New Congressional Bill Seeks to Encourage Music Creation Through Tax Code Change
A bill that would use a change in the tax code to encourage independent artists to create new music during the pandemic was introduced Friday (July 31) in the U.S. House of Representatives.
A bill that would use a change in the tax code to encourage independent artists to create new music during the pandemic was introduced Friday (July 31) in the U.S. House of Representatives.
Co-sponsored by Rep. Linda T. Sánchez (D-Calif.) and Rep. Ron Estes (R-Kansas), the Help Independent Tracks Succeed (HITS) Act would allow individuals to fully expense the cost of new studio recordings (up to $150,000) on their taxes within the same year of production, thereby easing the financial burden on creators of recording new music. That would be a change from the current tax code, which requires artists and producers – unlike TV and film productions, which already enjoy a 100% first-year deduction – to amortize production expenses for tax purposes over the economic life of a sound recording, a period that typically ranges between three and four years.
Speaking with Billboard, The Recording Academy’s chief advocacy officer Daryl Friedman says he began talking with Rep. Sánchez about potential tax legislation shortly after passage of the CARES Act stimulus bill in March. “[She] asked me after the CARES Act if there was something that the Ways and Means Committee could do for small independent artists through the tax code,” says Friedman. “And that was really the genesis of this.”
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Rep. Sánchez tells Billboard the HITS Act was inspired by discussions she had with music creators during a GRAMMYS on the Hill webinar in the early days of the pandemic. “Breaking into a career in the creative arts has never been easy…but the pandemic threw in insurmountable obstacles to an already tough path,” she says. “We can all agree that our world needs music now more than ever as we navigate this new unknown.”
While the proposed legislation would have benefited struggling independent artists even prior to the pandemic, Rep. Estes notes that the coronavirus-induced shutdown of venues — and attendant loss of income for creators — makes the HITS Act more necessary than ever. “We recognize that this has been an issue for many years, but now we can make it right by passing the bipartisan HITS Act – helping struggling producers today and in the future,” Rep. Estes tells Billboard.
Friedman says that while the bill is designed to help out struggling creators during the pandemic, he expects it to become a long-term benefit.
“We wanted to incentivize musicians to get back in the studio and put more music out into the world when we need it right now and give them an immediate financial benefit by having this deduction in the first year,” says Friedman. “But this will be an ongoing tax provision that will live beyond the pandemic and will be a benefit to artists for years to come.”
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Richard James Burgess, president and CEO of the American Association of Independent Music (A2IM), says the HITS Act will also provide a benefit to independent labels who finance artists’ recordings.
“During this pandemic, upfront production costs can threaten the survival of small labels,” Burgess tells Billboard via email. “The HITS Act…will allow labels and artists to write off qualified recording costs in the year they were incurred. This will minimize the risk to small businesses and allow musicians to continue developing their careers while they are unable to tour.”
Going forward, Friedman says the Academy membership will be mobilized to get more co-sponsors on board. He ultimately hopes Congress will integrate the legislation into its next COVID relief package, of which two separate versions now exist in the House and Senate.
According to statistics cited by The Recording Academy, the median income for a professional musician is currently less than $25,000 a year.
“The Recording Academy is proud to have worked alongside Reps. Sánchez and Estes to develop the key provisions in the HITS Act,” said Harvey Mason Jr., chair and interim president/CEO of the Recording Academy, in a release announcing the bill. “The HITS Act will make a meaningful impact and help ease the financial burden for thousands of independent creators getting back on track, eager to share their creativity with the world. It will inspire new music and create opportunities for many of the vulnerable professionals in our community to persevere during these uncertain times.”
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