Late-Year Tax Bill Would Extend Tax Incentive to Theatrical Productions

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A federal tax provision designed to benefit movie and TV projects would be extended to live theatrical productions as part of massive end-of-year legislation to extend an array of tax breaks and incentives.

The provision of the so-called tax extenders bill would also renew provisions of Section 181 of the tax code through the end of 2016. Section 181 allows productions to immediately deduct the first $15 million in costs. It applies to productions in which at least 75% of compensation is paid for services inside the United States.

The tax benefit is usually extended in one-year and two-year increments, and at times retroactively. The proposed extension would apply to 2015 and 2016.

Eligible live theatrical productions would include those with an audience capacity of 3,000 or less. Seasonal productions would be eligible if their audience capacity is 6,500 or less, according to the draft of the legislation.

The Broadway League has pushed for inclusion in the production tax benefit, arguing that such countries as the U.K. already allow for the immediate expensing of production costs for commercial theater productions. The disparate tax treatment, according to the league, had been driving new play and musical development to other countries. The league argues that the legislation would help lure investors, as they would be able to accelerate deductions.

Another provision in the tax extenders package would allow payroll service firms to be treated as the employers of film and TV production workers for federal employment tax purposes.