Legislation Proposed to Give Broadway Same Tax Breaks as TV & Film Productions

U.S. Senator Charles E. Schumer today announced his bipartisan plan to extend the same tax treatment afforded to film and television producers to investors in live theater, like Broadway productions.

The legislation, "Support Theaters in America Growth and Expansion (STAGE) Act," which is also sponsored by Senator Roy Blunt (R-MO), would change the federal tax code and give Broadway and live theater productions a tax break to encourage investment and spur job creation on the Great White Way. Schumer today noted that individual investors are the backbone of this industry, but it is often a prohibitively risky enterprise to invest and finance commercial stage production. Schumer said that the STAGE Act will finally end the disparate treatment in the entertainment industry and help the New York theater industry.

"New York is home to the culture and entertainment capital of the world, but without critical tax incentives, many production companies are moving elsewhere," said Senator Schumer. "The STAGE Act will finally put an end to the disparate tax treatment in the entertainment industry, which will mean more shows on Broadway, more jobs and more investment in and around the Great White Way. Live theater must be offered the same federal tax incentives as those afforded to television and film productions, and I am urging my colleagues to give its regards to Broadway by passing the STAGE Act!"

"Broadway is an iconic industry that entertains millions around the world and supports our nation's cultural community. Individual investors are the mainstay of our industry and we are incredibly grateful to Senators Schumer and Blunt for their appreciation of the multi-billion dollar impact that commercial theatre has on the U.S. economy. Because of their resolve, American theatrical producers may achieve a measure of tax parity with the film and television industries, as well as with foreign theatrical investors, through a change to the Tax Code that will eliminate a major impediment to attracting financing for commercial theatre at virtually no-cost to US tax-payers," said Charlotte St. Martin, Executive Director, The Broadway League.

The U.S. tax code now permits expensing of qualified film and television production costs up to $15 million when 75% of compensation paid is for services performed in the United States. Accordingly, studios producing movies and television shows may immediately recoup their investments before taxes are assessed on any profits earned. Under current law, Broadway shows and live theatrical productions are not offered the same federal tax incentives. Schumer's amendment would allow live theater investors to receive the same benefit.

According to the Broadway League, Broadway attendance in 2012-2013 reached 11.5 million. Broadway contributes $11 billion to New York City's economy on top of ticket sales and supports 86,000 jobs. Broadway is a world renowned tourist attraction, with over 7 million tickets purchased by visitors per year. Broadway also attracts repeat visitors; 58 percent of the audience attends at least two shows a season.

The benefits go beyond New York. In the 2008 to 2009 theatre season, approximately forty Touring Broadway productions traveled the country and performed in 192 venues to more than 13 million theatre-goers. These shows contributed almost $3.4 billion to the U.S. economy - $1.5 billion in show investment and $1.9 billion in visitor spending. Live theatre audiences make countless ancillary purchases, such as parking, restaurants, hotels, taxis and gifts. On average, Touring Broadway contributed an economic impact to the local economy that was 3.5 times the gross ticket sales. This income is also vital to sustaining our nation's theatres, as more than 50% of Performing Arts Center's ticket sales derive from patrons attending the Touring Broadway series. This revenue 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.

Unfortunately, a majority of commercial productions close before producers recoup their original investment. Due to the tremendous risk involved, it is very unlikely that any 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 United States has not utilized the tax and trade policy employed by many other countries to encourage investing in live theatre. For instance, Great Britain already allows for the immediate expensing of production costs. Accordingly, disparate tax treatment, combined with a number of other factors, have been driving American productions outside the U.S. for the past decade. Although future income derived from licensing and royalties return to the country of the production's origin, England, Australia, Canada and Asia are quickly becoming major centers for new play and musical development.

Schumer's STAGE Act 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. IRC 181 currently permits such expensing of film and television production costs, provided that expenses do not exceed $15,000,000 and 75% of compensation paid is for services performed in the United States. Schumer's legislation, which allows 100% of an investment to be deducted by the investor from their income in the year of the investment, would eliminate the double standard involved with taxing the entertainment industry, and would help deepen the pool of interested investors in Broadway.