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.

Development or Destruction

USA Today featured an article about a performing arts center being constructed on the site of Woodstock in Bethel, NY.

I have been following the story for awhile now since I grew up near the site and my mother currently lives within 10 miles of the location. (In fact, I mentioned the arts center in an earlier entry) Artists rendition of the site may be found here.

As you might imagine, there are quite a few people who are not happy that the historic land is being torn up for an arts center. One such group is the Woodstock Preservation Alliance. Although they tend to paint Allan Geery as an evil developer, he and his foundation have been somewhat responsive to the desires of the group and eliminated 90% of the planned construction. (Noted in coverage of the hearings here and here) For their own part, the Alliance isn’t opposed to the performing arts center. They realize its economic value to the area. They just don’t want it on the historic portion of the fields.

If you read the articles and look at the website, it is clear that Woodstock really touched a great number of people. Many of those opposed to the development are from Canada and many parts of the US. In fact, some of those opposed didn’t even attend Woodstock which goes to show how the power of the event has captured people’s hearts and imaginations.

On the other hand, a lot of locals support the site. This may not be unexpected. They live in a section of the Catskill mountains that has been economically depressed since people from NYC stopped flocking to the local resorts in the summer. People are heading back to the mountains again, but it is to attend newly built casinos which is a mixed blessing at best.

The one glimmer of hope has come from Allan Gerry and his Sullivan Renaissance program. He has taken the money he got from selling his cable company to Time Warner and has the local communities competing with each other to get improvement grants. Stories about how communities have mobilized to meet this challenge can be found here, here, here.

So when the man who has helped bring some pride back to the county says he is going to use his money build a performing arts center that will feature the NY Philharmonic, it is hard not to be grateful. Even his opponents admit it will be beneficial to the community.

It is tough to identify the bad guy in this case. There are too many elements to address in this small space, but briefly– Yes, Woodstock is a potent and pivotal part of our history and should be preserved and treasured. On the other hand the developer has eliminated a huge part of his plans for the site. His plans will bring thousands of visitors to the historical site which he intends to preserve a large portion of and do homage to in a museum. The Gerry Foundation has shown itself to be reverent of the local communities so the project probably won’t be cheesy or Disneyfy the locale or Woodstock ’69.

Personally, I think I would prefer the amibiance his project will bring to the local community rather than the one the casinos are going to.

When Free Ain’t Exactly Free

If you are like me, you often wondered how the Public Theatre could afford to do Shakespeare in Central Park for free for so many years. Well, it turns out it hasn’t been easy, nor has it been entirely free. An article appeared yesterday in the New York Times on this exact subject.

It turns out you can purchase tickets for reserved seating to the shows and this is not a new development. Founder Joe Papp started an audience sponsor program in 1960. The program was essentially a subscription plan where $7.50 got you reserved seats to 3 of the summer shows. According to the article, Papp felt this pricing scheme was essential for the theatre to survive.

Until recently, the theatre has downplayed the availability of the ticket program for fear of appearing too commerical. Executive Director Mara Manus has really made a push to promote the program this year. $100 gets you a reserved seat. Since the seating is free to all, the money is actually a tax deductible donation according to the website. The benefit you get is not having to stand on line and a preferred seating location.

The Public is capping the number of seats that can be reserved in this manner each night and the rest will be available for free. According to the article, “up to 19,950 of the total 79,800 seats to be occupied this summer will not be available.” The ticket program only covers 19% of the $1.9 million budget for the production this summer. “The remainder derives from foundations (24 percent), corporate donations (21 percent, which includes cash or in-kind giving by companies like J. P. Morgan and The New York Times) and the blocks of Delacorte tickets sold to businesses (16 percent). There is still a 20 percent shortfall.”

So obviously, it hasn’t been the easiest thing to do free Shakespeare all these years. Even the lofty goal of making theatre free to all has entailed selling tickets to those who will pay. I thought perhaps the Public’s other activities generated enough revenue to cover the loss of doing free Shakespeare. But it turns out it hasn’t been entirely free. Publicizing the availability of reserved tickets is a financial necessity. Ms. Mara projects that the Public will be in the black for the first time since 1998. (The Public has a $12 million budget so presumably other measures are being taken in addition to the sale of tickets at the Central Park event.)

This situation holds some interesting lessons for other theatres who try to financially support their free events. Not only will people pay for the privilege of a reserved seat at a free event, they will pay $100 for it. Essentially, people are paying as much as they would for some Broadway shows and they are doing so for a seat exposed to the elements.

I assume all the closest seating locations are taken by those who pay for their tickets no matter how long the first non-donating person has been standing on line. The theatre has 1,900 seats and up to 475 may be sold on any one night. Even though the first non-donating person will have a good seat, there could be some anger on their part if they can’t sit closer after standing on line for hours. The logic that they are getting it for free so they don’t have cause to complain about a donor getting better treatment is usually lost on people–and you have to remember, you are dealing with New Yorkers who can be a little less laid back than other folks. (Edit: Please read comment below where a reader corrects this impression.)

Even though they have been running the program for over 40 years, the fact they are heavily promoting it now means that the first non-donor in line will end up much further back than in the past. (Perhaps 400 people back vs. 100 people back in recent years.) As confounding as it may seem, the theatre could end up with a negative image for more strongly promoting a long time program so they can continue offering a show for free.

It will be interesting to see what happens.

Political Activity

While poking around the web today, I came across the Americans for the Arts’ Animating Democracy Initiative. It appears the project ended in March 2003, but the website still serves as a resource for research on “exemplary arts-based civic dialogue projects”

The initiative was a joint project of the Amercians for the Arts supported by the Ford Foundation based, in part, on the premise that:

“In the workings of democracy, civic dialogue plays an essential role, giving voice to multiple perspectives and enabling people to develop more multifaceted, humane, and realistic views of issues and each other. Yet there is growing concern that opportunities for civic dialogue in this country have diminished in recent years. In the renewal of civic dialogue, the arts can play a pivotal role in many ways.”

They worked with 32 organizations in their Animating Democracy Initiative Lab, giving them support to develop a number of projects. Those projects can be found listed here.

The website also provides links to case studies and profiles that Americans for the Arts weren’t necessarily involved in and reference materials in the resource section.