Tax Treaties

So I am learning about something I have never come in contact with before in my career–international tax treaties. Apparently the IRS is joining the INS and making it difficult for international acts to decide to perform in the US. I am told since 9/11 occurred, the IRS has really been cracking down on enforcing taxes on international performers. I guess they feel since they caught Al Capone on taxes, maybe they will get lucky and uncover some plots.

On the other hand this seems like a great topic for the blog so I have to grudgingly give an iota of appreciation for coming in contact with it.

In any case, what this means is that if a performer exceeds a certain level of income in the US in a year, as a presenter you are obligated to deduct 30% from the fees you are paying them. They can file to get it back but that can get annoying as you might easily imagine.

The federal government has apparently gone after a number of universities who haven’t done this for back taxes so my school is taking it very seriously and so are a lot of other places. One of the first things the guy who advised me told me is not to believe folks when they complained we were the only ones doing it. He forwarded me some emails from a Listserv group (definition of Listserv here if you aren’t familiar with the term) that had members from all over the country asking questions related to the tax situation.

Here is what I know so far–Any international performer who makes over a certain amount (the amount differs accord to the treaty the US has with the country of origin) has to have 30% deducted from their fees. Apparently under certain circumstances, this can apply to the value of accomodations and transportation the host organization provides as well. So if you are paying them $10,000 and then provide $10,000 worth of services in airfare, hotels, rental cars, etc you could potentially end up having to deduct $6,000 for taxes. The bit about how much of airfare and accomodations qualifies is a bit more convoluted and apparently doesn’t apply to our situation. Perhaps because they are paying their airfare out of their own fee.

It doesn’t matter if you are paying an agent, it is to be handled as if you are paying the artist directly. (So the performer hates you cause they get paid less, the agent hates you because their cut is smaller.)

The thing that really surprised me is that a we have a group from a foreign country that has incorporated in the US and has its own federal ID number. I assumed that since they would have to file corporate income tax, we would be off the hook with the percentage since the onus would be on them to tell the truth or lie about how much they made. Nope, my guy says. They will be exceeding the $7500/yr threshold set by treaty with their country so unless they show rules to the contrary, they get a bit taken out too.

So the question I have before my people right now–When do we make the performers and their agents aware of the fact they won’t be getting all of their fee, at least not up front.

I am going to a booking conference next week is this going to essentially end my ability to present really good international acts? Are people going to refuse to perform or bump their fees to make up the difference (which is a range I can’t afford). Yeah, there are plenty of great domestic acts and I am looking forward to seeing some at the conference next week.

But I am also living at a crossroads of the world where no racial background is dominant. People are interested in seeing things from their own cultural backgrounds and that of the next person. I don’t think the hyphenated American version of culture is going to cut it here where many people are hardly 1 generation removed from the real thing, if that. And there is far less pressure to move toward a homogenized culture than there is on the mainland so even after a couple generations, an awareness of the real McCoy may not fade.

I will keep folks apprised of what develops and how many people throw things at me out of frustration. I mean I get taxed by my own government all the time, I am used to it. It is just not a part of the American experience I would choose to share with visitors.

About Joe Patti

I have been writing Butts in the Seats (BitS) on topics of arts and cultural administration since 2004 (yikes!). Given the ever evolving concerns facing the sector, I have yet to exhaust the available subject matter. In addition to BitS, I am a founding contributor to the ArtsHacker ( website where I focus on topics related to boards, law, governance, policy and practice.

I am also an evangelist for the effort to Build Public Will For Arts and Culture being helmed by Arts Midwest and the Metropolitan Group. (

My most recent role was as Executive Director of the Grand Opera House in Macon, GA.

Among the things I am most proud are having produced an opera in the Hawaiian language and a dance drama about Hawaii's snow goddess Poli'ahu while working as a Theater Manager in Hawaii. Though there are many more highlights than there is space here to list.


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