My 4th grader has been singing selections from “Hamilton” all day. I’m no theater critic, but it has to be a good sign for the musical – with a record-breaking 16 nominations – in the run-up to the 70th annual Tony Awards when you’re so popular that even elementary school children can’t stop singing your songs.
But “Hamilton” doesn’t get all the breaks: producers all along Broadway are pretty thrilled, too. And not just with our Founding Fathers but with our current Congress. In December, our current Congress voted in a tax break for The Great White Way. As part of the Protecting Americans from Tax Hikes (PATH) Act 2015, also known as the Extenders Bill, Congress not only extended the expensing provision for qualified film and television through 2016 but added live theater productions to the mix.
The bill modified the provision found at section 181 of the Tax Code which formerly allowed:

A taxpayer may elect to treat the cost of any qualified film or television production as an expense which is not chargeable to capital account. Any cost so treated shall be allowed as a deduction.

With expensing, business owners can claim deductions for expenses paid in the year paid rather than the deferring the deduction over a period of years. That’s important to theater investors since – despite the popularity of shows like “Hamilton” and “Wicked” – most live theater productions don’t immediately recover all of their costs. It can take years for some shows to turn a profit and by then, many shows will have closed.
Previously, producers were asked to guess how long it might take for a show to recover the initial capitalization. They then paid taxes on the show’s anticipated first-year profit. Refunds were available if the money didn’t shake out but that was after the fact. Producers argued that, in reality, that required them to pay tax on profit that might not exist. Now, producers say, the system is more fair, putting them on par with motion picture and TV investors.
For purposes of the bill, expensing is capped at $15 million.
(You can read more about the extenders bill here.)
Those in favor of the extension included Bryan Cranston, Harvey Weinstein, and Neil Patrick Harris, all of whom lobbied for the provision on behalf of the theater industry. Supporters argued that the proposal would not benefit only Broadway but also cities and states around the country where plays are performed live. How much? The Broadway League reported in 2014 that Broadway contributes nearly $12 billion to the New York City economy on top of ticket sales; touring Broadway productions contribute an additional $3.2 billion to the U.S. economy.
But not everyone is on board.
Congressman Tom Marino (R-PA) who voted in favor of the PATH Act last year now opposes an extension, calling it “crazy.” Rep. Marino said, about the extension, “With that kind of thinking, no matter what the circumstances, if you lose money, you can write that off. And who pays for it? Middle-class taxpayers.”
The provision is up for renewal this year: expect a vote after the November elections.
As for Marino, he already knows how he’ll vote: “If these guys aren’t bright enough to put anything together that makes money, tell them to get out of the business.”

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Kelly Erb is a tax attorney, tax writer and podcaster.

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