Jerry Catalano Article Appearance!
How the Tax Code Perpetuates Hip Hop Blingdom
Written by: David Downs
That crazy new Lil Wayne video you just on Youtube: yeah, that’s a write-off.
The culture of hip hop blingdom – with its diamond-studded videos, spectacular tours, and pimped out cribs – is perpetuated by the whitest homie on the block: Uncle Sam.
According to certified professional accountants, the tax code itself perpetuates hip hop blingdom and may be responsible for its rise. The reason is simple: businesses are allowed to deduct certain business expenses from the amount they owe to the government every year. Since hip hop has made bling part of its business, they can write off the blingdom as a cost of doing work.
According to CPA Jerry Catalano [http://www.themusiccpa.com/] – who has spent decades representing recording artists – musicians can deduct business expenses so long as they are “ordinary and necessary.” But if you’re 50 Cent, define “ordinary and necessary”? That Rolex on 50′s wrist could well be considered an expense of maintaining his “brand,” especially if he only wears that watch on-stage.
Catalano points out, “Artists think it’s all about art, and it is, but it’s also a business. You are a product and you have to treat yourself as such.”
Rappers can deduct the cost of touring. They can deduct touring costumes, extravagant music videos, and insane home studio equipment. They can amortize the home studio itself. Moreover, Catalano says they should deduct their expenses or they have to give that money to the tax man.
It’s a pretty simple scenario: say, you’re an underground rapper who suddenly hits big. You get a $50,000 royalty check one week and now you’re looking at perhaps $20,000 in tax liability to Uncle Sam.
“I never recommend a client spend money just to get rid of taxes. You want to reduce taxes with expenditures that”ll expand your business,” says Catalano. “Buy the future, if you can. Ask yourself, ‘Is there something I can do for the next record or promotion, the next video, to help me make more money next year or the ensuing years?’”
That “investment” may be a dope new $3,000 MPC – the type of device artists like Mad Lib use to compose sick beats on the fly. It may be badass new speakers for a home studio. It may be leasing a crunk tour bus for your upcoming tour, or renting a bunch of cars with hydraulics and shooting an insane new video for an upcoming single. Marketing is a business expense, and hip hop perfected the art of it, says Catalano.
“Hip hop has the best guerrilla marketing of all forms of music. These guys invented guerrilla marketing, whether it’s selling CDs from the trunk of their car to ghetto mom and pop record stores where kids come in for the latest and buy their stuff.”
Transportation costs, cd printing costs, business lunches and dinners, rent on rehearsal space: all that can be a write-off, unlike simply sticking the money in your pocket and saving it for a rainy day.
Buy the future, if you can. Ask yourself, ‘Is there something I can do for the next record or promotion, the next video, to help me make more money next year or the ensuing years?
Of course, not all of it can be expensed. Personal items like fur coats and diamond chains are not a write-off unless they’re for stage-use only. The tax man will make sure you’re not wearing any of those items on the street.
Catalano says the IRS does something called a “lifestyle audit” as a way to check out people who report little to no taxable income every year. Furthermore, a purchase of $10,000 or more automatically triggers a note to the IRS about the purchaser. Newly flush underground artists dealing in cash get popped for big pimpin’ all the time, says Catalano.
“They’re always being hunted down,” says Catalano. “There’s some bizarre thinking that because it’s cash it’s not taxable — it’s taxable.”
The bottom line is politicians are using the tax code to alter the behavior of businesses and citizens.
“Congress would have nothing to do if they didn’t change the tax law all the time. They always push us in the direction they want us to go,” describes the CPA.
Since Uncle Sam wanted businesses to invest, hip hop simply became a business. Now, many of its hallmarks – big booty girls soaked in soapy suds draped over a Cadillac with 20-inch rims – are a legitimate business expense.
Holla at your CPA, ya’ll!
sending...