IRS Targets Award Show Goody Bags

Companies donate items because they hope being associated with a movie star will generate publicity for their products and services. Typically they expense the donation as an advertising or marketing cost.

Many in Hollywood wonder if the IRS crackdown will cause other organizations and charities to suspend the practice of giving out goody bags at their events.

Once upon a time, swag was simple, commemorative and not worth much.

Swag observers noticed a pronounced change around 2001, when the entertainment media discovered the bags and began an escalating war to publicize their contents. For each successive awards show, it was like an arms race. The gifts just got bigger and bigger and more extravagant.

"It became a phenomenon," said Karen Wood, president of Backstage Creations, which helps place high-end products in a well-manicured hands. "Let's face it. Celebrities are our royalty. They're the arbitrators of style, the taste-makers for that hot new trendy item."

She said swag-giving isn't necessarily dead. The trend now, she said, is to couple the gift-giving with charitable donation. As Wood's company does it, celebrities enter a small "gifting room," where they choose the phones, shoes, watches or other items they want. At another table, they donate all or some of the loot to a charity -- and get a tax letter then and there.

"It's win-win," Wood said.

Staff writer William Booth contributed to this report.