[Congressional Record Volume 150, Number 20 (Tuesday, February 24, 2004)]
[Senate]
[Pages S1521-S1522]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]

      By Mr. BUNNING (for himself, Mr. Miller, Mr. Alexander, and Mr. 
        Hatch):
  S. 2106. A bill to amend the Internal Revenue Code of 1986 to provide 
capital gains treatment for certain self-created musical works; to the 
Committee on Finance.
  Mr. ALEXANDER. Mr. President, I applaud Senator Bunning for 
introducing the bill to amend the Internal Revenue Code of 1986 to 
provide capital gains treatment for certain self-created musical works, 
and I am proud to be a co-sponsor of this bill.
  This bill will make songwriters eligible for the capital gains tax 
rate when

[[Page S1522]]

they sell their portion of a song catalogue. It treats the taxation of 
songwriters fairly so that they are on equal footing with musical 
publishers. Many songwriters are self-employed small business owners, 
but they are distinguishable from other similar small business owners, 
such as authors, because the rate of pay for songwriters is set by the 
Federal Government.
  Historically, almost all professional songwriters assigned their 
copyright to a music publisher. As a result, the songwriters did not 
own the song or receive any royalty payments from the song. The 
songwriters did not own the copyright, and therefore, were not required 
to participate in any expenses toward exploiting it.
  Currently, songwriters and music publishers are equal, joint-venture 
business partners. The publisher serves as the songwriter's agent in 
getting songs recorded or placed, otherwise known as ``co-publishing.'' 
Under this scenario, the songwriter and publisher equally share 
expenses of, among other things, demos costs and legal fees, and they 
equally share in any royalty income. Alternatively, the songwriter is 
the music publisher and bears all of the expenses of, among other 
things, demo costs and legal fees. Under the first scenario, the 
songwriter is subject to ordinary income tax, rather than capital gains 
tax, despite the fact that the sale of the song catalogue was actually 
a capital gain and should have been taxed at a lower rate. A capital 
gain is the result of a sale of a capital asset. Clearly, a song 
catalog is a capital gain because it is an asset of the songwriter.
  Under current law, music publishers are eligible for the capital 
gains tax rate when they sell their portion of a song catalogue, but 
songwriters are not. When the publishing rights or the song catalogue 
is sold, music-publishing companies are allowed to claim the capital 
gains tax rate on their portion of the sale. However, because the 
songwriter wrote the song, they must pay ordinary income tax on their 
share of the same sale even though they share in expenses toward 
exploiting the copyright.
  I am proud to be a cosponsor of this bill because it levels the tax 
playing field between songwriters and music publishers.
                                 ______