On March 1, Georgia’s Department of Revenue adopted regulations relating to the music industry tax incentives recently passed by its state legislature. The Georgia Musical Investment Act, which became effective Jan. 1, has introduced broad new tax breaks in an attempt to create jobs for the musical production ecosystem, including musicians, composers, and stage designers. Georgia now joins a handful of states in offering a tax credit to encourage development of the music industry within its borders.
These credits may be sweet music to the ears of artists preparing for their summer tours, who could potentially benefit from this incentive. Beyoncé, Jay-Z, and Taylor Swift have already sold out countless venues and could save big tax dollars thanks to music tax credits. Here are a few states that offer these credits:
Music has long been a part of Georgia’s history. However, in recent years, the state has seen a decline in its ability to attract projects, which have been going to competing states, like New York, according to Georgia Music Partners, a Georgia not-for-profit 501(c)(6) corporation.
Under Georgia’s new provision, production companies may be eligible for an income tax credit equal to 15 percent of qualifying expenditures. For expenses incurred in Georgia’s least developed counties, the program provides an additional 5 percent credit.
According to the Department of Revenue’s FAQs, the credit applies to live productions and recorded musical performances, such as the score and musical accompaniment of a motion picture, television, or digital interactive production. However, touring musical or theatrical productions must originate and have the initial live performance in the state, or debut in Georgia after rehearsing for at least 7 days in the state.
To claim the credit, a production company must meet the following minimum spending thresholds: $500,000 for a musical or theatrical production; $250,000 for a recorded musical performance incorporated into film, television, or digital interactive entertainment; and $100,000 for other recorded musical performances. Funding for the program is subject to a $5 million cap for the 2018-2019 taxable year.
Louisiana’s Musical and Theatrical Production Tax Credit offers a unique income tax incentive for qualifying productions. The state applies a tiered system, which ranges from a 7 percent to 18 percent credit, depending on the amount of expenditure. An additional 7 percent credit is available for payroll expenditures to Louisiana residents.
Like the Georgia incentive, Louisiana’s also requires that qualifying productions originate or debut within the state. So, for example, were the Rolling Stones to launch their tour in Louisiana, the credit could be available. Eligible expenditures include venue rentals, artist compensation directly related to performance days in Louisiana, physical production costs, as well as hotel and airfare directly related to production.
New York, often considered the capitol of musical and theatrical productions, offers the Empire State Music and Theatrical Production Tax Credit. This program encourages production companies to pre-tour, rehearse, and perform shows in upstate New York by offering a 25 percent credit for certain production and transportation expenditures. The credit is designed to help this region in particular, which competes with neighboring states that also offer production incentives. Only performances taking place in locations deemed a “qualified production facility” by the state are eligible for this credit.
Those of you interested in putting on a musical or theatrical production may want to consider whether your state offers similar tax benefits. For those in the music industry, music tax credits may end up sounding a lot like big savings.
Continue the discussion on Bloomberg BNA’s State Tax Group on LinkedIn: Should your state provide music tax credits to incentivize investment?
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