199A and Specified Service Businesses

Log in to Post

Message Board 199A and Specified Service Businesses

This topic contains 1 reply, has 2 voices, and was last updated by Mike Giangrande 5 days, 21 hours ago.

  • Author
    Posts
  • #141995
    Anonymous

    We just viewed the webinar of the Federal and California update.

    In the section on section 199A on slide 5-20 of the power point it says that Managers and Promoters in the Performing Arts areas are NOT SSTB’s.  This is contrary to advice we’ve been given from tax lawyers in the entertainment business.  Can you let us know what the basis of this conclusion is on your part?

  • #142346
    Mike Giangrande
    Participant

    Not all service businesses are specified services businesses. So, unless a service business is “specified” in the Code or Regs., it is not an SSTB. When it comes to performing arts, it is clear that only those professions that are integral to the creation of the performing art are SSTBs.

    When you look at examples of who is “integral,” it is clear that you are looking at the creative individuals, not just anyone that has some involvement. Stated otherwise (in my opinion) if a person can be replaced and have no effect on the creative outcome, then they are not integral to the creation of the performing art. In my opinion, a manager or promoter can be replaced with a different manager or promoter and have no effect on the creative outcome in any real sense.

    I think it is equally unlikely to squeeze manager and promoters in to the SSTB category based on consulting. A service business is a consulting business if it involves the provision of professional counsel and advice. Granted, most professional services businesses likely meet this definition to some extent, but a manager or promoter, while I’m sure they provide some level of counsel and advice, that is not what they are being paid for. They are being paid to advertise/promote their client and to manager their affairs.

    HOWEVER, every business must be evaluated individually. For example, if a manager only advises an actor on which parts to accept and which parts to reject, then this might be seen as consulting and therefore an SSTB. The final regulations make very clear that every individual business must be evaluated separately.