same drawback applied to the solar energy investment model. Once the solar panels started generating revenue, that revenue would be taxable income for the investor. And once Kent Salveson bought back the solar project after five years – either for a purchase price or by forgiving the balance of the debt – then that, too, would be taxable for the investor.
But the IRS alleged that Salveson did not tell investors that. In its 2019 explanation, the IRS stated that Salveson had “not fully considered the consequences to himself or the customers” of his taking ownership of the solar projects after five years.
“Nowhere in any of the provided documentation, on the website or in any interviews or meetings with Salveson has Salveson been able to show that he has let the customer/investor know that when they sell the system back to him it will have no basis which will result in a taxable gain to the customer,” the IRS said. “Additionally, Salveson has not shown that he would properly account for receiving or repossessing a solar energy system by including the value of the system and the income stream in his (or his entities) income.”
In other words, Salveson appeared to be far more diligent about claiming credits and deductions than he was about reporting income.
In April 2021, the IRS alleged that Salveson had failed to report $1.86 million of income in 2015 and 2016. The IRS also accused him of concealing and commingling assets, failing to keep adequate records, and failing to cooperate with its investigation. According to the IRS, Salveson had not filed his tax returns on time eight years in a row.
The IRS alleged that Salveson owed $794,000 in unpaid taxes for those two years, plus $595,000 in fraud penalties, $260,000 in delinquency penalties, and $339,000 in interest.
Salveson filed a tax court petition in June accusing the IRS of numerous errors, and seeking a tax refund. The IRS filed an answer in November, restating its earlier allegations and accusing Salveson of failing to substantiate hundreds of thousands of dollars in claimed deductions. The case remains pending.
It is not clear whether the IRS has investigated Streamline. The IRS declined to comment, citing the confidentiality of tax records.
The attorney who works with Streamline investors, who asked not to be identified, said that one of his clients had been audited, and the IRS approved the return with no change.
“You’re digging in the wrong direction,” the attorney says. “The tax benefit is just icing. These people want to be involved in films. They want to be around actors and the glamor of the film industry. They get tickets to the premiere. They hobnob with famous people. I think that’s the primary motivation.”