Unions Ask Congress to Restore Business Expense Deductions for Hollywood Workers

Robyn Beck / AFP
Hollywood

Their goal: restore tax deductions for unreimbursed business expenses, which can be quite large, even for working- and middle-class personnel.

A coalition of almost 20 entertainment unions, management organizations and associations on Monday urged Congress to pass legislation restoring deductibility of business expenses for entertainment workers, which was effectively eliminated in the 2017 tax revision championed by Republicans and President Donald Trump.

That was a change that hit unionized actors, crew, directors and writers especially hard, because entertainment is one of the few industries in which workers are categorized as employees yet have potentially large unreimbursed business expenses: agent and manager commissions, attorney fees, training classes, equipment and more can add up to as much as an estimated 30 percent of a worker’s income.

In contrast, when professionals in corporate positions — executives, computer programmers, managers — incur business expenses, the employer usually pays or reimburses those costs.

That’s not the case in entertainment. And none of those expenses are deductible unless the worker is an independent contractor — which for legal reasons is virtually never the case with union-covered gigs — or establishes a loan-out corporation. But that latter mechanism can entail costly accounting and legal fees, and create tricky accounting and legal issues for middle-class, let alone working-class, personnel.

The tax code does take account of this dilemma already, but the so-called Qualified Performing Artist deduction is currently all but useless, since it caps eligibility at $16,000 in adjusted gross income, a figure that has not been increased in the three decades since the provision was enacted. The coalition sent a letter to Congressional leaders asking them to support raising the cap to $100,000 for individuals and $200,000 for couples filing jointly.

Despite its name, the Qualified Performing Artist deduction is not limited to actors, but they are among the workers hardest hit.

“Today, SAG-AFTRA, joined by our sister entertainment unions, urged Congress to provide additional relief for our members and industry colleagues by updating the tax provisions allowed in the Performing Artist Tax Parity Act in upcoming relief packages,” SAG-AFTRA president Gabrielle Carteris said in a statement. “Updating the Qualified Performing Artist deduction in the current tax code to expand work-related deductions will provide relief for middle class working performers who are affected by COVID-19 production shutdowns.”

Read the letter, below.

April 27, 2020

Dear Speaker Pelosi, Majority Leader McConnell, Minority Leader Schumer, and Minority Leader McCarthy,

We write today on behalf of more than 500,000 workers in the entertainment industry. Like many during these uncertain times our workers have been devastated by the financial impact of COVID-19 with a complete shutdown of production and live performances.

As Congress works to provide relief to the nation during this unprecedented crisis, we urge you to consider the Performing Artist Tax Parity Act, H.R. 3121, a bipartisan bill introduced by Representatives Judy Chu and Vern Buchanan. The bill modernizes an existing tax deduction and allows entertainment industry workers to keep more of their hard-earned money. The update is also included in S. 3232, the Promoting Local Arts and Creative Economy Workforce Act of 2020 (PLACE Act) introduced by Senator Brian Schatz. With the deadline to file income taxes moving to July, hundreds of thousands who have not already filed their taxes could benefit if H.R. 3121 were included in any relief package.

H.R. 3121 updates the Qualified Performing Artist deduction (QPA) put into the tax code by President Reagan in 1986. The QPA was initially an important tool for artists to be able to deduct the business expenses they incur to pursue their careers. However, the QPA capped adjusted gross income at $16,000, which has not changed since enactment almost 35 years ago.

These are not celebrities on the red carpet. They are the working-class men and women in front of and behind the camera, on stage and off, who are the lifeblood of our industry. These taxpayers need tax relief now.

Unlike most other workers, entertainment industry employees can spend on average 20-30 percent of their income on industry-related expenses such as agents, managers, promotional materials, equipment, and travel. These expenses come directly out of their own pockets. In the past these expenses had been covered by miscellaneous itemized deductions. However, recent changes to the tax code increased the standard deduction and eliminated those provisions, preventing entertainment employees from deducting their ordinary and necessary business expenses. This resulted in an industrywide tax increase for working class creative professionals.

H.R. 3121 will correct that issue by raising the QPA adjusted gross income to $100,000 a year for single taxpayers and $200,000 for couples filing jointly, with a built-in phase out to transition the taxpayer out of the deduction. As the country works to reignite our economy, this deduction will be an enormous benefit to entertainment workers and aid our industry in getting up and running again.

We appreciate your efforts on behalf of America’s workers and urge you to include this language in any future relief packages.

Sincerely,

Screen Actors Guild - American Federation of Television and Radio Artists (SAG-AFTRA)

Actors’ Equity Association

International Alliance of Theatrical Stage Employees (IATSE)

American Federation of Musicians

American Association of Independent Music (A2IM)

American Society of Composers, Authors and Publishers

Berkshire Theater Group

Broadcast Music, Inc.

The Broadway League

League of Resident Theaters

Music Artists Coalition

Music Publishers Association

National Music Publishing Association

Recording Industry Association of America

The Recording Academy

Songwriters of North America

Writers Guild of America, East

Writers Guild of America West

Department for Professional Employees, AFL–CIO