Tax Cut Package Contains Break for Songwriters
A major legislative gain, the provision means songwriters will be able to treat the sale of their song catalogs as capital gains instead of as income
By Bill Holland
Congress passed a $70 billion tax cut extension package May 11 that contains a provision that’s music to the ears of the nation’s songwriters: a capital gains tax break. The measure has since been signed by President Bush.
The Nashville Songwriters Association International (NSAI) spearheaded the legislation with a minimum of lobbying bucks, spending five years putting together relationships with lawmakers in the House and Senate, and convincing them that the change was needed. NSAI had the support of other songwriter groups and others in the music community, including BMI, who went to bat for the change in tax status.
The break, seen as a major legislative gain, means songwriters will be able to treat the sale of their song catalogs (compilations) as capital gains instead of as income.
In business jargon, a capital gain is the result of a sale of a capital asset. Songwriters convinced lawmakers that a song catalog sale is a capital gain because it is an asset of the songwriter.
The provision was introduced both in 2004 and 2005 as a stand-alone bill, the Capital Gains Tax Equity Act. Earlier this year, it was folded into the larger tax package bill, President Bush’s Tax Relief Extension Reconciliation Act, H.R.4297, in Senate-House deliberations.
Before the bill’s passage, under law, only music publishers were eligible for the capital gains tax rate when they sold their portion of a song catalog.
Songwriters, however, had to pay the higher income tax rate on their share of the same sale, even though these days they share in expenses of exploiting the copyright in co-publishing deals.
Such a change could be a financial boon - in the millions - to established writers with successful catalogs.
President Bush’s bill passed the House May 10 by 244 to 185 along party lines. The Senate followed the next day in a 54 to 44 vote.
“This is an amazing victory for American songwriters,” said NSAI executive director Bart Herbison. “Decades ago, the category in which songwriters pay taxes was changed, and they should have become immediately eligible for this tax treatment. Through an oversight, the language in the U.S. Tax Code that would have permitted the appropriate tax rate never evolved. NSAI learned of the situation five years ago and immediately began crafting the legislation to accomplish this ‘technical correction’ to the tax code. I want to thank Del Bryant and everyone at BMI for supporting this important change. A songwriter will now pay up to 30% less in taxes on a song catalog sale.”
Posted May 22, 2006
Member Comments
Thanks to: president Bush,Congress,NSAI,BMI,Del Bryant,Bart Herbison, all songwriter envolved.This should be a great bill for all songwriters. Many thanks to Bill Holland for this good news article. Keep up the good work for all involved in helping songwriters. Again thanks:jwscott62@peoplepc.com
I’ve had to juggle my books and pay tax Lawyers for years to keep running balances just to have deductions from income. Maybe this will simplify things a bit. You can sprnd a fortune over many years promoting a good song and never get a dime untill a major Artist on a major label records your song. Meanwhile the writer becomes discourged before the publisher gets the right break and release. It’s the most high odds poker game in town. Just mail out is very costly.
From what I have read this may be a big deal for the high rollers but what is it going to do for the average songwriter just trying to collect royalties on a single song. As I understand it, nothing will be any different. It only applies to the sale of song catalogues or compilations of songs accumulated by a songwriter. If I am wrong, somebody please correct me.
Somebody like Michael Jackson selling the Beatles catalogue would probably benefit from this, but that is about as far as it goes.
What does this new tax law mean, if anything, to someone who has assigned his copyrights to a print publisher? For instance, a folio of piano solo arrangments of public domain songs?
From What I understand should you sell the copy rights for a profit, it’s concidered Capital gains and not personal income. So you pay less in incme tax. If you have songs that are good but you can’t get a major to cut them and you get an offer from some one that will get you some return then cell. Use the money to produce some new music maybe you’ll come up with a better catalog. Just make sure you get your writers rights. 50% of something is better than a 100% of nothing. You’d be suprized what inspirations come from letting go and reaching for a new level of creativity.
My grandfather was a well known songwriter/musician. In the late 40’s he wrote and recorded a song, “Hadacol Boogie” that went to #9 on Billboard.
Since he is deceased, the family has turned his music business over to another Publisher/agent.
Jerry Lee Lewis has recorded Hadacol Boogie on his last man standing CD and Timelife has released it on one of their CDs.
We receive royalties from the Musoc Company that handles the family business. They will either send us a 1099 or w2 for the royalties each year. How do we treat this money. Do we treat it as income or as a Capital Gain?
