Like most producers, Tom Kirdahy, a producer of It’s Only a Play and the upcoming musical The Visit, spends a lot of his time looking for potential investors for his projects. But frequently when he found a live wire, he encountered a curious roadblock to that possible donor’s involvement.
“When I was trying to recruit new investors into the theatre, people who had a history of investing in film or television,” said Kirdahy, “it was more difficult because of the disparity.”
The “disparity” Kirdahy referred to is one that has existed for some years, and makes investing in film and television fiscally more attractive to many people than does investing in theatre.
“In the film business, there’s a provision among many incentives that Congress has arranged over the years that allows investors in smaller films of $15 million and down to write off their investment in the first year of the activity of the film,” explained Tom Viertel, the head of the Government Relations Committee at the Broadway League, the trade organization that represented many commercial producers.
Commercial theatre, however, enjoys no such advantage.
“So,” continued Viertel, “if we wind up with a show that runs for five or six years, our obligation is to write off the cost of that show over its life. What that means is that investors in such a show wind up having taxable income, even though all that’s happening is they’re getting their money back.”
If that arrangement sounds odd to you, you’re not alone.
Changing the law is “something that should be obvious,” commented producer Kevin McCollum, who has backed Motown, Rent, Avenue Q and this season's Something Rotten!, “but the obvious becomes political when taxes are involved.”
The Broadway League and a couple Senators are currently endeavoring to correct this imbalance between the various art forms. A bill titled “Support Theaters in America Growth and Expansion Act” (STAGE for short) is currently working its way through Congress. It would extend to commercial theatre productions costing $15 million or less the same tax breaks enjoyed by the film and TV industries. The bill is being sponsored by Senators Charles E. Schumer (D-NY) and Roy Blunt (R-MO).
Viertel, McCollum, Kirdahy and others have been working on the bill’s passage for a few years and had hoped it would pass in 2014. Many industries enjoy tax breaks, but such measures are rarely permanent; they must be reevaluated and renewed every year or so by Congress. In late 2014, the tax rule for film investors was set to expire. Schumer inserted the new theatre parity section into the film bill. The measure got through the Senate Finance Committee, of which Schumer is a member, and was passed by the Senate. It was then sent to the House, which looks at dozens of such extensions every year. It sailed through the Ways & Means Committee. It was set to pass when the House decided to try and make certain provisions in the bill permanent.
“The President said ‘I’m going to veto that bill,’” explained Viertel. “‘I’m not going to make those provisions permanent.’”
In response, the House agreed to only extend the provisions that already stood as law. “We were excluded from that because we’re not one of the ones that already exist,” said Viertel. So Schumer and company began to eye 2015. This year, the theatre tax treatment bill will stand on its own. Kirdahy is confident of their chances, because live theatre is something that politicians from every state—not just New York—can understand as an economic engine.
“For one, Broadway is a national brand,” he said. “But live theatre exists in all 50 states. The challenge has just been trying to get people to pay attention and make clear it would not be an economic burden.”
The involvement of Blunt, a GOP Senator from the middle of the country, might seen unlikely at first glance. But, Viertel pointed out, “He was very enthusiastic. There’s commercial production all over the place, including Branson, MO, which has more theatre seats than Broadway. He has a very substantial state-oriented interest in commercial theatre.”
“I think everyone now realizes this, whether you’re representing Cincinnati in Congress,” or other cities, argued McCollum. “All these cities now understand, when Motown or Rent comes into your town—everyone now gets it.”
Viertel said the current set-up creates a no-win situation for theatre investors. If the show is not a success (as is often the case in the risky financial world of the stage), they lose their money. But if it is a success, they pay taxes on the return of their investment. “It’s damned if you do, damned if you don’t,” said Viertel.
“I think it does a disservice to local economies,” said Kirdahy. “There are a lot of people who have a history of investing and who love the theatre but can’t wrap their brains around the idea that this one art form would be treated differently than these other art forms. And the truth is, there is no rational reason.”
“We’re not asking for benefits,” McCollum echoed. “We’re not asking for anything tax-free.” According to its advocates, the STAGE bill is important to the commercial stage’s future ability to attract financial supporters.
“We have to take better care of the capital,” argued McCollum. “This is found capital. These aren’t big corporations. These are people putting their money behind their passion. To help get these shows up, we shouldn’t be penalized. And we’re being penalized.”
Both McCollum and Kirdahy said they are willing to go to Washington, D.C. to speak in favor of the bill. Kirdahy mentioned that the group would be lobbying for the measure on April 15, tax day.
“We show up and we keep telling our story,” said McCollum. “That’s what we do.”
“We feel we’ve laid the groundwork,” said Kirdahy. “We have enough allies on both sides of the aisle. We’ve done the explaining. We believe we have the right people on board to make this a reality.”