Qualified Musical and Theatrical Production Credit Program
By Barry Halpern, Partner, Tax & Business Services & Lisa Haime, Senior Manager, Tax & Business Services
On July 22, 2021, New York Governor Andrew M. Cuomo announced the launch of a new $100 million New York City Musical and Theatrical Production Tax Credit designed to help revitalize an industry vital to the state’s continued economic recovery.
The new tax credit, which is part of New York’s Pandemic Recovery and Restart Program, provides a credit of 25% of qualified production expenditures for eligible businesses. The program is a two-year program and companies can receive credits for tax years beginning on or after January 1, 2021, but before January 1, 2024. The credit is available to businesses principally engaged in the production of a qualified musical or theatrical production that is to be performed in a qualified New York City production facility, and that have incurred qualified expenditures during the credit period of April 19, 2021 to March 31, 2023.
- For-profit business principally engaged in the production of a live, scripted, dramatic performance with one or multiple performers.
- Ballet, opera, musical solo, group, band or orchestral performances, and stand-up comedy performances are not eligible.
- Production is performed in a qualified production facility in New York City:
- Facility is intended to host live theatrical productions with a stage, dressing room, other amenities.
- Seats 500+.
- Receipts from ticket sales are 75% or more of gross receipts.
- Incurred cost for property used or services performed in the production of a qualified musical and theatrical production in the State of New York, including:
- Design, construction and operation (costumes, wardrobes, makeup, sound, lighting, payroll) not to exceed $200,000 per week.
- Up to 50% of total advertising and marketing costs incurred and paid in New York State.
- Refundable credit is 25% of qualified production expenditures during the credit period.
- Credit is limited to:
- $3 million per production for first-year program applicants.
- $1.5 million per production for second year program applicants.
- Credit period starts 12 weeks prior to the first paid public performance of the qualified production after April 19, 2021, and ends the earlier of:
- When sufficient funds are expended to hit the cap,
- The production closes, or
- No later than March 31, 2023.
- The partners in a partnership or shareholders of S-corporations that receive the credit are allowed a prorated share of the credit.
- Other requirements – All applicants must also:
- Participate in diversity training.
- Implement a plan to ensure the production is accessible to low income New Yorkers.
- Contribute up to 50% of the credit to the New York State Council on the Arts Cultural Program Fund. (Depending on growth targets.)
How to Apply
Complete an initial application prior to the first paid performance (10 days prior to such performance is strongly encouraged) – no later than December 31, 2022, with the following information:
- Project summary.
- Production venue and operating budgets.
- Weekly payroll report.
- A diversity and arts job training program plan.
- A public access and availability plan.
The applicant must agree within the Project Summary to contribute to the New York State Council on the Arts Cultural Program Fund if ongoing revenues are more than two times ongoing production costs, after receiving a tax credit.
Complete a final application (due no later than 90 days after the production closes or 90 days following the program end date of March 31, 2023, whichever comes first) which will include the General Ledger and General Ledger Reports that correspond to the budget categories identified in the project summary.
Third Party CPA Review of Final Application
Qualified production companies applying for the New York City Musical and Theatrical Production Tax Credit can opt to have final applications reviewed by pre-qualified CPA firms in order to potentially expedite approval. (Agreed upon procedures are still under development.)
The program allocates $100 million to encourage qualified productions at qualified facilities New York City and provides much-needed support to an industry that provides thousands of jobs and drives millions of dollars in tourism revenue. Considering the level of detail and commitment involved for the application, approval and appeal process, companies should plan to carefully consider all of the requirements to determine if they qualify before investing the time and effort necessary to apply.