Santa came early for Broadway Investors and Producers this year.
The gist of the change is this . . .
Previously, Broadway Investors were required to pay tax on paper profits as reported by the show, even if the Investor had not yet received the money for those profits. Confusing? Exactly. That’s why they changed it up.
I can’t tell you how many angry phone calls and emails I’ve received from Investors (usually around April 14th) saying, “Ken! I finally got a hit! And now I’m writing a check to the IRS, even though I don’t have the money that I’m paying that tax on? Tell me why am I doing this again?”
Now, under the old system, the cash would eventually straighten itself out, but boy oh boy was it confusing.
Under the new law? That “phantom income” concept is gone. You only pay tax when you get the profit. (Duh, right?)
What does this mean? Well, it simplifies Broadway Investing, and anything we can do to make the process simpler (especially when paying profit) and easier to understand gives us a better chance of Investors continuing to play our game. Too many complications and things that don’t make sense (especially about taxes, which I’m convinced only about 7 people in the world truly understand), and suddenly, just writing a check to a non-profit, which allows the Investor to take the loss right away, seems that much more attractive.
Will the change mean a flood of new Broadway Investors to our market? Nah. But we’ll have less Investor attrition for sure.
The bigger win here has nothing to do with the law. It’s the tip of the hat and the deep bow that Congress just gave Broadway.
What you may not know is that TV and Film already had this tax benefit, but no one ever cared enough about us in DC to make the change. Broadway was the only entertainment industry treated in this unfair manner. After the past several years of record-breaking seasons, after multi-billion dollar economic impacts on NYC, after headline-getting news like Universal announcing Wicked would be its most profitable venture ever, after visits from the Obamas to many of our shows, and after our shows making so many appearances at the White House, Congress finally realized that they needed to give our cottage industry a second look.
Yep, this 13-year-old, pimply-faced girl with braces just grew up into a supermodel.
So yeah, I’m happy about the tax change.
But I’m even happier about the Aretha Franklin-sized R-E-S-P-E-C-T that the lawmakers just gave us all.
Major kudos go to the Broadway League, and its Government Relations Committe (led by the Two Toms, Tom Ferrugia and Tom Viertel) for their tireless efforts on our behalf.
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