Are you getting a lot of “donate now” emails?
I don’t know about you, but my inbox and mailbox are filled with requests for cash donations from all sorts of non-profits, charities, etc. Why do they come in such a high volume this time of year? Three reasons:
- It’s the “season of giving.”
- It’s the end of the year for the charities, so they’re trying to get their numbers up.
- It’s the last chance individuals have to make donations that will count as tax deductions in the current calendar year.
It’s the last one that is the most significant. What this means is that if a person thinks they’re going to have to pay a lot of tax, they can make a donation to reduce that tax. It’s a perfect example of a win-win transaction for both sides. The donor gets the tax deduction. The recipient gets the money.
And this little calendar based fact is one of the sole differences between the tax advantages of investing in Broadway shows versus giving money to a non-pro.
You see, if a Broadway show investment doesn’t work out, the investor can still write this loss off on their tax return, just like a stock or any investment that goes wrong. But the investor just can’t pick the year that deduction occurs in. For investors in a Broadway show, their gain or loss depends on a number of factors, including how long that show is expected to run, accounting style, and so on.
Could this be one of the ways that the government could incentivize people to invest in Broadway shows? What if you could make an investment in a Broadway show (which is investing in the arts, and creating jobs) and claim some kind of credit right then and there, in the year that you’re making the investment? I’m not saying you should get the whole thing, but just a portion – an arts investment credit, if you will.
Of course, if the show (or any artistic commercial enterprise) was successful, you’d have to pay up on whatever amount you didn’t pay before, and maybe even a touch more, but it would be a tax deferral, and even the playing field a little for folks looking to raise money for non-profits (that non-profit money donated at the end of the year could just be going to fund administrative costs like salaries (or end of the year bonuses even)).
Maybe this is the answer. Maybe it’s not.
But one thing is for sure. As producing Broadway shows, Off Broadway shows, independent films, or even artistic ashtrays becomes more and more risky, we need financial incentives for investors to get in the game.
And we shouldn’t be penalized just because we want to make money.
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