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Actors Leslie Odom Jr., left, Phillipa Soo, and Christopher Jackson take a bow with actor and "Hamilton" creator Lin-Manuel Miranda during his final performance curtain call at the Richard Rogers Theatre on Saturday, July 9, 2016, in New York. (Photo by Evan Agostini/Invision/AP)

While everyone is busy talking about 'Hamilton,' Broadway could lose its tax breaks

While everyone is busy talking about 'Hamilton,' Broadway could lose its tax breaks

The cast of 'Hamilton' has gotten a lot of attention this week thanks to an altercation with Vice President-elect Mike Pence, but the hit musical and other live productions have an even bigger problem coming their way; they're about to lose their tax breaks, unless Congress renews them. 

The Stage Act

Last year, Congress approved a new addition to the tax code called The Stage Act. It basically says that investors in live theatrical productions, along with certain film and television projects, don't have to pay federal taxes for the first year of a show's run until the production turns a profit. 

Most plays don't recoup startup costs and the law made it so only producers who saw a profit had to pay taxes. The Stage Act, and other tax breaks, have to be renewed annually by Congress. 

Why give tax breaks to the theater? 

New York Democratic Sen. Charles Schumer and Missouri Republican Sen. Roy Blunt championed The Stage Act last year because it would benefit theater industries in their states and other that rely on theatre tourism. 

Schumer has argued that preserving the theater industry, which in New York contributes billions of dollars to the economy, was vital for the state's economy. In Missouri, the town of Branson is a theater destination, commonly known as "Broadway in the Ozarks."

Tax breaks and loopholes must be closely scrutinized to ensure they are in the best interest of American taxpayers
Rep. Tom Marino, R-Pennsylvania

A complicated tax code

Critics of the Stage Act say it and other tax loopholes complicate and already complex tax code. Republicans hope to streamline the code under a new GOP-led administration. 

Should Congress extend tax breaks for theater, film and TV productions?

Waiting for tax reform

Tax provisions like The Stage Act are typically renewed at the end of the Congressional year in what's called a "tax extenders" bill.

But, after Donald Trump won the election, Republican Rep. Kevin Brady, who chairs the House Ways and Means committee, indicated that the Republicans would not renew those tax extension and instead would wait for a comprehensive tax reform bill to be introduced early next year. 

Mixed reviews from taxpayer watchdogs 

Taxpayer groups are divided on whether or not The Stage Act should be extended. 

"It should be a basic principle across the tax system, for all taxpayers, that income and profits should only be taxable when they actually occur," said Pete Sepp, president of the National Taxpayers Union.

Others argue that shows like "Hamilton" are doing just fine without the tax breaks. The Stage Act didn't exist when "Hamilton" debuted. 

Broadway fighting for an extension

Thomas Ferrugia, director of governmental affairs for The Broadway League, a trade group that lobbied for The Stage Act, told Circa the league is "aware that there is a question" about whether the tax break will be extended. 

He added that the benefit has only been in place for one year, and said "in order for it to get traction in the industry, we really need it to last for more than one year." 

Cost of entertainment tax breaks

The federal cost to extend tax breaks to film, TV and live theater productions last year was about $26 million, according to data from the Joint Committee on Taxation.

Sen. Schumer and Sen. Blunt did not respond to Circa's requests for comment. 

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