Withholding The Foreign Artist
Apparently, there’s a lot of money being withheld by the government when foreign artists tour the U.S. All it takes to free up the funds is a little paperwork and some guidance from the Internal Revenue Service.
Details will be available during a Roundtable Session at the Concert Industry Consortium, when experts on the subject sit down at the Century Plaza hotel in Los Angeles February 7th.
Pollstar was given a primer for those who can’t make it. Basically, the U.S. government passed a law in 1989 that frees up cash for touring entertainers from other countries. Yet, to this day, practically nobody knows the cash breaks exist.
Cecil Glunt and Mary Ann Waters of the IRS are expected to be at the roundtable, along with the Haber Corporation’s Ken Ewing. Moderating is The Agency Group COO Jan Sikorski, who created a worksheet to help navigate the tax laws. The information will be distributed at the session but can be downloaded here in PDF format.
Glunt told Pollstar that, even though there are between 40,000 to 50,000 foreign artists or athletes who come into the U.S. every year, only a 1,000 actively pursue Central Withholding Agreements. In essence, a CWA could free up a lot of cash flow.
Glunt is in charge of an education program that enlightens facility operators, promoters and agents about the CWA and she has been trekking the country over the past year to give the skinny on this advantageous tax law.
"Let’s just say, for example, a foreign entertainer comes in and they’re going to do a $2 million tour," Glunt said. "Instead of withholding [30 percent of the gross], we’d direct withholding only be done on the net, the $1 million, at the graduated tax rate for the individual."
A simple explanation – for those who have a tough enough time keeping score in bowling – is that most tours have money tied up at the onset because everyone is handing money over to the U.S. Treasury, following an archaic practice. Instead of giving the IRS cash, it can be kept and used for flights, transportation, hotels, production and all of the good stuff that tour accountants count as expenses.
Usually, the facility operators are the first withholding agents, Glunt said.
"The way the chain falls is if we don’t have a Central Withholding Agreement, we instruct the venue to pay 30 percent of what they’re paying out. They withhold on the promoter’s money, the agent’s money, and the entertainer’s money because all of the money is paid to, or for, the benefit of the act performing. If that happens, all are harmed.
"If there is no CWA, once the facility is ready for settlement the withholding is 30 percent if the artist is a resident alien, regardless of who they have their contract with."
Of course, the definition of net income can get murky, but Glunt stressed that this is a withholding document, not an audit, and a tax return still has to be filed when all is said and done.
What constitutes a foreign artist can get confusing, too, what with U.S. artists living overseas and vice-versa. But Glunt said, in general, facility managers contact her all the time wanting to get the finer details of what constitutes a resident alien subject to withholdings.