On December 11, 2020, Alan Epstein was quoted in the Wall Street Journal on the tax benefits at play in the sale of Bob Dylan’s songwriting catalog to Universal Music Publishing Group.

According to the article, the price of the sale hasn’t been revealed but is said to be between $300 million and $400 million, making it the latest and largest of a spate of similar deals this year that come with significant tax benefits, both for the songwriters selling the rights and for the companies buying them. “Many of these deals are not tax-driven, but some have a significant tax flavor,” says Epstein.

For musicians, a key advantage is that they can sell self-created works and owe capital gains tax rates of 20% on the sale instead of owing ordinary tax rates of up to 37% each year on the royalty income they get from streaming, licensing, and other uses of their works. The lower capital gains rate isn’t available to painters, filmmakers, or videogame developers, who pay ordinary income tax rates on sales and royalties.

The advantage exists because in 2006, senators and congressmen heeded the call of the country music industry and created a special provision for songwriters. In addition, the 3.8% tax that applies to most capital gains and other passive income of higher earners likely doesn’t apply here because the songwriters are active participants in the business, according to Epstein.

The favorable provision for songwriters may not last forever, and neither might today’s capital gains tax rates.  With a Democrat in the White House for the next four years, tax rates are likely heading up or staying flat. President-elect Joe Biden has proposed raising the top tax rate to 39.6% and taxing capital gains at ordinary income rates for people earning more than $1 million annually. His ability to turn those ideas into law will be limited unless Democrats win control of the Senate in Georgia’s runoffs January 5, but anyone who wants to lock in the Trump-era rates with certainty needs to act in 2020.

“There was a lot of fear in the bowels of Hollywood over how the Biden plan would affect the taxation of rights owners,” says Epstein.