Music Groups Launch Year-End Push for Bill That Would Provide Tax Break for Music Creators

Proponents of the Help Independent Tracks Succeed (HITS) Act are making a renewed effort to get the bill through Congress.

On Wednesday (Sept. 27), the Recording Academy and the American Association of Independent Music (A2IM) sent a letter to House Ways and Means Committee chairman Jason Smith (R-MO) and ranking member Richard Neal (D-MA) urging them to add the bill to end-of-year tax legislation.

The HITS Act would provide an extra tax break to musicians, technicians and producers for recording sessions, allowing them to deduct 100% of recording expenses up to $150,000 on their taxes in the year they’re incurred. That would be a change from the current law, which requires music creators and labels to amortize those expenses over the economic life of a sound recording, a period that usually ranges between three and four years.

“The bill is designed and tailored to specifically incentivize independent artists, songwriters and labels to produce new music, sparking important creative investments in countless music small businesses across the country,” reads the letter, signed by Recording Academy chief advocacy and public policy officer Todd Dupler and A2IM president/CEO Richard James Burgess. “This targeted approach makes the HITS Act a fiscally responsible investment in the American creative economy.”

The letter goes on to point out that film, TV and live theatrical productions all enjoy the option of fully deducting production costs in the year they’re incurred and argues that music productions should get the same treatment. For independent creators and labels, being forced to amortize expenses “slows down their reinvestment in new projects that can fuel growth,” the letter adds.

Speaking to Billboard last year, Burgess put it in starker terms, noting that specifically for independents, “getting $150,000 per project [that can be] written off against your taxes in the year that you incurred it, could really make a difference between being able to make another record next year or not.”

The bipartisan HITS Act was first introduced in the House on July 31, 2020 (followed by a companion bill in the Senate on Dec. 3, 2020), though it failed to pass as part of the two pandemic relief packages or as part of the $3.5 billion budget reconciliation package known as Build Back Better, which was ultimately halved and renamed the Inflation Reduction Act of 2022 before being signed into law in August 2022. A similar lobbying effort at the end of last year to pass the bill ahead of the changeover to a new, split Congress — Republicans took control of the House of Representatives in January while Democrats held the Senate — also failed.

Read the full letter below.

Dear Chairman Smith and Ranking Member Neal:

On behalf of independent music makers and record labels we call on the Committee of Ways and Means to advance into law the bipartisan and bicameral Help Independent Tracks Succeed (HITS) Act (H.R. 1259) as part of any tax policy package considered before the end of the year. The HITS Act is a low-cost and commonsense modification to existing U.S. tax law that will incentivize the production of new sound recordings and songwriter demos by allowing qualified productions to deduct 100% of their costs upfront. With an annual deduction limit of $150,000, the bill is designed and tailored to specifically incentivize independent artists, songwriters and labels to produce new music, sparking important creative investments in countless music small businesses across the country. This targeted approach makes the HITS Act a fiscally responsible investment in the American creative economy.

The HITS Act also brings much-needed parity to the tax code for all creative industries. Currently, under Sec. 181 of the Internal Revenue Code, qualified film, television, and live theatrical productions may elect to fully deduct new production costs in the year they are incurred. Music production, which occurs in every state and congressional district, deserves the same treatment. Instead of being able to fully deduct production expenses in the year they occur, independent music makers must currently amortize production expenses for tax purposes over the full economic life of their creation. For small creators and the small businesses that invest in their careers, this timing difference slows down their reinvestment in new projects that can fuel growth. The HITS Act harmonizes the tax code and ensures that all the major creative industries are treated similarly.

As you consider how to best craft comprehensive tax legislation this year, the music community strongly urges you to include the HITS Act in any vehicle. It represents exactly the type of bipartisan, bicameral, and non-controversial economic investment that Congress should be proud to support. Passage of H.R. 1259 is a smart and simple step that will make a lasting difference for countless independent music creators and music small businesses.

Thank you for your consideration.

Signed,

Dr. Richard James Burgess
President and CEO
American Association of Independent Music (A2IM)

Todd Dupler
Chief Advocacy and Public Policy Officer
Recording Academy