On July 4, 2025, President Trump signed into law the One Big Beautiful Bill Act (“OBBBA”), which enacts significant changes to federal tax provisions. Among the changes, OBBBA adds “qualified sound recording productions” as a category eligible for preferential expensing provisions under I.R.C. § 181, which also generally applies to “qualified film, television, and live theatrical productions.” As a result, a “qualified sound recording production” — a sound recording (as defined under U.S. copyright law) produced and recorded in the U.S. — would be allowed a deduction up to $150,000 in the year such expenses are paid or incurred (rather than being capitalized or deferred to subsequent tax years).
However, Section 181 is scheduled to sunset by 2026 and, therefore, the election is only available to qualified sound recording productions (and qualified film, television, and live theatrical productions) commencing before December 31, 2025.
Nonetheless, the OBBBA also makes qualified sound recording productions eligible for 100% bonus depreciation under I.R.C. § 168(k) when placed in service. For purposes of this I.R.C. § 168(k) accelerated depreciation, a qualified sound recording production will be considered placed in service at “the time of initial release or broadcast.” The bonus depreciation amendments apply to qualified sound recording productions commencing in tax years ending after July 4, 2025.
It is worth noting that while these changes are favorable overall, the true impact and benefits to recording artists and production companies remain to be seen. The IRS may release specific guidance on these new provisions, which may resolve many questions on how individuals and/or companies can best claim and benefit from these tax changes. For example, one notable question may be establishing which party incurred the qualifying expense related to a sound recording — and thus, which party is entitled to the tax benefit. Further, many states may try to expand (or even restrict) these federal tax benefits through their own state tax codes.
