The Program was launched in 2021 in time for the reopening of Broadway in September 2021 when new surges of coronavirus cases started in the late fall and winter of 2022. Based on the initial demand for the Program and due to further delays caused by the pandemic, statutory changes were made to extend the end of the credit period from March 31, 2023 to September 30, 2023, the application deadline December 31, 2022 to June 30, 2023 and to double the availability of credits from $100 million to $200 million. This regulation is necessary to implement these changes,

Arts, entertainment, and recreation has been one of the most impacted sectors in New York City and the sector where employment increases have been the slowest. According to recent statistics from the Department of Labor, employment in the “arts, entertainment and recreation” sector dropped by more than 66% from 87,000 in 2020 to about 34,100 in April 2021. A healthy, vibrant Broadway is essential to the recovery of New York’s tourism and hospitality industries. Prior to the pandemic, almost 250,000 people saw a Broadway show every week. Broadway supports nearly 97,000 local jobs and contributes over $14 billion every year to the New York City economy. Broadway productions draw visitors to New York City from all around the country and the world, helping drive the regional tourism economy.

Due to the indoor venues of eligible shows and the close proximity of patrons, actors, and crew, the reopening of large indoor recurring productions must be slower and more carefully planned than reopening for many other segments of the industry. While Broadway was permitted to open in September 2021, the financing of such large in-person events remains extremely challenging. As news of the New York City Musical and Theatrical Production Tax Credit has spread, industry plans have rebounded. Since the initial passage of the credit program in 2021, additional shows were announced/planned for the fall 2021 and winter of 2022. However, with the rapid surge of new coronavirus cases due to the delta variant, productions have had to proceed with caution. During, the winter surge of COVID cases, 26 shows were forced to cancel over 208 days of performances through January. Additionally, one show canceled in March. In April, three shows have been forced to cancel 30 days of performances. And, there is now the threat of another surge due to the omicron variant. The incentive this tax credit provides to Broadway is critical as the industry struggles to resume productions in a still highly uncertain economic environment and lingering public health threat.

These regulations must be promulgated immediately so that the Department of Economic Development can continue accepting applications as the industry struggles to restart productions that have been delayed or are in hiatus and to open new shows this year. Emergency adoption of this rule will enable the State to act to provide relief to New York City Musical and Theatrical Production Companies as they continue their recovery from the pandemic and rehire the thousands of New Yorkers who work directly in the industry and to help support the recovery of New York’s tourism and hospitality industries in the process. Pursuant to Chapter 59 of the Laws of 2022, the Commissioner of Economic Development is expressly authorized to promulgate regulations for this Program on an emergency basis.

The regulation begins by extending the end of the credit period of a production from March 31, 2023 to September 30, 2023 per statute. It also extends the program application deadline from December 31, 2022 until June 30, 2023 per statute.

Next, the regulation clarifies the criteria for evaluation of a final application to make clear that an applicant must provide evidence that they have implemented the specific requirements they have attested to in their initial application, including the profit-sharing requirement under the program.

The regulation concludes by clarifying that the trigger date for economic evaluation of the credit cap is now on or after January 1, 2023 and that the overall cap on credits is now expanded to $200 million (from the existing $100 million).

STATUTORY AUTHORITY:

Chapter 59 of the Laws of 2021 allow the Commissioner of the Department of Economic Development (the “Department”) to promulgate regulations establishing the application process for the New York City Musical and Theatrical Production Tax Credit Program (“the Program”). These regulations include provisions describing the application process, the due dates for such applications, the standards that will be used to evaluate the applications, the documentation that will be provided by applicants to substantiate to the department the amount of qualified production expenditures of such applicants, and such other provisions as deemed necessary and appropriate. In addition, Part F of Chapter 59 of the Laws of 2022 made certain changes to the Program which this regulation incorporates.

LEGISLATIVE OBJECTIVES:

The proposed/emergency rule gives effect to the intention of the legislature in adopting this new tax credit program which was to provide immediate financial incentives to qualified New York City musical and theatrical production companies for productions that produce either paused or new performances shows during the next two years.

NEEDS AND BENEFITS:

This proposed/emergency is necessary in order to update the administrative process for this tax credit program enacted in response to the devastating impact of the COVID-19 pandemic on the arts, entertainment, tourism, and recreation sectors in New York State generally, and on the New York City tourism and musical and theatrical industries in particular.

The New York City Musical and Theatrical Production Tax Credit program was first enacted in 2021 in response to the devastating impact of the COVID-19 pandemic on the arts, entertainment, tourism, and recreation sectors in New York State generally, and on the New York City tourism and musical and theatrical industries in particular. The new program provided incentives to qualified New York City musical and theatrical production companies for productions that either paused productions in 2020 or delayed the production of planned new performances for 2021 and 2022.

The Program was launched in 2021 in time for the reopening of Broadway in September 2021 when new surges of coronavirus cases started in the late fall and winter of 2022. Based on the initial demand for the Program and due to further delays caused by the pandemic, statutory changes were made to extend the end of the credit period from March 31, 2023 to September 30, 2023, the application deadline from December 31, 2022 to June 30, 2023 and to double the availability of credits from $100 million to $200 million. This regulation is necessary to implement these changes.

COSTS:

I. Costs to private regulated parties (the business applicants): None. The proposed/emergency rule will not impose any additional costs to eligible business applicants.

II. Costs to the regulating agency for the implementation and continued administration of the rule: None.

III. Costs to the State government: None.

IV. Costs to local governments: None. The proposed/emergency rule will not impose any costs on local governments.

LOCAL GOVERNMENT MANDATES:

None. There are no local government mandates associated with this program.

PAPERWORK:

The proposed/emergency rule requires an application process and necessarily entails certain paperwork burdens including materials to be submitted as part of applications for tax credits, additional documents the Department may request from applicants as part of its evaluation of applications, and certain records that must be maintained by program participants for auditing purposes.

DUPLICATION:

The proposed/emergency rule creates a new tax credit program and, accordingly, there is no risk of duplication in the adoption of the proposed/emergency rule.

ALTERNATIVES:

No alternatives were considered with regard to not creating a new rule in response to the statutory requirement. The rule is authorized by statute.

FEDERAL STANDARDS:

There are no federal standards applicable to this program; it is purely a state tax credit program. Therefore, the proposed rule does not exceed any federal standard.

COMPLIANCE SCHEDULE:

The affected agency (Department of Economic Development) and any applicants to this program will be able to achieve compliance with the regulation as soon as it is implemented.

Participation in the New York City Musical and Theatrical Production Tax Credit Program is entirely at the discretion of qualifying business entities. Neither statute nor the proposed/emergency rule impose any obligation on any local government or business entity to participate in the program. The proposed/emergency rule does not impose any adverse economic impact or compliance requirements on small businesses or local governments. In fact, it may have a positive economic impact on small businesses.

Because it is evident from the nature of the proposed/emergency rule that it will have either no impact or a positive impact on small businesses and local government, no further affirmative steps were needed to ascertain that fact and none were taken. Accordingly, a regulatory flexibility analysis for small businesses and local governments is not required and one has not been prepared.

The New York City Musical and Theatrical Production Tax Credit Program does not impose any special reporting, record keeping or other compliance requirements on private entities in rural areas. Therefore, the proposed/emergency rule will not have a substantial adverse economic impact on rural areas nor on the reporting, record keeping or other compliance requirements on public or private entities in such rural areas. Accordingly, a rural area flexibility analysis is not required, and one has not been prepared.

The proposed/emergency rule updates the administrative process for the New York City Musical and Theatrical Production Tax Credit Program. The program aims to assist small businesses negatively impacted by the COVID-19 pandemic and will not have a substantial adverse impact on jobs and employment opportunities; rather, the program is intended to increase employment opportunities.

Because it is evident from the nature of the proposed/emergency rulemaking that it will have either no impact or a positive impact on job and employment opportunities, no further affirmative steps were needed to ascertain that fact and none were taken. Accordingly, a job impact statement is not required and one has not been prepared.