The German government could move as early as May 5 to push through a new law that will shut down one of Hollywood's top sources of international film financing: German film funds.

COLOGNE, Germany (The Hollywood Reporter) -- The German government could move as early as May 5 to push through a new law that will shut down one of Hollywood's top sources of international film financing: German film funds.

The cabinet of German Chancellor Gerhard Schroeder is expected to meet May 5 to approve a shake-up of German tax law that would make film funds in their current form illegal. If passed, the law would still have to be approved by Germany's upper house of parliament, the Bundesrat.

This could be a major blow to studios counting on German fund cash for off-balance-sheet financing and independent producers who rely on Teutonic funding to get their projects greenlighted.

Last year, German film funds raised about $1.7 billion, most of which went to back U.S. film productions. Recent features that have tapped fund cash include "The Interpreter," "Alexander," "Hostage," "The Matador" and "The Upside of Anger."

The Hollywood Reporter has acquired the latest draft of the new law, which gives investors until May 4 to qualify for tax write-off benefits by investing in one of the funds already on the market. Only funds launched before March 18 will be able to take advantage of the old law.

"There is a major rush on now. Funds are pushing to hit their investment targets before time runs out," an investment adviser that specializes in film funds said.

The tight deadline means several funds could fall short and will have to scale back. German fund executives at this month's Festival de Cannes are expected to be a lot less generous backing new projects.

"This looks like the end of the whole fund model," one fund manager said.

Others were more optimistic, noting that the German government has tried to shut down the film funds before.

"The managers of these funds are tax experts; they have always managed to work around whatever new laws Berlin throws in their way," an adviser close to one of Germany's top funds said. "At the moment, everyone is running around like it's 'The Texas Chainsaw Massacre,' but we'll see how much [the German government in] Berlin will be able to saw off in the end."