The German government's cabinet on May 4 approved a change in German tax law that would shut down the nation's film funds, the financing structure that pumps more than a $1 billion into U.S. productio

COLOGNE, Germany (The Hollywood Reporter) -- The German government's cabinet on May 4 approved a change in German tax law that would shut down the nation's film funds, the financing structure that pumps more than a $1 billion into U.S. productions annually.

Those funds have helped finance such megabudget projects as "The Lord of the Rings" and "Alexander" as well as such indie films as "Monster" and "Prozac Nation."

The new law, which will now go before the German parliament, would close a tax loophole that allows investors in film funds to write off their investment against taxes in the first year of operation.

Under the proposed regulations, German taxpayers will be able to write off only their investments in film funds against proceeds from the same funds.

A spokesman for the German finance minister said that the government hopes to fast-track the new law through the upper and lower houses of parliament and put it into effect before the summer.

This would mean the end of German film funds, which last year raised $1.7 billion in financing mainly for Hollywood productions.

The proposal is part of a larger overhaul of the German tax code, which also will see the government lower the corporate tax rate from 25% to 19% in a bid to revive the German economy and bring down record unemployment. The government hopes to help pay for the tax cut by clamping down on film funds and similar tax write-off plans.