Industry Pro Newsletter: Who Benefits from the NYS Tax Cut for Broadway?

Another regional theatre has announced their closure, with Cutting Ball in San Francisco becoming the latest to look at their financial situation and decide that there was no viable path forward. This is something that we’ve been watching closely at BroadwayWorld, and moving forward we’ll have more coverage here and in our marketing update about the things that are working for theatres that have found a way to thrive in the new normal, and what is contributing to the closure of other theatres that haven’t been able to find their footing post-pandemic.

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Industry Trends

Disneyland Characters and Parades Cast Members to Unionize With Actors' Equity Association

Disneyland's characters and parade cast members have voted to unionize with the Actors' Equity Association, marking a significant development in labor relations at the theme park. The move comes amid ongoing negotiations between Disneyland and its workers regarding wages, benefits, and working conditions. Unionization provides these employees with collective bargaining power to address their concerns and ensure fair treatment. The decision reflects growing efforts across the entertainment industry to protect workers' rights and improve working conditions.

TITANIQUE Production Workers Vote to Join IATSE

Production workers of the parody musical "TITANIQUE" have voted to join the International Alliance of Theatrical Stage Employees (IATSE), signaling a victory for labor rights in the entertainment industry. The decision follows concerns raised by production workers regarding working conditions and compensation. By unionizing, these workers aim to secure better wages, benefits, and job protections.

Broadway/New York

Industry Trends Weekly: NYS Theater Tax Credit: Who Benefits and How by Cara Joy David

One thing that has been pivotal to Broadway’s return is the New York City Musical and Theatrical Production Tax Credit, which is a New York State program, despite what the name might indicate. It now applies to both Broadway and off-Broadway. Several producers have told me it was pivotal in securing investors for their shows.

“The NY tax credit has absolutely helped keep the Broadway and off-Broadway investor remain on board amidst the fluid times the industry is going through,” stated producer and general manager John Johnson, who has shepherded numerous shows on and off Broadway (and is one of those leading the recent resurgence of high-profile commercial mountings). “It acts as the incentive it was legislated to [be] by investing dollars in jobs in the arts and provides the investors with a layer of security as shows try to recoup their costs.”

Not only that, but it is helping diversify the industry and its fanbase. Applicants are expected to participate in a “diversity and arts job training program” and also offer a substantial amount of low-or no-cost tickets to low-income New Yorkers. (The number of these tickets depends on house size and running weeks, but for shows that run a year, the number is double the venue’s capacity. It is pro-rated for shorter runs.)

I've long wanted to write about how the credit works. It is solely targeted at “for-profit, live, scripted dramatic performance” and does "not include ballet, opera, musical solo, group, band or orchestra performance, or solo, duo or several performers’ stand-up comedy performances.” (One wonders about Broadway shows that straddle the lines there.) The credit is for shows that open on or before June 30, 2025, assuming the $300 million allocated for the program has not dried up beforehand. 

It is a refundable credit, meaning you can get a refund even if you don't owe any tax. So it’s basically cash back from the state. For Broadway shows, you get up to $3 million on 25% of qualified expenses. Not everything is a qualified expense—for example, no legal expenses, no royalties, no shipping or transportation to/from outside the state, salaries are capped at $200,000, and only 50% of advertising and marketing is covered. But you can see how large musicals would get up to $3 million pretty quickly. (For off-Broadway—and it only applies to off-Broadway in Manhattan—the credit is up to $350,000 provided that the production has a production budget of at least $750,000 and incurs at least $750,000 in qualified expenses.) If the show is a big hit—the statutory definition of which is too complicated to get into here—applicants agree to pay an amount monthly into the New York State Council on the Arts Cultural Program Fund up to 50% of the total credit they receive. So there is a possibility that some of it needs to be returned in a sense, but if your show is that big a hit, you probably can't be too angry about netting $1.5 million less of state money.

If a show opened last spring, or was still in the process of hitting that $3 million mark well into 2023, its full credit information isn’t available yet, but I can tell you some of the Broadway shows that have benefited. Among those that have received the full $3 million are: A Strange Loop, Aladdin, Beetlejuice, Come From Away, American Utopia, Dear Evan Hansen, Funny Girl, Girl From The North Country, Hadestown, Harry Potter and the Cursed Child, Moulin Rouge!, The Music Man, The Book of Mormon, The Lion King, Tina, and Wicked. Obviously, if a show, even a big musical, doesn’t run that long, it does not net that full $3 million. For example, KPOP received a credit certificate for $1,870,970. A couple of other musicals received just short of the $3 million. In terms of plays, some like Harry Potter will get up to the maximum amount, but many will not. The play that kicked off the reopening, Pass Over, received a credit certificate for $886,873. Some other plays to benefit include Slave Play ($1,481,877), American Buffalo ($1,856,405), The Minutes ($1,892,161), and The Lehman Trilogy ($2,091,142). I’d have to assume Leopoldstadt will hit that $3 million mark, assuming it applied, but its credit information is not obtainable yet.

2023 Tony Honor for Excellence in the Theatre recipient Robert Fried, who is a partner and co-founder of Theatre Industry Services Team at Withum, an advisory and accounting firm, said that the credit is claimed by either a production services corporation or a producing limited liability company (LLC) or Limited Partnership (LP). "[The credit is] treated as income when it comes in and it's available like any other stream of income,” Fried stated.

If the credit goes to the production services corporation, it can be paid to the producing entity itself, which then means it can pay current expenses or be used for return of capital, as a profit distribution, or to repay priority loans. If the credit is claimed by the producing entity, then it must flow to the taxpaying owners of the producing entity (read: investors).

To keep in perspective what this means. If a taxpaying entity is one of two $10 million investors in a $20 million musical that runs through its reserve and closes with nothing in the coffers, that entity still may receive a “refund” for $1.5 million, meaning some recoupment where none would exist without this credit.

I want to do additional columns about how New York expanded the credit last May and how other states are supporting theater, but I didn't want that to get lost in here. The point here is that this credit has been indispensable in keeping the industry afloat.

To show you just how valuable this credit is—I’ve heard of producers essentially guaranteeing priority loans on the basis of it. Because you get a preliminary okay from the state, so a producer may know a credit for at least a certain amount is coming in when they seek that priority loan.

Some shows are also recouping solely on the back of this credit. It puts them over the line.

“I have found most investors are keen to inquire about the credit,” noted Brian Moreland, producer of several Broadway productions, including early credit recipient Thoughts of a Colored Man (which received a credit certificate of $1,389,604) and the upcoming The Wiz revival. “Often times if the investor is working on multiple shows the credit becomes quite appealing. One thing is certain, I hope the tax credits remain, as the costs in theatre continue to rise, all of us can use some support from our states.”

Broadway Cares Awards $28.3 Million To Food Meal Delivery Programs Nationwide

Broadway Cares/Equity Fights AIDS has allocated $28.3 million to support food meal delivery programs across the United States, providing vital assistance to individuals and families facing food insecurity. The funding will benefit numerous organizations, including food banks, meal delivery services, and community outreach programs, in response to increased demand due to the ongoing COVID-19 pandemic. These funds will help ensure that vulnerable populations have access to nutritious meals and essential support services during these challenging times. Broadway Cares' generous contribution underscores the theater community's commitment to social responsibility and helping those in need.

Regional

Ensemble Theatre Company of Santa Barbara Joins League of Resident Theatres

The Ensemble Theatre Company of Santa Barbara has become a member of the League of Resident Theatres (LORT), a prestigious organization representing professional regional theatres across the United States. The company's acceptance into LORT reflects its commitment to artistic excellence and professional standards. As a LORT member, the Ensemble Theatre Company gains access to resources, networking opportunities, and advocacy efforts that support its mission and growth. The affiliation with LORT strengthens the company's position within The National Theatre community and enhances its ability to serve its audience and artists.

San Francisco Chronicle: San Francisco's Cutting Ball Theater Announces Closure

San Francisco's Cutting Ball Theater, known for its innovative productions and commitment to experimental theater, has announced its closure after 20 years of operation. The decision to shutter the theater comes amidst financial challenges exacerbated by the COVID-19 pandemic and rising operating costs. Despite efforts to secure additional funding and explore alternative revenue streams, the theater's leadership ultimately determined that closure was unavoidable. 

Charlotte Business Journal: Blumenthal Arts eyes theater growth beyond Broadway shows

Blumenthal Performing Arts, a prominent cultural institution in Charlotte, is exploring avenues for theater growth beyond its traditional focus on Broadway shows. The organization is considering expanding its programming to include a broader range of theatrical productions, such as immersive experiences, experimental works, and productions by local artists. This strategic shift aims to diversify the offerings available to audiences and attract a wider demographic, while also supporting the local arts community. By embracing innovation and collaboration, Blumenthal Arts seeks to enhance the cultural landscape of Charlotte and strengthen its position as a leading arts destination.

International

The New York Times: National Theater Moves to Earlier Start Times

The National Theatre in London is shifting its performance start times to earlier in the evening, a move aimed at accommodating audiences and improving accessibility. The decision to start shows at 7 p.m. instead of 7:30 p.m. reflects changing preferences among theatergoers, particularly those with early morning commitments. The shift also aligns with efforts to attract a wider demographic and enhance the overall theater experience. By adjusting start times, The National Theatre seeks to remain relevant and responsive to the needs of its patrons while maintaining the integrity of its productions.

Missed our last few newsletters?

February 12, 2024 - AEA Members Authorize Strike, Boston Theaters Fight for Survival

AEA members voted to authorize a strike against the Broadway League of the development agreement - while this doesn’t mean the union will call a strike immediately, it does give them another bargaining chip in their ongoing negotiations with the League over the development contract. Regionally, we have a lot of stories of announced retirements and new leaders stepping into roles at institutions of all shapes and sizes. We’re also sharing a Boston Globe story this week that details the struggles of Boston area theaters to emerge from the pandemic.

February 5, 2024 - Roundabout Unveils the Todd Haimes, The Struggle of Toronto's Theatre Sector

Regionally, a few new leaders in high profile positions across the country - including Nicole A. Watson at Playwrights Center, Megwyn Sanders-Andrews at at Milwaukee Chamber Theatre, and Geneé Coreno at WAM. In the UK, a new union agreement for Equity and the ITC, and in Toronto, a tale of haves and have nots in the recovery of one of the most important theatre cities in North America.

January 29, 2024 - GALA Made Whole, Tony Eligibility, Royal Court Might Make Job Cuts

This week, the NEA announced $32 million in grants to institutions across the country, and while these grants are going to be vitally important to the groups that received them, it is just a drop in the bucket to the economic impact that arts organizations have on their local communities. In a new report out of Cincinnati, the impact of arts and culture institutions on that cities economy is $1.6 Billion - and that’s in one mid-sized city. In New York, we regularly see reports about the impact of Broadway, and how it is the economic engine that drives the tourism industry in NYC. Meanwhile, arts funding continues to get cut, both in the United States and abroad, leading to many institutions, like the Royal Court, facing tough choices about their future.

BroadwayWorld Resources

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