×

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.

Popular on Variety

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.”

The deferment could prove particularly attractive to the small investors who comprise the majority of Broadway backers. Or at least it could eliminate one more stumbling block to investing in the already risky world of the Main Stem.

Section 181 was initially proposed to prevent runaway film production. That’s less of an issue for the Broadway-centric commercial theater world, although it could become more of a concern in the future, given the recent push Australia has made to attract the development of globally aimed stage work.

The League also is pushing for additional tax-code changes that nail down the nebulous question of when an investor is able to write off a passive loss against active income. There are also efforts to expand to producers of live musicals and plays the code section in which profits from the sale of self-created musical works (read, publishing rights) are taxed as capital gains rather than ordinary income, as well as to secure tax deductions for companies that make physical goods used by legit productions.

Broadway types underline their cause with studies that show that in the 2010-11 season, Rialto productions had a cumulative economic impact of $11.2 billion in Gotham, while touring shows contributed $3.4 billion to the U.S. economy in the 2008-09 season (the latest year for which figures are available).

The League can also enlist allies with a vested interested in keeping Broadway busy with new productions and the new jobs that go with them. Tom Carpenter, general counsel of Actors’ Equity Assn., envisions the thesp and stage manager union collecting stories from member actors who have been cast in productions that might have been saved by the prospective bill. “We’re going to try to quantify that data, so that we can show how many jobs can be protected,” he says.

There’s no set timeline for the Stage Act, especially since, in Ferrugia’s estimation, the bill is small enough that it wouldn’t go through as a stand-alone. The next step, then, is to drum up bipartisan support for a companion bill in the House of Representatives, and wait for a batch of tax reforms with which the Stage Act could be bundled.

More Legit

  • The Prince of Egypt review

    'The Prince of Egypt': Theater Review

    In “The Prince of Egypt,” a swords-and-sandals epic minus the swords, no one speaks, they declaim; no one questions, they implore to the heavens. In a musical re-telling of the Exodus story that is bigger on plagues than on developed characterization, subtlety was always going to be in short supply. But did everything have to [...]

  • Katori Hall

    Listen: Katori Hall's 'Quiet Revolution'

    Playwright Katori Hall’s latest, “The Hot Wing King,” centers on a group of black gay men — a community so rarely depicted onstage in the theater that she can’t think of another example. Listen to this week’s “Stagecraft” podcast below: Which means there’s real power just to see them represented. “Because there aren’t a ton of images [...]

  • Cirque Du Soleil Volta

    Volta: Cirque Du Soleil’s Latest Blends Themes of Self-Discovery with Street Sports

    Blending themes of loneliness, isolation and self-discovery with the magnetic culture of street sports, Cirque du Soleil’s latest iteration, “Volta,” is an eye-popping and psychically soothing spiritual journey experienced through a prism of jaw-dropping acrobatics and aerodynamics that leave one gasping for breath. The Montreal-based entertainment company has produced a steady string of awe-inspiring shows [...]

  • Cambodian Rock Band review

    'Cambodian Rock Band': Theater Review

    Is there anything less politically threatening than a rock band jamming to its own vibrant music? Tell that to the Khmer Rouge, which descended on Cambodia in 1975 and killed off some three million people, including many musicians. In Lauren Yee’s play “Cambodian Rock Band,” the doomed, fictional band Cyclo is represented by actor-musicians with [...]

  • Protesters demonstrate at the Broadway opening

    'West Side Story' Broadway Opening Night Sparks Protests

    Roughly 100 protestors gathered outside the Broadway premiere of “West Side Story” on Thursday night, carrying placards and chanting in unison to demand the removal of cast member Amar Ramasar. “Hey, hey, ho, ho, Ramasar has got to go,” they cried while holding signs that read “Keep predators off the stage,” “Sexual predators shouldn’t get [...]

  • West Side Story review

    'West Side Story': Theater Review

    Whittled down to one hour and forty-five minutes, “West Side Story” – with book by Arthur Laurents, music by Leonard Bernstein, lyrics by Stephen Sondheim, and choreography by Jerome Robbins — has grown exceedingly dark and mislaid some of its moving parts in the new Broadway revival from edgy Belgian director Ivo Van Hove. (Can [...]

More From Our Brands

Access exclusive content