Today, U.S. Senator Charles E. Schumer announced his plan to extend tax treatment afforded to film producers and music publishers to investors in live theatre. Schumer will introduce the STAGE Act of 2013, which aims to amend the Federal Tax Code and to promote financing in the often prohibitively risky enterprise of commercial stage production. Schumer noted that there are dozens of theatres throughout Upstate New York, like Proctors in Schenectady, Shea's Performing Arts Center in Buffalo, the Rochester Broadway Theatre League, Stanley Theatre in Utica and Broome County Forum Theatre that put on Broadway shows and live productions, and this bill would benefit the production companies that bring their shows to those theatres.
“From New York City to Upstate New York, the entertainment industry should be offered the same federal tax incentives, regardless of whether it’s a filmed or live production,” said Schumer. “Broadway shows provide billions of dollars to New York’s economy and support thousands of jobs, however, without these critical tax incentives, many production companies are moving elsewhere. The STAGE Act will finally end the disparate tax treatment in the entertainment industry, meaning more shows, more jobs and more investment in-and-around the Great White Way.”
The U.S. tax code now permits expensing of qualified film and television production costs up to $15,000,000 when 75 percent of compensation paid is for services performed in the United States. Accordingly, the studios producing movies and television shows may immediately recoup their investments before taxes are assessed on any profits earned. Broadway shows and live theatrical productions are not offered the same federal tax incentives.
On average, Touring Broadway contributed an economic impact to the local economy that was 3.5 times the gross ticket sales. Over 13 million theatre-goers attended a Touring Broadway performance and 64 percent of Touring Broadway patrons reported that theatre played an important role in their decision to visit the venue area. Live theatre encourages individuals to leave their homes and leads to countless ancillary purchases, such as parking, restaurants, hotels, taxis and gifts. In 2009 (the most recent year for which figures are available), approximately forty Touring Broadway productions traveled the country and performed in 192 venues. These shows contributed over $3 billion to the U.S. economy – $2.1 billion in show investment and $1.15 billion in visitor spending. Most successful shows tour nationally and, on average, more than 50 percent of any individual state’s Performing Arts Centers’ ticket sales derive directly from patrons attending the Touring Broadway series. This income permits local venues to offer opera, ballet, unique exhibitions and to fund much needed arts education curricula. Without Touring Broadway, all of these vital programs would suffer
In 2011, over 12 million people attended a Broadway show and spent in excess of $8.9 billion in New York State (not including the cost of the tickets), while production related spending totaled more than $2.2 billion, for a cumulative economic impact of over $11 billion.
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The majority of commercial productions close before producers recoup their original investment. Due to the tremendous risk involved, no managed fund or banking institution in the United States will lend resources for live theatrical productions so the majority of capitalization comes from small or independent investors. Costs for professional theatrical productions continue to rise dramatically and, as a result, attracting enough backers to fund new productions is becoming increasingly difficult.
The STAGE Act of 2013 would add commercial theatrical productions to the list of activities that qualify for immediate expensing under Internal Revenue Code 181, which accelerates deductions and precludes investors from paying income tax on profits until such profits are actually realized. 181 currently permits such expensing of film and television production costs, provided that expenses do not exceed $15,000,000 and 75 percent of compensation paid is for services performed in the United States.