Tax Treatment for Songwriter Catalogs

$ound Advice

I recently had lunch with two of my esteemed colleagues. One is a leading accountant in the music industry and the other is an attorney/songwriter advocate.

We were discussing the tax benefits of selling a songwriter’s catalog vs. using a line of credit based on the equity value of the catalog. Many artists and songwriters have been selling – or are considering selling – their songwriter’s share, based in part on the recent capital gains treatment alluded to (but not yet ruled on) in H.R. 4297 – The Tax Relief Extension Reconciliation Act. NSAI and others did a great job of moving this important issue forward, and it has now been signed into law. However, the IRS has yet to rule on the interpretation of the law, i.e., how to treat a songwriter’s future royalty rights. The consensus of my recent lunch and conversations with other tax professionals on the question of whether capital gains vs. ordinary income tax treatment should be used for the sale of a songwriter’s catalog is that it is still very much a grey area – until the IRS decides to make a specific ruling on the issue. The bottom line is this: If you or your client are deciding on whether to sell or leverage the equity in a songwriter catalog, you should seriously consider the possibility that such a sale could be treated as ordinary income (at a higher rate) by the IRS in the future. On the other hand, you could take advantage of a smart alternative and tap into the catalog’s equity through a lo

an or line of credit. This option offers you immediate access to the equity in the catalog, while delaying the majority of the tax liability to later years and letting the future royalties repay the loan. Best of all, at the end of the day, you or your client still own the catalog.

Keep it in the groove,

Eli Ball
CEO Lyric Financial

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Events

For those who could not attend, last month’s Atlantis Music Conference was outstanding (http://www.atlantismusic.com/). The clear benefit of the Atlantis Conference is that it is serious enough to attract an impressive array of professional and creative talent, while remaining intimate enough to make networking and showcases meaningful. Better yet, it’s hosted in Hotlanta! Shout-outs to Mark Willis, Rich Levy, Kathy Stringer and the whole Atlantis team for a job well done. While in town our friends at BMI co-hosted a receptioin with LYRIC at the Luckie Lounge...it was a fantastic event! Many thanks to the fabulous Catherine Brewton, David Claasen and Byron Wright.

LYRIC and BMI rock Hotlanta!

Sound Advice - August 2008

My father went to heaven this past month on July 26th. At his memorial service, I was asked what one thing I remember most about him. My answer: He was a simple man who worked hard without complaint, who loved his family and put the needs of those around him above his own. To me that is the true measure of greatness. In today's hyper competitive, 24/7, look-at me, media-saturated world, it is easy to lose track of the simple things that make our God-given life so wonderful - love, family, friends, our co-workers, the person in front of you in line. Treating each other as we ourselves would like to be treated. That's the legacy that my father left me and, for that, I am blessed. So take time to spend with your loved ones, respond to a snarl with a kind word or smile and be grateful you are alive and have the ability to make a difference in someone's life everyday.

Eli Ball

CEO Lyric Financial

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NEWS

We are very honored to welcome award-winning writer/recording artist Al Kapone (whose hit songs, "Whoop That Trick," "Snap Yo Fingers," and "U & Dat" were featured in the hit feature films "Hustle and Flow" and "Stomp the Yard") to the LYRIC Financial family as our first "Director of Artist/Writer Relations." Al is also the current President of the Memphis Chapter of NARAS and a member of their Grammy Screening Committee. He will be responsible for reaching out to the urban-hip/hop community on behalf of LYRIC Financial, as well as assisting us in crafting our educational message and product designs. His first outreach will be as the host of a VIP Reception following the BMI Producer Panel at the Atlantis Music Conference in Atlanta, Sept 17-20th, www.atlantismusic.com. Al and I are also participating as panelists at the conference. Learn more about Al on his site: www.myspace.com/alkaponememphis.

PRODUCT UPDATE

We at LYRIC are continuing to reinvent the financing concept for music professionals and companies. Our FastForwardMyRoyalties advance program for performance royalty income is a huge success. Building on that success, we hope to extend our advance program to include mechanical royalties in the near future. Mechanical income, while declining to some extent from illegal downloads and the move of consumers away from albums to singles, is still, and will continue to be, a significant source of income for many songwriters, producers and publishers in the music community. We hope to have more details for you this Fall.

UPCOMING EVENTS

September 9th - R&B Foundation Pioneer Awards. A wonderful organization solely dedicated to preserving Rhythm & Blues music and celebrating the artists who create it. This year will be the gala celebration of the Foundation's 20th Anniversary that will bring together the royalty of Rhythm & Blues, along with a veritable "who's who" of the entertainment industry. For tickets and info: www.rhythm-n-blues.org.

And remember you can either come from love or fear...it's not a big menu, you make the choice.

Sound Advice - June 2008

I once heard that "you are entitled to your own opinions, but not your own facts." Despite the struggles of the major labels' out-dated business model, the demand for music has never been greater. As new technologies create new platforms and packaging possibilities for music, it is our individual and collective responsibility to evolve our value proposition to our clients. Here at Lyric Financial^TM, we are excited to create funding solutions that support independent music companies that understand how to communicate directly with their customers.

FastForwardMyRoyalties^TM

The debut of our FastForwardMyRoyalties^TM program for BMI affiliates has been outstanding. We have received more than 150 requests for more than $5.2 million in advances since the program began a mere six months ago. The requests have come from all over the globe, LA to London and Philly to Paracuru, Brazil. It just goes to show how wide the reach of the creative community extends. Funding for catalog loans continues, contrary to the well publicized credit crunch in the mortgage industry. It appears that the market for copyrights is still quite active as publishers look to take advantage of more reasonable valuations to build value and diversity in their catalogs. Periodically, you'll hear from the Lyric Financial family with updates on the industry and our products, or as we learn something that we think you ought to know. We look forward to your responses, feedback, and continued support of our company as we champion the creative spirit of the music community by making a few of the financial challenges a little easier.

Keep It In The Groove,

Eli Ball
CEO Lyric Financial

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Lyric Financial Welcomes...

Please join me in welcoming Joseph Moran to the Lyric Financial team as loan processor and analyst. He comes to Lyric after more than eight years at Regions Bank. Joseph completed his MBA from Belmont University in December 2007. He is a fan of just about every music genre. He snowboards in the winter and plays golf in the summer. Joseph has been to nearly every country in western Europe, Mexico and Argentina.

Interesting tidbits about Joseph...he can solve a Rubix Cube in less than 2 minutes and he posts home improvement videos on youtube.com.

Exciting News!

Dear Friends,

It is with great excitement that I contact you today to share a few announcements on behalf of First Entertainment Financial.

First off, the big one. First Entertainment Financial is changing its name to Lyric Financial™. With the move of our operations to Nashville last year, coupled with the release of several new products that were designed specifically to serve the music community, we have renewed our commitment to being the first financial services company created by music people, for music people. We believe that our new name, Lyric Financial more accurately reflects that mission.

Today we also announce new alliances with both BMI and the Nashville Songwriters Association International (NSAI). Lyric Financial™ has created a program available to BMI affiliates called FastForwardMyRoyalties™. This unique program provides songwriters and publishers who earn royalties, a simple method of accessing their future earnings, now. The program is safe and does not jeopardize the client's ownership of their catalog. More information about FastForwardMyRoyalties™ can be found at www.fastforwardmyroyalties.com/bmi.

Lyric Financial™ announces its collaboration with the Nashville Songwriters Association International (NSAI). NSAI has been an advocate of the songwriter community since its inception in 1967 and Lyric Financial's support of this organization will allow them to further their mission of advocacy, guidance and education on the craft and business of songwriting. Lyric Financial™ is proud to be a part of what NSAI brings to the songwriter community.

And, finally, Lyric Financial™ announces the launch of its new web site at www.lyricfinancial.com. To learn more about the company and our services, visit us today.

Thank you for your ongoing support of our mission, and stay tuned for more great things to come.

Eli Ball, CEO
Lyric Financial