Music Industry Pushes Lame Duck Congress to Pass Tax-Deductible Recordings Bill

Music Industry Pushes Lame Duck Congress to Pass Tax-Deductible Recordings Bill

Advocates representing a broad cross-section of music industry are urging Congress to again pass the Help Independent Tracks Success (HITS Act), the long-stalled legislation that would give musicians, producers, and technicians an additional tax break for recording sessions.

“Prior to the conclusion of the 117th Congress, the American music community calls on you to support American music creation that is still reeling from the pandemic by passing into law the bipartisan and bicameral Help Independent Tracks Succeed (HITS) Act,” reads a Nov. 15 letter sent to Congressional leadership, co-signed by 23 groups across the business.

The Recording Academy made the bill a key focus of its Grammys on the Hill in April and its annual District Advocate Day October. It continues to lead the charge. During the latter event, held on Oct. 6, approximately 2,000 Academy members participated in lobbying for the HITS Act and other music industry priorities at nearly 200 U.S. congressional offices in Washington, D.C.

“Our hope is that we can get it done here before the 117th comes to a close because we have a lot of bipartisan support, bicameral support [in the] House and Senate,” says Recording Academy CEO Harvey Mason jr. “I really feel like this is something we should be able to get done and we’re hoping we can get done in the next few weeks.”

The HITS Act would allow musicians, technicians and producers to deduct 100% of recording expenses up to $150,000 on their taxes in the year they’re incurred. This is a change to the current law that requires music creators and producers to amortize these expenses over the economic lifetime of a sound record, which usually takes between three and four year.

The bipartisan bill was first introduced in the House on July 31, 2020 (followed by a companion bill in the Senate on Dec. 3, 2020), though it failed to pass as part of the two pandemic relief packages or as part of the $3.5 billion budget reconciliation package known as Build Back Better, which was ultimately halved and renamed the Inflation Reduction Act of 2022 before being signed into law in August. With only one month remaining before the switchover to a new, divided Congress, Democrats will retain control of both the Senate and House of Representatives. Advocates hope that the bill can be passed as part of a must-pass bill in the final weeks of the year.

“[During] the lame-duck period with these must-pass bills, if any tax language or economic language is in there that ties into this, we’re really hoping it will get in this way around,” states Richard James Burgess CEO of the American Association of Independent Music, which has been a key advocate for the legislation.

In the entertainment realm, music production is an outlier in terms of taxation; film, TV and live theater productions already enjoy a 100% first-year deduction. Burgess stated that the HITS Act would apply the same standard to music and encourage future music creation. “I think musicians are the ones who really need it. Independent musicians, independent artists, and independent labels are most affected by the HITS Act. They have less financial bandwidth than everyone else. The idea of getting $150,000 per project [that can be] written off against your taxes in the year that you incurred it, could really make a difference between being able to make another record next year or not.”

Burgess says that the bill will not only affect producers and musicians, but also other sectors of the industry and the wider economy. He says that every artist who makes a record has a knock-on effect on many, many other musicians as well as ancillary workers in music industry. These tax benefits will make a big difference .”

Burgess and Mason Jr. were both confident HITS would pass the next Congress, given the bill’s bipartisan support. However, they have clearly become impatient for creators, many who lost their income during the initial stages of the pandemic. Mason jr., after more than two years’ disappointment, stated bluntly: “Yes, it could pass next year but…I don’t think we should continue having it laid off and cut from bills. This is something we need to do when we get out of COVID. This community has suffered enough .”

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You can read the full Nov. 15 letter below.

Dear Speaker Pelosi, Leader Schumer, Leader McCarthy, and Leader McConnell: The 117th Congress has witnessed significant bipartisan and bicameral accomplishments that have benefitted American workers, families, and consumers, and levelled the playing field so some important domestic industries can grow. Prior to the conclusion of the 117th Congress, the American music community calls on you to support American music creation that is still reeling from the pandemic by passing into law the bipartisan and bicameral Help Independent Tracks Succeed (HITS) Act (H.R. 1945/ S. 752).

The HITS Act is a low-cost and commonsense modification to existing U.S. tax law that will incentivize the production of new sound recordings by allowing qualified productions to deduct 100% of their costs upfront. With an annual deduction limit of $150,000, the bill is designed and tailored to specifically incentivize independent creators and labels to produce new music, sparking important creative investments in countless music small businesses across the country. The HITS Act is a fiscally responsible investment in America’s creative economy.

The HITS Act brings much-needed parity in the tax code for all creative industries. Current law, Sec. 181, the Internal Revenue Code, allows qualified film, television and live theatrical productions to elect to deduct all new production costs for the year in which they occur. Music production, which is common in every state or congressional district, should be treated the same. Independent recording artists cannot deduct production expenses immediately. Instead, they must amortize production expenses over the entire economic life of a sound record. This timing difference can slow down small creators’ ability to reinvest in new projects that could fuel growth. The HITS Act harmonizes tax codes and ensures that all major creative industries are treated equally.

The music community strongly urges that you pass the HITS Act as you consider legislation for the end of the year. It is a bipartisan, bicameral and non-controversial investment in economic growth that Congress should be proud of. H.R. 1945/S. 752 will make a significant impact on the lives of many independent music creators and small businesses that sell music.

We are grateful for your consideration on behalf of the hundreds and thousands of music producers and music businesses in the country.

Signed,

American Association of Independent Music

Artists Rights Alliance

ASCAP

Black Music Action Coalition

Broadcast Music Inc .

Christian Music Trade Association

Digital Media Association

Future of Music

Global Music Rights

Gospel Music Association

Music Artists Coalition

Nashville Songwriters Association International

National Independent Talent Organization

National Independent Venue Association

National Music Publishers Association

Recording Academy

Recording Industry Association of America

SAG-AFTRA

SESAC

The Society of Composers and Lyricists

Songwriters Guild of America

Songwriters of North America

SoundExchange

CC Chairman Ron Wyden, Senate Finance Committee

Ranking Member Mike Crapo, Senate Finance Committee

Chairman Richard Neal, House Ways and Means Committee

Ranking Member Kevin Brady, House Ways and Means Committee

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