How to Take Advantage of the New York City Musical and Theatrical Tax Credit Program

How to Take Advantage of the New York City Musical and Theatrical Tax Credit Program

The NYC Musical and Theatrical Tax Credit Program was established to help the theater industry recover from the COVID-19 pandemic...

The New York City Musical and Theatrical Tax Credit Program was established to help the theater industry recover from the COVID-19 pandemic. It has grown to become a key funding resource for both Broadway and Off-Broadway productions.

In May 2023, the tax credit was extended for an additional two years, through September 30, 2025. Additionally, another $100 million was allocated to the program, for a total of $300 million. Under the amended guidelines, the date of the first paid public performance must now be on or before June 30, 2025.

Program Overview

First launched in 2021, the New York City Musical and Theatrical Tax Credit Program is designed to incentivize theatrical productions in NYC and boost tourism in the wake of the COVID-19 pandemic by offsetting certain costs associated with producing a show in New York City. Eligible expenditures for eligible productions include:

• Production costs for sets, costumes, wardrobes, makeup, accessories and costs associated with sound, lighting and staging;
• Salaries, wages, fees, and other compensation, including related benefits for services performed (total allowable expenses may not exceed $200,000 per week);
• Technical and crew production costs, such as expenditures for qualified production facilities; and
• Up to 50% of the advertising and marketing costs incurred and paid in New York State by the applicant.

Companies applying for the NYC Musical and Theatrical Tax Credit must implement a New York State-approved diversity and arts jobs training plan and take actions to increase access to productions for low-income residents. Highly successful productions, which are defined as those generating ongoing revenues more than 200% of their ongoing production costs after reaching the end of their credit period, must contribute up to 50% of the tax credit to the New York Stater Council for The Arts Cultural Program Fund.        

Eligibility Requirements

To be eligible for a tax credit, a musical and theatrical production generally must be a live, scripted performance with one or multiple performers that, in its original or adaptive version, is performed in either a Level 1 Qualified New York city production facility or a Level 2 qualified production facility in New York City.

• Level 1: Companies producing a qualified musical and theatrical production in a Level 1 qualified New York city production facility can receive tax credits of 25 percent of qualified production expenditures up to $3 million per production. A Level 1 qualified New York City production facility is defined as a facility in Manhattan in the area bounded by and including 41st Street, 54th Street, 6th Avenue and 9th Avenue; in which live theatrical productions are intended to be primarily presented; containing five hundred seats or more along with at least one stage and additional necessary amenities for theatrical productions; and for which live theatrical productions constitute 75 percent or more of gross receipts for the facility.
• Level 2: Companies producing a qualified musical and theatrical production in a Level 2 qualified New York City production facility can receive tax credits of 25 percent of qualified production expenditures up to $350,000, provided that the qualified musical and theatrical production has a production budget of at least $750,000 and incur at least $750,000 in qualified production expenditures. A Level 2 is a facility in Manhattan; in which live theatrical productions are intended to be primarily presented; containing one hundred seats or more along with at least one stage and additional necessary amenities for theatrical productions; and for which live theatrical productions constitute 75 percent or more of gross receipts for the facility.

Under the New York City Musical and Theatrical Tax Credit Program, the following productions are ineligible for tax credits: ballet, opera, musical solo, group, band or orchestra performance, or solo, duo, or several performers’ stand-up comedy performances.

Application Basics

Initial tax credit applications must be submitted prior to a production’s first public performance. The initial application consists of the following:

• Project summary;
• Production and operating budgets;
• Weekly payroll report;
• Documentation outlining the ownership structure of the applicant entity;
• A diversity and arts job training program plan outlining proposed method(s) of participating in a New York state diversity and arts job training program; and
• A public access and availability plan outlining the ways the applicant will ensure that their production is available and accessible for low or no-cost to low income New Yorkers.

Applicants must also agree to contribute to the New York State Council on the Arts Cultural Program Fund if ongoing revenues are more than two times ongoing production costs after receiving a tax credit.

Key Deadlines

The New York City Musical and Theatrical Tax Credit Program is currently funded until 2026.Pursuant to the most recent program guidelines, initial applications must be submitted prior to the first public performance and before June 30, 2025. Final project summaries are due no later than 90 days after the credit period end date.

The credit period begins on the production start date, which is deemed to be up to 12 weeks prior to the first paid public performance. Meanwhile, the credit period ends on the earliest of the following: the date the production has expended sufficient qualified production expenditures to reach its credit cap; the date the qualified production closes or September 30, 2025. The date the production closes is defined as either the date of the last paid performance or the date after the production’s final paid performance on which the move of all physical production assets from the theatre is complete and all qualified costs are paid.

How We Can Help

To reap the full benefits of the NYC Musical and Theatrical Tax Credit, it is essential to understand the eligibility requirements, qualified costs, application process, and regulations that govern the tax credit program. Scarinci Hollenbeck’s Entertainment & Media Law Group is staffed with industry insiders who can help productions successfully navigate the process.

If you have questions, please contact us

If you have any questions or if you would like to discuss the matter further, please contact me, Brian Spector, at 201-896-4100.