Taxing the “Afterlife”: Michael Jackson, Prince, the Right of Publicity, and CGI


A couple of my colleagues on the news desk, Allyson Versprille and Matthew Beddingfield, published a pair of articles this week on the recent conclusion of the Tax Court trial in the Michael Jackson estate’s tax dispute with the IRS. At issue is the value of the King of Pop’s rights in his name, image, voice, likeness, and persona (known as the “right of publicity”) at the time of his death – and the estate tax due on that asset. The estate, citing the child molestation rumors and accusations that swirled around Jackson at the time of his death, valued the rights at around $2,100 (that’s not a typo – the estate claimed that at the time he died you could have bought the rights to Michael Jackson’s name and image for less than the cost of 1989 Yugo). Looking at the performance of the name since Jackson’s death, particularly the fact that the estate has monetized that name to the tune of $1 billion since 2009, the IRS has claimed a value of $161 million.  The ultimate decision in the case, should the parties not settle before a ruling is issued, will be groundbreaking in the area of valuation of rights of publicity for estate tax purposes.

You might ask, “how did it take so long for this to become an issue?” – we’ve had famous people for a long time, and even though photography and film have been around for over a hundred years, the right of publicity itself is fairly new – only really coming into being in the 1950s (prompted, if you can believe it, not by movie stars but by baseball players worried about baseball card companies using their images). Even newer is the protection of those rights after death. In fact, even California, a place you’d expect to have robust protections for celebrities’ images given the concentration of famous residents there, did not recognize a posthumous right of publicity that could pass to heirs or assigns after death until after a 2012 court opinion determined that California’s then-existing law did not provide for such a descendible right. Obviously, if the right of publicity ceases to be a protectable interest at death, there isn’t even an “asset” left in the decedent’s estate to value.

Which brings us to Prince. As many readers may know, the iconic Minneapolis native died without a known will or other estate plan, leading to a mad scramble to figure out what to do with his intellectual property and artistic legacy. Prince was shrewd about maintaining ownership of his songwriting and performance copyrights as well as guarding those properties in the new digital age. While the IRS will certainly have a field day with the values attaching to Prince’s prodigious oeuvre, one value it may not get a crack at is that for Prince’s right of personality. Why? Well because we don’t really know whether Prince has such a right – Minnesota has neither statutory nor case law explicitly recognizing a right to publicity, though federal courts have decided that Minnesota would recognize a common law right to publicity. Even if the federal courts are correct, there remains no certainty that the right would extend after death such that Prince’s estate or heirs would have the ability to control or protect his name and image.  No asset, no estate tax value.

Jumping back to the Jackson case for moment, although the Jackson estate may be overplaying things, it clearly has a point in noting that the decedent’s reputation and public image has a significant impact on value. Then again the IRS has a point in saying that it was reasonably foreseeable that interest would revive after Jackson’s death such that the name and image would again be marketable (as events have shown to be the case). As with many valuation matters, there is no clear answer or a static set of factors to consider in coming to the right number, though we do know that courts generally frown upon using post-death events (and the benefit of hindsight) to establish date-of-death value. One factor that would appear to be significant is “lifespan” – how long the deceased celebrity will remain culturally salient such that people will pay for a name or image. This is one place where technological advance may have a great deal of impact.

Allyson and Matthew also wrote about the impact of computer-generated imagery on estate tax values. What do we do when technology can allow you not only to “photoshop” some film footage of a dead celebrity into your advertising (something that has been used already), but regularly allows you to create a digital double of the celebrity that can engage in completely new scenes with other actors (living or dead)? Being freed of the limitations of trying to work existing imagery of a star into your work could make individuals nearly immortal. Of course, any efforts would be limited by the salience of the individual, but we already have what I’ll call “multi-generational stars” – people like Marilyn Monroe and Elvis Presley, who have fans who weren’t even alive at the time they died and who look set to have fans “forever” – and a CGI technology that could effectively bring them back to life could have the taxman salivating like one of Pavlov’s dogs reacting to the dinner bell.

With that sort of issue out there, the way to ultimately make this a bit easier is for states that recognize the posthumous right to move to a “term-limited” system similar to current copyright laws, allowing estates and heirs to control the decedent’s image for a suitable period, but would eventually allow for passage into a public domain. A bill to protect posthumous publicity rights introduced in Minnesota after Prince’s death (but quickly retracted), would have gone this route with a 50-year initial term with extensions possible where the right remains in regular use. Regardless, while the Jackson case may provide some much needed guidance, we can probably count on more disputes over this type of valuation going forward.

With a free trial to the Estates, Gifts and Trusts Portfolios Library, you’ll receive in-depth analysis of key issues necessary for developing and implementing the best estates, gifts, and related income tax strategies.