Producers of “Jersey Boys” don’t “Walk like a Man”, cave to Chicago anti-smoking law. July 8, 2008
Posted by Gordon Firemark in : Theatre law, entertainment law , add a commentChris Jones of the Chicago Tribune reports that the producers of the hit jukebox musical “Jersey Boys” have decided to present the show “smoke-free” in Chicago, where the city’s anti-smoking ordinance doesn’t permit any form of smoking (whether tobacco, or herbal cigarettes) in public spaces, including theatres. Jones’ article points to the absurdity of the anti-smoking law designed to “protect” the public, but which essentially requires a revisionist approach to history. The fact is, these people (Frankie Valli and the Four Seasons) smoked in real life, but in the musical portraying their lives, they’re supposed to be non-smokers?
Jones has written on this subject before, and I agree with his position. In his current article, he calls for a specific exception for arts presentations featuring smoking.
As I’ve previously written here, here and here, I think these laws will fall under constitutional scrutiny. Limits on the actions conducted on-stage by actors are an unacceptable abridgement of the rights of artistic expression.
Where there’s a less-restrictive-alternative to a total ban on speech, a governmentally imposed restriction on speech will not stand. Here, I submit that there ARE such alternatives… mandatory use of special high-power ventilation systems, for example… that would acheive the same governmental goal (public protection)
All we need now is someone to stand up for the First Amendment by defying one of these overbroad anti-smoking laws. It’s a shame the Jersey Boys producers didn’t show more backbone.
Whether you favor smoking bans or not, this is a matter of concern for you. This is the beginning of a slippery slope. What’s next? Shall we permit government to ban on-stage portrayals of points-of-view we don’t agree with? Could a local government ban the use of weapons on stage, because portrayals of violence lead to the real thing? (Sword fights in Romeo and Juliet, knife/gun fight in West Side Story, etc.). What happens when a law is passed prohibiting negative portrayals of the President? Where will we draw the line?
Tags: theatre, smoking, Jersey Boys, cigarettes, first amendment, free, speechTax Withholding: An unwieldy burden for entertainers and the organizations that hire them. May 12, 2008
Posted by Gordon Firemark in : entertainment law , 3 commentsThis article was first published in “Western Ways” the Newsletter of the Western Arts Alliance - Spring 2008
N.B. I am an entertainment lawyer, not a tax lawyer, but my clients and colleagues are confronted with the issues presented by this article on a regular basis. I recommend talking to a tax attorney whenever questions about taxation arise.
In recent years, state and federal taxing authorities have implemented new or revised programs designed to ensure the collection of taxes on earnings of athletes and entertainers who travel to reach their audiences. According to the IRS, “These individuals, and those associated with arranging their appearances…are typically high income individuals”. While this may be true for many professional athletes and certain headline-level entertainers, it is anything but true for the average performer, producer or manager. These new tax laws and regulations place a tremendous strain on the already limited resources of the arts organizations who must comply, and have a demonstrated chilling effect on such presenters’ use of international and out-of-state talent. Foreign artists, already faced with the realities of a weakening U.S. Dollar, now have even less incentive to share their offerings, as Uncle Sam dips so deeply into the already shallow pool of funds for such visits.
The Tax Rules
Generally speaking, the tax rules appear deceptively simple, but it is in their implementation that the true burdens appear.
At the Federal level, the Internal Revenue Service requires that, unless there exists an applicable tax treaty with a foreign artist’s home country, any U.S. organization that makes payments to such an artist for ‘independent personal services’ (which covers most arts activities) must withhold tax at a rate of 30%. These payor organizations are referred to as “Withholding Agents”. Even when payments are made through a U.S. agent or manager, if the Withholding Agent knows that the payee is acting on behalf of a foreign person, it must treat the payment as made directly to that foreign person, and must withhold tax at the 30% rate. A Withholding Agent that fails to comply with the requirements will be liable for the amount required to be withheld, or the tax actually due, whichever is less.
Compounding matters, a number of states have implemented similar tax withholding requirements. One example, California, requires withholding at a rate of 7% of gross payments made to nonresident entertainers unless the California Franchise Tax Board approves a different withholding rate. Massachusetts, Connecticut and several other states have similar withholding requirements. Rates vary from state to state.
All of this makes the U.S. a rather unfriendly host for foreign artists, and only slightly more attractive to U.S. performers who earn a living on the road. On the other side of this equation, the potential downside for presenters and arts organizations makes hiring foreign performers a daunting proposition.
Tax Treaties
Various foreign countries have entered into tax treaties with the U.S. Under these treaties, compensation paid to artists from signatory countries may be exempt from U.S. income tax when the services are performed during a limited period of temporary presence in the U.S., and the pay is within the limits established by the applicable treaty. Such exemptions are available for both employees and independent contractors, but since exemptions may depend on factors that can’t be determined until year’s end, it will often still be necessary to withhold at the statutory rates. The Artist will then have to submit the appropriate claims and/or tax returns before taxes withheld can be refunded.
Only the “beneficial owner” of the income in question is permitted to make the tax treaty claim, which presents a problem where a group of foreign entertainers presents a joint performance. Unless the group is officially organized as a corporation or other entity in its home country, the ‘group’ is not the beneficial owner of the income, and each individual performer must make his or her own tax treaty claim.
The various states do not individually have treaties with foreign nations. Whether a U.S. tax treaty preempts state taxation schemes likely depends on the specifics of the treaty in question.
Central Withholding Agreements
The IRS has implemented a system whereby a foreign entertainer may apply for a so-called “Central Withholding Agreement”. Essentially, under a CWA, provided that an artist designates a central withholding agent, provides details about all of the engagements to be covered by the agreement (including copies of contracts, details about lodging, transportation, advertising, accompanying personnel, and a proposed budget for the tour or appearance), and agrees to file timely statements and U.S. tax returns, the IRS may approve a reduced tax withholding rate for each nonresident artist covered by the CWA. This is a time-consuming and unwieldy process. The application must be submitted at least 90 days in advance of the agreement’s proposed effective date (i.e., 90 days prior to arrive in the U.S.), and must be signed by each artist, the withholding agent, and a representative of the IRS.
State withholding rules may also be subject to agreements adjusting the withholding rate. Each state’s rules are different, and should be checked carefully to ensure eligibility, etc. For a performer touring the U.S., the prospect of dealing with the government both at the Federal level, and in each State where performances occur ,is daunting to say the least.
Problems and Issues
Obviously, these withholding requirements present challenges to artists, managers and presenters alike. For artists, the burden of either applying for a Central Withholding Agreement, or making a tax treaty claim, combined with increased record-keeping, administrative time, and the cost of professional tax advisers, essentially mean that many will be forced to accept payment at 70% of the quoted fee, until a tax return is filed and a refund issued. Even then, the accountants’ fees may exceed the amount of an expected refund. More likely, foreign entertainers will simply increase their fees to make up for the withheld sums.
For booking agents and managers, particularly the smaller operators common in the dance, classical and world-music arenas, the representation of foreign artists is rapidly becoming untenable. The administrative burden of identifying applicable tax treaties, applying for Central Withholding Agreements, and sometimes serving as a central withholding agent) significantly compound their existing challenges of obtaining visas, arranging transportation. Moreover, as costs to artists drive performance fees higher, booking jobs becomes more difficult.
For presenters, the withholding requirements impose significant additional record-keeping, administrative, accounting and other costs. Additionally, some artists may prefer to simply increase their performance fees, and forget about filing tax returns, treaty claims and CWAs. These increased expenses, coupled with the potential of liability for inadequate withholding have a chilling effect on the presentation of art and culture from overseas. Essentially, tax burdens on these types of speech effectively suppress diverse, minority voices.
Conclusion
State and Federal tax withholding requirements on nonresident and foreign entertainers place a tremendous burden on artists and those who employ them. Significant administrative burdens and cost has the effect of discouraging presenters from hiring foreign talent and presenting culturally diverse programming. In the end, we must ask whether the tax revenues gained by enforcement of these requirements really justify the cost of decreasing the diversity of voices in the American marketplace of ideas and culture.
Tags: noneRECOMMENDATIONS
1. Contracts must provide for the presenter’s right to deduct and withhold applicable taxes. Where a contract is silent on the question, an artist may be justified in claiming the full contract price, leaving the presenter/employer holding the bag for tax withholding.
2. Contracts must provide for the Artist to cooperate fully with the Withholding Agent in filing of treaty claims and applications for waivers, exemptions and the like.
3. Forms and information about tax withholding, treaties, exemptions, and the like should be included as part of the booking agreement packet, and completion should be made a condition of the agreement taking effect.
4. Artists, Presenters, Managers and Arts Organizations may wish to join forces to lobby Congress to take this situation out of the hands of the administrative agency (IRS) by crafting a comprehensive solution to the issues presented by the current tax scheme.
5. Finally, those affected by these rules must consider attacking them in the Courts on grounds that the withholding requirements threaten free speech protected by the First Amendment, and that state tax structures are preempted where U.S. Tax treaties are in effect.
Smoking Bans and Theatre - the debate continues March 21, 2008
Posted by Gordon Firemark in : Theatre law, entertainment law , add a commentThe New York Times reports in this article, that a Colorado State appellate court has ruled against the owners of several theatres who’ve challenged the State’s ban on smoking indoors on First Amendment grounds. The theatres have indicated that they’ll appeal to the state’s Supreme Court.
Will they succeed. Is “smoking” an expressive form of speech? Isn’t the use of smoke, lighting cigarettes, etc., sometimes powerful in its symbolism, etc?
Suppose stage directions call for an actress to take a drag on her cigarette, and then, in response to something another character says or does, blow the smoke into his face? Isn’t this a significant part of the playwright’s expression of the characters’ disdain for one-another? Isn’t this a form of protected speech?
Under traditional first amendment analysis, the State’s law must be “narrowly tailored” to acheive a “compelling government interest”. The compelling government interest here is ensuring public health and safety… but is a total ban on indoor smoking really “narrowly tailored” . Is there some, less restrictive alternative available?
If so, should the theatres prevail? Should the burden be on the theatres’ entertainment lawyers to prove that such an alternative exists?
I’m inviting your comments… I look forward to hearing what readers think!
Tags: noneAre audience participation/interactive shows in peril? February 11, 2008
Posted by Gordon Firemark in : Theatre law, entertainment law , 2 comments
A Chicago man has filed a lawsuit against the producers of the Blue Man Group theatrical act. His suit claims that he was chosen by the performers to participate in their “esophagus video” gag. The actors held the man in place, and allegedly “forced the esophagus cam into his mouth, and while he struggled to free himself, an image of his mouth and throat was projected on a video screen before the other audience members (including the man’s grandson). The man claims that this amounted to “offensive touching” caused injury to his throat, mouth and dental work, and his lawsuit includes claims for Battery, negligence, and negligent infliction of emotional distress.
The lesson for producers of live entertainment featuring interactions with the audience is that care must be taken to select audience participants who indicate their willingness to join in the show, and to be alert to signs that the audience participant may be embarrassed, upset or angered by the events as they unfold.
Audience members should be asked whether they consent to participate, and given a meaningful opportunity to decline. Ultimately, the performers should take “no” for an answer.
Photo courtesy of Flickr user “Stelb”, used by permission under Creative Commons License
Tags: noneForce Majeure clauses (on firemark.com) January 23, 2008
Posted by Gordon Firemark in : entertainment law , add a commentIn the wake of contract terminations at ABC last week, I’ve posted a short discussion of Force Majeure clauses on my other website at firemark.com. Please have a look, and let me know if you have comments!
Tags: none
