Tag Archives: political update

Federal Government Tax Reform: What It Means for You

The Republican-led Congress and administration have now embarked on a debate over another feature piece of legislation promised during the 2016 campaign: tax reform. At this writing, the Republican-led House of Representatives has introduced its far reaching reform proposal, which it claims focuses on a tax savings for middle-class Americans. Along with White House regulatory reforms, the House says the bill will provide tax savings and incentives for American businesses, especially those with overseas or offshore operations.

Working alongside the majority party in Congress, the White House is expecting delivery of a complete tax package to the President’s desk before Christmas. The steady grind of the legislative machine in both the US House and Senate since the end of the August recess may drive this package through (loopholes and all), especially if the House and Senate can make a final deal with disgruntled Republicans and some nationally recognized outside groups like the Mortgage Bankers Association, national real estate organizations, and others who are on the fence.

Though the philosophy of the majority party is to move this process through before too many stakeholders weigh in, there are those who believe that the package as written, containing a limit on interest deductions for new home purchases of $500,000 or more and an expansion of the standard deduction (as outlined in a November 3 New York Times article), is a losing proposition, too difficult to sell to their constituents. In the same New York Times article, others, including Congress’s Joint Committee on Taxation and the independent Tax Foundation, find that America’s highest earners would receive at least twice the tax cut that middle-class workers would get, as a percentage of their income.

Democrats, along with other outside groups who sit in opposition to the package, say that the plan is not well thought-out and is moving too quickly. It will harm, not help, middle-class Americans because it will raise taxes. Meanwhile, it will eliminate some much sought-after and expected annual tax staples such as state and local tax write-offs (businesses will continue to be able to deduct state and local taxes incurred in the conduct of a trade or business) and House reductions in the mortgage interest cap. Also, it will use funds from the elimination of important programs, such as the CHIP and state Medicaid Expansion, which were put in place to help middle-class Americans. Opponents say this, along with other loopholes, is all to help pay for a tax reform package designed to help wealthy taxpayers.

Concerns for Members

A look at the tax reform package reveals some issues—changes for the average American and for musicians and others in the media and entertainment fields.

The House Ways and Means Committee, the committee that oversees the drafting and implementation of tax legislation, has outlined what the new tax law does. You can read the Tax Cuts and Jobs Act at https://waysandmeans.house.gov/taxreform/. The committee states that the bill:

Lowers individual tax rates for low- and middle-income Americans

Eliminates special-interest deductions

Establishes a new Family Credit, which includes expanding the Child Tax Credit

Reduces the tax rate on the hard-earned business income of Main Street job creators

Significantly increases the standard deduction

Takes action to support American families

Preserves the Child and Dependent Care Tax Credit

Lowers the corporate tax rate to 20%

Opposition forces say that the bill falls short of all these goals and leaves the average American subsidizing proposals that only benefit the rich.

Yeh Shen of Local 6 (San Francisco, CA) states, “Under GOP’s tax plan, all of the necessary costs associated with maintaining a freelance career and professional activities are not tax deductible, if players continue to be paid as W-2 wage [earners].”

Winners v. Losers

But, who are the winners and losers? An article from The Hill  describes who stands to gain and who stands to lose. Here’s a summary:

Winners—Corporations will see their tax rate go down from 35% to 20%. Companies would be allowed to deduct the full costs of buying new equipment for five years. And businesses that had been keeping profits overseas to avoid the 35% tax rate would be able to bring the money back, or repatriate to the US, and pay only a 12% tax for cash assets. Major business groups like the US Chamber of Commerce and the National Association of Manufacturers back provisions to lower rates for businesses, in order to move to a “territorial” tax system that exempts dividends from companies’ foreign subsidiaries and to enhance expensing of capital investments.

Super wealthy individuals will keep the top tax rate in place, but they have a lot to gain from the bill.  First off, the income tax bracket thresholds increase, which will accrue savings at the top. Second, the bill would double the limit on the estate tax and then phase it out altogether. Currently, the estate tax only applies to estates of $5.5 million or more, and twice that for couples. The bill would immediately double that, giving tax shelter to anyone with an estate between $5.5 million and $11 million (or, again, double those amounts for couples). After a few years, the tax would be eliminated altogether, meaning that the very wealthiest in the country could receive their inheritances tax-free. Third, the plan would lower the taxation rates of “pass-through” corporations, or S-corps, to 25%, allowing certain business owners to claim part of their income at the lower rate. Fourth, it would eliminate the alternative minimum tax, which was intended to create a floor on tax exemptions.

Losers—Blue states, the budget deficit, universities, homeowners, and nonprofit organizations.   

House v. Senate Bills

As for House and Senate bill comparisons, Sarah Babbage from Blumberg outlines direct differences in the bills. You can read her analysis at: https://about.bgov.com/blog/bgov-onpoint-comparing-house-senate-tax-bills/.

For musicians, the tax plan in its earliest form hit on two issues that would have directly impacted artists and their supporting institutions. The first was a provision in the code that provided the time and manner rules for electing capital asset treatment for certain self-created musical works. The original temporary regulatory proposal was published in the Federal Register February 8, 2008. No comments appeared in response of the proposed rulemaking and no request for a public hearing was received. The Treasury then decided to adopt the proposed regulation with some minor changes. However, on November 6, 2017, the provision was removed from the Ways and Means Manager’s Report. The Manager’s Report would have allowed a taxpayer to treat the sale or exchange of a musical composition or a copyright of their personal musical work as a capital gain or loss.

Secondly, the House bill eliminates certain language referring to business entertainment write-offs. This could mean fewer business professionals using theater, restaurant, and other performance venues as write-off activities for their clients. Section 3307 entitled “Entertainment, etc. Expenses,” denies a business deduction for entertainment, amusement, recreation, and other fringe benefits in the media and entertainment industry to embrace or entice business partners. The provision goes on to say: “No deduction otherwise allowable under this chapter shall be allowed for amounts paid or incurred for any of the following items … this may impact any entertainment, amusement, or recreation activity; membership dues; amenities not directly related to the taxpayers trade or business; or on-premise athletic facilities, not related to a trade or business.” 

The Senate bill, introduced November 14, is currently under debate. We must consider that, at this writing, the House bill is still under consideration and the Senate bill, though just introduced, has additional changes. No new policy is set in stone until the chamber has a final vote on it. However, we expect those votes very soon. The AFM will continue to work with its affiliates and outside partners to help mitigate the negative effects of this legislation.

AFM Partners with Government and Airlines to Resolve Long Overdue Inconsistent Policies

DOT Issues New Musical Instrument Airline Carriage Rule

On December 29, 2014, Department of Transportation (DOT) Secretary Anthony Foxx issued a final rule regarding the carriage of musical instruments onboard US air carriers. The rule was published in the Federal Register January 5, 2015 and is scheduled to go into effect 60 days after publication in the Federal Register, around March 6. The rule comes about as a result of language outlined in Section 403 of the Federal Aviation Administration (FAA) Modernization and Reform Act of 2012, which required rulemaking by February 14, 2014. With the effective date looming, AFM President Ray Hair instructed the AFM Office of Government Relations, in cooperation with our arts and entertainment partners, to contact members of Congress, as well as the DOT, to initiate the rulemaking process.


Over the two-year period between passage of the 2012 FAA Reauthorization and the February 2014 rule deadline date, AFM Local 257 (Nashville, TN) President Dave Pomeroy and his legislative assistant Kathy Osborne worked with Congressman Jim Cooper’s office to help keep the carry-on issue alive. On February 11, 2014, Congressman Jim Cooper (D-TN) and Senator Lamar Alexander (R-TN), along with 33 members of Congress, forwarded a letter to Foxx urging that rulemaking for musical instruments as carry-on baggage become a priority. At a reception at Vice President Biden’s residence, Foxx assured me that this rule was a priority for him as he is himself a trumpet player who understands why it’s important.

On February 3, 2014, members of the arts and entertainment community sent a letter to Foxx urging promulgation of the new rule. In addition to the AFM, signatories to the letter included: Recording Industry Association of America, Department for Professional Employees, Recording Academy, SoundExchange, Americans for the Arts, International Alliance of Theatrical Stage Employees, Association of Performing Arts Presenters, musicFIRST, Chamber Music America, Performing Arts Alliance, Society of European Stage Authors and Composers, National Alliance for Musical Theater, American Composers Forum, Opera America, Dance/USA, Alternate Roots, Theater Communications Group, Fractured Artists, National Association of Latino Arts and Cultures, Network of Ensemble Theaters, Chorus America, New Music America, League of American Orchestras, and Percussive Arts Society. Washington, DC based affiliates of these organizations assisted with setting up our DOT meeting.

Getting to Yes

Staff level meetings began in June 2014. Our first full meeting took place in July 2014, with a final meeting September 2014. AFM President Hair led the proceedings for music stakeholders. Present at the table was Foxx, DOT General Counsel, DOT Assistant General Counsel, and FAA staff. Senior level airline representatives from Airlines for America, National Air Carrier Association, Regional Airline Association, Alaska Airlines, American Airlines/US Airways, Delta Air Lines, JetBlue Airways, Southwest Airlines, and United Airlines all participated. Other AFM stakeholders included AFM Local 161-710 (Washington, DC) President Ed Malaga, ICSOM Executive Board Member and National Symphony Orchestra Violist Jennifer Mondie, and AFM Local 257 President and AFM International Executive Board member Dave Pomeroy.

How to Navigate This New Environment

Education is key. The success of our talks with airlines and DOT centered on our team having a complete understanding of federal government and airline industry policies. The federal government regulates airline traffic and requires each carrier to file a Contract of Carriage that outlines commitments between the airline and its passengers.

In addition to the airlines themselves, the Department of Homeland Security has the responsibility for security matters, while the DOT, the FAA, and the airlines harbor responsibility for the safety of the flying public. The result is a complex maze of rules and regulations. Flying today is far more regulated than 10, or even five years ago. Congress’s efforts centered on developing legislation to create consistent carriage safety and boarding policy within the aviation community, as well as between airlines.

Prior to purchasing tickets, traveling musicians should familiarize themselves with the Helpful Websites (below) to ensure a safe and uneventful journey. The Airlines for America link outlines policies for each major airline.

We anticipate additional conversations with the DOT and airlines. Please be sure to label your instrument clearly on the outside of its case. In addition, take a photo of both the outside of the case and your instrument in the case. Insure your instrument with a reputable insurance carrier that will provide you full replacement value. If you have issues, request a conversation with a first-line supervisor who can help resolve most matters and will be trained on this new ruling.

The statute language states, “such [as] a guitar or violin, etc.” Musicians should understand that these instruments are only cited as examples. On the first day of talks, a complete list of musical instruments and case sizes was distributed to airline and music stakeholders. We anticipate that air carriers will train employees on the full range of instruments.

Read the January 5 DOT Carriage rule in the
Federal Register at: www.federalregister.gov/articles/2015/01/05/2014-30836/carriage-of-musical-instruments.

Airline Instrument Carriage Rule Summary:

  • Outlines DOT rules for large and small instruments as carry-on, cargo in the passenger compartment, as well as checked baggage, on major airlines, as well as regional and smaller carriers.
  • The rules also address seat purchases and specific information about the placement of large instruments in cabin.
  • When statute language states, “such [as] a guitar or violin, etc.,” musicians should understand that these instruments are only cited as examples.
  • Air carriers are required to adequately inform passengers and the public about the limitations and restrictions imposed.
  • Musicians should study and follow guidance outlined in federal and air carrier online policy statements.
  • When booking air tickets, musicians must inform carrier representative(s) that he or she will be transporting a musical instrument.
  • Rules relating to on-board stowage will apply to any instrument that meets FAA carry-on size requirements.
  • Information and periodic airline reminders or audits and training of counter agents, gate agents, first line supervisors, and baggage acceptance clerks and handlers is required.
  • Mandatory training is also required for general and operational managers, reservation agents, ticket clerks, first-line supervisors, laborers, and material movers.
  • There will be additional meetings between music stakeholders and airline representatives.
  • Rules include foreign air transportation.

Notes for Traveling with Instruments:

  • Musical instruments fall into the category of “unusual or fragile items,” hence must be considered for stowage.
  • Board early; ask ticket agent for priority seating when you book passage.
  • Overhead and under seat stowage is on a first come, first serve basis.
  • Once an instrument is stowed in-cabin, it cannot be removed or be replaced by other bags.

Helpful Websites:

National and Internet Press

Instrument Carry-on Rule for Flights Pleases Musicians 

DOT Harmonizes Rules for Musical Instruments on Flights 

Musicians Get Approval to Carry on Instruments When Flying 

DOT Final Rule on Musical Instruments in the Cabin 

DOT Updates Rules for Musical Instruments on Planes 

U.S. DoT Issues Final Rule – Air Travel with Musical Instruments 

Hey, Rockstars, You Can Now Legally Bring Your Instrument as a Carry On