More Tax Treaties!

Okay as promised, I took notes at the international tax session at the WAA conference. It was actually a hot topic. The session was scheduled for about 1.5 hours but at the end of the time it ended up moving to another room and continuing. (I moved on to a grants session because I had notes on 90% of what I wanted to know.) Then the discussion apparently infiltrated an Arts Presenter’s session as well.

The speaker at the session was Stanley E. Majors: Attorney, Fettmann, Tolchin & Majors, P.C.. (CPA and Tax Attorney licensed to practice in DC, MD and VA)

Among the things I learned was:

-Tax treaty is determined by place of residence. A French national residing in Switzerland falls under Swiss treaty.

-Everyone in the payment chain-presenter, agent, manager, etc can act as the collection agent of the 30%. The IRS typically starts at the end of the chain with the last person to handle the money before the artist gets it when researching if the money was collected. Mr. Major’s suggestion was to put something in the contract that stipulates who will be the party responsible for withholding. Obviously, many of the presenters’ preference would be for the agent or manager to be the responsible one.

Though empowering everyone in the chain to collect the tax looks like the IRS is just increasing the number of people they can blame, Mr. Major assured us that it wasn’t the case. Nor is it so they can collect the tax multiple times.

-The Alien has to fill out a certificate 8233 to claim exemption if they feel they are entitled to keeping their 30% The IRS has 10 days to agree with the exemption or not. A presenter can not make a decision to withhold or not unless they file. (For example, if you have someone coming in for 1 day and they are making $1000 to speak and then leaving the country and you know they fall below the exemption threshold, you still can’t exempt them unless they file.)

-If you know that a person has falsely filed an exemption, you have to withhold. You don’t necessarily have to research their entire tour schedule, but if you know that they are performing in a city south of you one night and a city to the north of you the night after for the same rate they are charging you and it exceeds the exemption amount and they file an exemption, you can’t accept it.

-Article 16 or 17 of the tax treaty is where the pertinent info is usually found. (For tax treaties, a good place to start is this IRS webpage. It contains links to more specific information, including the treaties, as you find you need it.

-This restrictive clause in the treaties only applies to performers and athletes. Their managers, lighting people, make up people, etc fall under a more liberal portion of the treaties. Apparently, the US actually wants people to come to the country and do business and the more liberal portions reflect that. The restrictive portions are to prevent people like the Rolling Stones from coming in, making millions of dollars and leaving. Unfortunately, since the Rolling Stones are making millions of dollars, they aren’t hurt too much by it, but the smaller folks are.

-Just like US citizens, the alien can get a refund by itemizing their operational expenses on a 1040NR at the end of the year.

-I spoke to Mr. Major specifically about a South African group with incorporation
and Fed. tax number in the US and his opinion was that the taxes didn’t need to be withheld since they are 1) obligated to file corporate tax returns every year 2) the IRS can exert enforcement powers if they lie, especially since so much of their income is derived in the US. (Which is probably why they incorporated in the US in the first place–to avoid the bite) Of course, to get him to issue an opinion the IRS would care about, I assume we would have to pay lots of money.

-If a foreign group claims to be a non-profit organization similiar to 501 (c) (3) in the US, you can request that the IRS make a determination if the organization meets the same criteria as a US non-profit.

That is about everything I learned. The one thing I didn’t note was whether you treat a group as 1 entity earning 10,000 or 10 people earning 1,000. I am told he covered that in a later session on the same topic so I am inquiring if a colleague took notes specifically on that since that was an area of concern for her.

Back from WAA

Well I have returned from Spokane, WA a bit older and wiser for the experience. There was plenty that happened so I will have ample fodder for posting. Unfortunately, the amount of work left undone while I was away may keep me from my posting. We shall see.

Let me first start by saying Spokane is a lovely city is walk around, especially near the convention center which is right on the edge of a park where Expo 1974 occurred. The conference itself was well organized and there were some procedures that had been adopted that went over very well with the membership–but more about that in a later entry.

I ended up learning quite a bit, but I was concerned that wouldn’t be so when the conference first started (and not just because of my articles on useless meetings, part 2 here). The keynote speaker was Gunther Schuller who has had a long career as a musician and has certainly shown his love and stamina for his craft (he apparently would play in an orchestra for an opera and then walk into a jazz club to continue playing into the night.) However, in my estimation, he really has no concept about what it takes to run an arts organization.

I was really rather angry at the conference coordinators for picking him and had to resist an outburst at various times during the week when I came in contact with them. (I will avail myself of the feedback forms they provided, however, and probably won’t be any more diplomatic than I will be here.)
It was probably the worst example of many of the things I have railed against the arts community over in prior posts.

His whole speech was about how great the good old days were. He didn’t say anything I didn’t know 20 years ago. He cited the miniscule proportion the NEA budget has to the entire federal budget. He spoke of low listenership and programming of classic music on radio stations and lauded NPR for having the courage to play the music. Pop music and network television are the enemies leading to illiteracy and the destruction of culture. It is a terrible thing, he says that Hootie and the Blowfish get to be on the talk shows and Beethoven is no where to be seen. It was all doom and gloom and really just very old news.

It all may be absolutely true, but nothing he said acknowledged the fact that this was the environment in which arts organizations operate today and then try to offer practical solutions that reflect this fact. His suggested solution was sandwich booking where you put a lesser known show between two popular shows. Again, this is a really old strategy that doesn’t reflect how people currently make decisions to buy tickets.

I momentarily thought I might be wrong about this being an old strategy when he started lauding the great success the Boston and Philadelphia symphonies had with this strategy–until he got around to mentioning that he was talking about men who were running the organizations in 1939! His criteria for what constituted good popular music with which to sandwich the new stuff was even more telling when he discounted the value of most of Vivaldi in an aside. In my mind, if someone isn’t comfortable or familiar with classical music, that composer’s “Four Seasons” is probably a good introduction.

The only suggestion he made that I felt had merit was that the creators of a work (composers/playwrights), the purchasers and presenters, and the performers of works communicate with each other more effectively about how to combat the apathy about the arts. He didn’t give any examples other than those I mentioned, but as a general concept it seems to have merit.

On the whole though, I was really annoyed by the talk. I am going to suggest some alternative speakers for next year (Douglas McLennan would have been perfect this year given that he is about a 45 minute flight away from Spokane). In my mind, a keynote speaker should set the stage for discussion throughout the conference–even if it is arguments. The only discussion that came out of this session was akin to churchgoers musing about why sinners didn’t see the light and come to church and congratulating one another for taking their children to Sunday school. As much as I may dislike most organized religions, to properly employ this metaphor I have to say–there wasn’t any discussion about effectively witnessing and converting the great unwashed. (The problem being that the speaker essentially derided the great unwashed for their entertainment habits.)

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.