On December 27, 2020, President Trump signed into law the $2.3 trillion Consolidated Appropriations Act, 2021 (the Act). At over five thousand pages, the Act is an amalgamation of numerous legislative measures, including further stimulus measures to combat the coronavirus pandemic, as well as an omnibus spending bill. Below is a discussion of some of the tax provisions in the Act that may impact the entertainment industry.

Continue Reading Impactful Tax Changes for the Entertainment Industry

The federal government’s latest spending bill, the Consolidated Appropriations Act (Act), included $284 billion of renewed funding for the Paycheck Protection Program (PPP) and a newly established $15 billion grant program for “Shuttered Venue Operators” (described below). Congress also modified the PPP in numerous ways that should benefit businesses who receive PPP funding.

Under the Act, the allowable uses for PPP funds that will be forgiven was broadened to include, among other expenses, costs associated with protecting workers in compliance with federal health and safety guidelines and property damages caused during public disturbances in 2020 that were not covered by insurance. Additionally, the Act created a simplified loan forgiveness process for PPP loans under $150,000. Lastly, Congress clarified its original intent to allow taxpayers to deduct expenses paid with tax-free, forgiven PPP funds.


Continue Reading New COVID-19 Relief Bill Reboots Paycheck Protection Program and Provides Grants to Hardest Hit Businesses in Entertainment

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.


Continue Reading Wall Street Journal Quotes Alan Epstein on Tax Benefits at Play in Sale of Bob Dylan’s Songwriting Catalog

Although many businesses providing services in the field of performing arts are not eligible for the qualified business income (QBI) deduction, some entertainment businesses that do not fall in this category have taken the position that they do qualify.  Recent indicators from the IRS, however, suggest that taxpayers claiming the QBI deduction may be subject to increased audit risk in the near future.
Continue Reading Taxpayers Claiming QBI Deduction May Face Increased Audit Risk

Employers of U.S. residents who are remaining in Europe while projects are shut down because of the COVID-19 pandemic might benefit from a new taxpayer-friendly approach. The new protocol forgives days spent abroad because of COVID-19 travel restrictions, as part of a foreign-country corporate residency analysis.

On March 23, 2020, the Irish Revenue Commissioners (Irish Revenue) issued Revenue eBrief No. 46/20, which announced Irish Revenue will adopt a taxpayer-friendly approach to corporate residency determinations for companies whose employees, directors, service providers, and/or agents are unable to travel as a result of recent government-imposed travel restrictions. This guidance came at the same time as similar announcements by the Organization for Economic Cooperation and Development (OECD) and several other countries. In particular, on May 20, 2020, and May 25, 2020, France and Germany, respectively, announced bilateral agreements with neighboring countries to ignore the presence of employees who must work outside of their country of employment due to government-imposed travel restrictions. Taken together, these policies suggest a universal willingness among international taxing authorities to quickly respond to the COVID-19 crisis and accommodate taxpayers as they navigate the evolving commercial realities of their businesses.
Continue Reading Working on a Production in Europe? Take Note of New Taxpayer-Friendly Residency Approaches in Light of the COVID-19 Crisis

This article has been published in the September/October edition of Probate & Property.


With much of the entertainment industry currently at a standstill as a result of rampant production shutdowns, now may be a good time for those who are finding themselves idle to use this extra time to take stock of their financial situation and plan for the future.  Economic factors, such as the current depressed financial markets and historically low interest rates, have combined to impact and drive a variety of estate planning techniques.  While the current uncertain environment may – understandably – cause many to hesitate to engage in a substantial family gifting program, these economic conditions present a unique opportunity for families to pass a significant amount of wealth to younger generations with minimal transfer tax exposure.  We recommend contacting your Venable Wealth Planning counsel to discuss the techniques that may provide the most viable opportunity for your particular circumstances.

This post provides a high-level discussion of those estate planning techniques that present the greatest potential for an upside when implemented during a state of declining financial markets combined with historically low interest rates.
Continue Reading Estate Planning Opportunities for the Entertainment Industry in a Low Interest Rate Environment

For many entertainment businesses, the recent congressional stimulus has proved to be a smash hit. The IRS, however, is a tough critic and is looking to claw back some of that money by disallowing deductions associated with such stimulus funds. On April 30, 2020, the IRS released Notice 2020-32 (the Notice), which provides some clarity regarding the tax treatment of loans received pursuant to the Paycheck Protection Program (PPP). Specifically, the Notice clarifies that any expenses paid with proceeds from forgiven PPP loans are not deductible for federal tax purposes. In an earlier post, we raised the question of whether such a deduction would be allowed; now the IRS has answered, but it may not get the last word on this issue.
Continue Reading No Deductions (Yet) for Business Expenses Paid with Paycheck Protection Loans

The Coronavirus Aid, Relief and Economic Security Act (the CARES Act) created the Paycheck Protection Program (PPP), pursuant to which certain taxpayers are eligible to obtain low-interest loans to enable continued operations during the coronavirus pandemic. If a taxpayer spends the PPP loan on certain enumerated expenses, including, among other things, payroll costs and rent, all or a substantial portion of the PPP loan will be forgiven. Participation in the PPP, however, has some critical tax impacts that should be considered. Below is a summary of some of such tax impacts:

Continue Reading Tax Impact of the Paycheck Protection Program

As the entertainment industry continues to adjust to a new normal, a largely forgotten provision of the Internal Revenue Code may provide welcome relief to both entertainment businesses and their employees during these uncertain times. The provision would allow individuals to receive tax-free payments from their employers while still giving employers the benefit of a deduction for such payments. The tax relief in question hearkens back to an earlier national crisis: following the September 11 terrorist attacks, Congress passed the Victims of Terrorism Tax Relief Act of 2001, which was intended to provide federal tax relief to victims of national disasters. Among the tax provisions to stem from this legislation was Internal Revenue Code Section 139 (Section 139).

Section 139 permits individuals to exclude from gross income for federal income tax purposes payments from any source (including an employer) that are qualified disaster relief payments. Qualified disaster relief payments include, among other things, payments and reimbursements for reasonable and necessary medical, personal, family, living, or funeral expenses that are incurred by an individual as a result of a qualified disaster[1] and not otherwise compensated (e.g., by insurance). Significantly, employers are able to deduct such payments for federal income tax purposes. Section 139 payments are also not subject to any federal withholding obligations and, therefore, do not need to be reported on a Form W-2 or 1099.


Continue Reading Take Two for an All-But-Forgotten Disaster Relief Provision of the Tax Code

The Coronavirus, Aid, Relief, and Economic Security Act (the CARES Act) provided the largest economic stimulus in American history in hopes of combating the economic effects of COVID-19. $349 billion was set aside for the Paycheck Protection Program (PPP), which provides loans, sometimes forgivable, to eligible small businesses. As we noted earlier, many production companies and other businesses in the entertainment industry will likely qualify to receive funds under the PPP.

But what if a company does not qualify for a PPP loan? For example, larger entities ultimately might be ineligible because of the 500-employee cap for eligible businesses. For these companies that cannot access PPP funds (or choose not to), the CARES Act provides alternative potential payroll tax relief.

The CARES Act creates a fully refundable payroll tax credit, the Employee Retention Credit (ERC), for eligible employers that do not receive a PPP loan. Companies entitled to an ERC will be able to use federal employment taxes, including withholdings, that such companies should have otherwise remitted to the IRS to fund “qualified wages” (defined below). Notably, if a company determines that its ERC will exceed qualified wages, it can request an advance of the credit from the Internal Revenue Service (IRS) through IRS Form 7200.


Continue Reading Not Entitled to a Paycheck Protection Program Loan? Payroll Tax Relief for the Entertainment Industry Is on the Way Under the CARES Act