AZ Filmmaker Lee Storey Scores Big Win for Documentary Industry in Tax Court Ruling

Lee Storey has a brand new reason to smile 'til it hurts.

A Phoenix-based water rights attorney with Ballard Spahr LLP, Storey earned a spot as one of our 2011 Big Brain Finalists for her debut feature documentary, Smile 'Til It Hurts: The Up With People Story

The film tells the complicated tale of the Up with People program, which sent large casts of singing, dancing, turtle-necked youth around the world in the 1960s and '70s to represent American exceptionalism with a smile. As ambassadors from the land of peace and love (with, in this case, a distinctly conservative bent), the Up with People performers - like Glenn Close and Storey's husband, William - shared surreal meetings with world leaders as they spread their homespun values during the Cold War era.

Completed in 2009, the documentary earned praise from audiences and critics alike and a spot in film festivals across the country, winning the Special Jury Prize at Michael Moore's Traverse City Film Festival. What it didn't earn - yet - were financial profits. Storey had claimed hundreds of thousands of dollars in losses from her work on the film during the years 2006-08, but in an audit the Internal Revenue Service denied those deductions and charged Storey $259,842 in back taxes.

Storey had "no other choice but to go to trial over this," she says, and "fight the good fight." At issue was a very key battle for documentary filmmakers everywhere:

whether documentaries were ever, by definition, meant to earn profits


Certainly the pioneering Lumiere brothers, who screened their mini-documentaries to awed European audiences in the 1890s, were not charging admission as a formality. Since then, documentaries have fluctuated in popularity, but contemporary trends suggest a high potential of financial success for the genre: Moore's controversial Fahrenheit 9/11, for example, grossed more than $100 million in the U.S. and more than double that worldwide.

The question stems from a general sense that documentaries are like the vegetables to the candy of action and comedy: They're good for you. But framing documentarians as only not-for-profit saints and educators, while it may sound complimentary, is actually highly dangerous for the industry. If filmmakers are not allowed to deduct losses incurred in the business of making documentaries, the whole process becomes far less accessible to the average person. These financial barriers would allow for "only the most established filmmakers to make documentaries, because it's just too hard," says Storey.

And that's why, says Storey, "All documentary filmmakers are doing the happy dance right now." On last Thursday, April 19, U.S. Tax Court Judge Diane L. Kroupa ruled in Storey's favor

"It's a huge relief to me personally, but the issue is bigger than myself," says Storey, who called the decision a "huge victory for the arts." This is the first time the tax court has so definitively acknowledged not just that documentary filmmaking is a business, but that it's a business that may take a little longer - like horseracing, oddly enough - to turn a profit. It's those profits, then, that would be taxed: "My intention is not to avoid taxes," says Storey.

While the ruling may be thrilling, Storey admits that it was sometimes hard to be fighting "on the frontlines of the film industry." The IRS argued that her documentary work was merely a hobby, not a business, and used YouTube clips of interviews with her at film festivals to allege that she spent that crucial marketing time "going to parties," she explains.

Ever the smiling pragmatist, Storey came up with a solution: She now recommends that all documentary filmmakers wear sandwich-board vests of taped-together DVDs to film festivals, to remind everyone that they are still there, as businesspeople, to sell a product.

Storey is currently working on her next documentary project, a biopic on famed record producer (and inspiration for Austin Powers' sexy style) Peter Asher, with fellow Arizonan CC Goldwater. She also hopes to soon land a television deal for Smile 'Til It Hurts, which screened on cable TV in Canada but has not yet in the U.S. You can purchase the fascinating, probing, and often funny documentary on DVD for $19.99.

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