WASHINGTON, D.C. and NASHVILLE, TN - As of late last week, The Songwriters Capital Gains Tax Equity Act passed both the U.S. House of Representatives and the U.S. Senate as part of the Tax Reconciliation Act of 2005. President George W. Bush is expected to sign the Bill early this week and the songwriters provision will take effect on January 1, 2007.
Loeb & Loeb attorneys Denise Stevens and John Beiter were instrumental in assisting the firm's pro bono client, Nashville Songwriters Association International (NSAI), in formulating and achieving passage of this legislation. They were recognized for their roles in the process at a press conference last Thursday at NSAI. Denise took the lead by drafting the proposed bill and attending one of NSAI's many advocacy trips to D.C., and John assisted with the legislative strategy development. Loeb & Loeb serves as General Counsel to the NSAI.
According to NSAI, an advocacy group and trade association for songwriters, the legislation was designed to benefit American songwriters who sell a song catalogue (a group of songs). Previously, songwriters paid ordinary income taxes and self-employment taxes that could amount to more than 40% of their income from the sale. Now they will be eligible for the flat 15% "Capital Gains" business tax rate, just like their joint-venture music publisher partners. The legislation applies only when a songwriter sells the royalty stream on a catalogue and will not apply to ordinary royalty and licensing income.
"It was rewarding to be a part of the movement to help songwriters receive fair tax treatment upon sale of their creations, which puts them on equal footing with their joint venture partners and similarly situated music publishers," said Denise Stevens. "This Bill addresses the financial inequities historically faced by those songwriters who own part or all of their catalogues and ultimately have the opportunity to sell such catalogues."
She added regarding the legislative process, "The obstacles to getting this legislation passed seemed insurmountable as we began more than five years ago. The bill became more of a reality as persistent personal visits by songwriters to D.C. received warm reception. The support and momentum developed one person at a time and it was inspiring to witness the understanding and respect that unfolded."
John Frankenheimer, Co-Chair of Loeb & Loeb and head of the firm's music industry practice group said, "The Bill will assist not only in correcting the historically inequitable tax treatment of composers and writers in the sale of their catalogues, but, at the same time, the process will increase legislators' understanding of the unique aspects of income distribution from musical compositions. This will prove useful in future legislation, particularly as it may arise in the digital realm."
Denise M. Stevens is resident in Loeb & Loeb's Nashville office. She focuses her practice on entertainment, copyright and trademark transactions and counseling, primarily in the music industries. Her clients include recording artists, songwriters, producers, artist managers, authors, record labels and music publishers.