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Sunday, June 30, 2013

Broadway Pushes to Extend § 181 Deduction for Film and Television Production Costs to Theatre

BroadwayVariety:  Broadway May Be Closer to Earning an IRS Write-Off: Bill Would Help Backers Defer Taxes Until a Show Recoups, but Passage Needs a Strong Supporting Player:

Why should film and TV get all the breaks? The tax breaks, that is.

Broadway producers have been asking that question for years now — and with the recent announcement by U.S. Sen. Charles E. Schumer (D-N.Y.) of his intention to introduce the Stage Act of 2013, the legit industry may be one step closer to earning an IRS write-off.

The goal is to include investors in theatrical productions among those who benefit from Section 181 of the federal tax code, which allows film and TV producers to expense up to $15 million of the costs of a U.S.-based project — meaning that a studio or production company won’t start paying taxes on income from a project until that $15 million is recouped. Earlier this year, Section 181 was extended through 2013.

The Broadway League, the trade association of legit producers and presenters, stepped up its advocacy for legit’s inclusion in the section when Rialto producer Tom Viertel became the chair of the league’s government relations committee a few years back. About a year ago, the League got Schumer interested in the proposal, but the idea couldn’t progress without bipartisan support, which recently came from Sen. Roy Blunt (R-Mo).

The benefits of Section 181 seem pretty obvious to legiters. The capitalization costs of most Broadway productions, except for a rare mega-budget endeavor such as Spider-Man: Turn Off the Dark” fall under that $15 million mark, meaning that investors wouldn’t have to start paying taxes on income from a production until the show has actually recouped and they’ve started to make a profit.

That’s a big change from the current state of things, where investors pay taxes on income from a show that hasn’t made it into the black yet. “In a producer’s offering papers to investors, you have to disclose that investors could pay taxes before they’ve made a dollar of profit from the project,” says Tom Ferrugia, the League’s director of government relations. “That’s a big disincentive to invest.”

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