Billionaire pop star Taylor Swift's production company received $2.8 million in tax credits from the state of Pennsylvania through one of the only places in the U.S. that can help it prepare for a major tour: Rock Lititz in Warwick Township.
Here’s only one way Swift’s Tennessee-based production company, Firefly Entertainment, could get that break on its potential Pennsylvania tax bill: rehearse at Rock Lititz, the only place in the U.S. built expressly for highly technical stadium shows.
No other rehearsal space in Pennsylvania qualifies under the state law championed by two Lancaster County politicians: former Republican state Sen. Ryan Aument and Republican House Rep. Bryan Cutler. The law created what is known as the Entertainment Economic Enhancement Program.
In May 2019, Swift’s production company received an $800,000 tax break just six months after the star wrapped up her first all-stadium tour, which Billboard Boxscore reported grossed a record-breaking $266.1 million in the U.S.
Firefly received another $2 million Rock Lititz tax break in 2022 for Swift’s rehearsals for her record-breaking $2 billion Eras Tour.
Swift wasn't the only wealthy superstar to get a Rock Lititz tax break. Elton John’s production company got $4.05 million in tax credits over three years of his Farewell Yellow Brick Road tour. His tour has grossed $471.4 million since 2020, according to PollStar.
Since 2019, production companies of 33 stars ranging from Ariana Grande to The Weeknd and Tim McGraw have been given a total of $48 million in state tax breaks because they rehearsed for their huge, multimillion-dollar tours at Rock Lititz.
About 80% of entities receiving tax credits went on to sell the credits to Pennsylvania companies and residents, which is allowed by the law. Among those buying the tax credits were Adam Davis and Troy Clair, founders of Rock Lititz. In addition, a consultant with political ties to Aument and Cutler is playing a key role in selling the credits.
In October, the state legislature and governor expanded the program to give Rock Lititz’s customers up to $5 million more in tax credits when they donate to a certain kind of charity.
READ: Here's who benefits from tax credits at Rock Lititz besides celebrities
READ: Here's how a tax credit for Rock Lititz was created and revised
Creation and criticism of tax credit
The state legislature first created the tax credit two years after Rock Lititz opened in 2014. The intent was to lure performers to rehearse at the fledgling facility, Aument told LNP | LancasterOnline at the time. The law defined the purpose of the tax credit to “attract investment in the state by awarding tax credits to tour operators representing musicians for rehearsals and live musical performances.” The tax break only applies to state taxes, not federal taxes.
Since then, the EEEP tax credit has been criticized as corporate welfare by the Commonwealth Foundation, a Pennsylvania-based conservative think tank, and Good Jobs First, a progressive research institute based in Washington, D.C., focused on economic development. Even the state Independent Fiscal Office, which provides objective nonpartisan analysis of fiscal, economic and budgetary issues to the legislature, has questioned the tax credit’s value. IFO also suggested changes to improve the credit program, but when the law was revised in October few of those changes were adopted.
“On its face, it's the definition of special interest capture,” said Greg LeRoy, executive director of Good Jobs First, referring to the interests of firms or political groups being given priority or favor over the interests of the public.
In the decade since it opened, Rock Lititz has flourished, rebounding from a pandemic shutdown to become an economic driver in Lancaster County that is widely considered the best and perhaps only place in the country that big-ticket live events trust with design, engineering and rehearsal. Its 108-acre, 10-building campus in Warwick Township has 35 related businesses employing an estimated 1,500 people. It recently announced a $52 million expansion in Nashville, Tennessee.
A privately held company, Rock Lititz’s profit has never been publicly disclosed, nor is there any requirement that it be revealed. Its finances and the stars who rehearse there are closely guarded secrets.
Since the tax credit was enacted, the legislature and governor have increased the program’s annual cap sixfold to $24 million from $4 million in 2017-18 fiscal year. The annual credit award cap for individual taxpayers — like Swift— had been $800,000 but is now $5 million, depending on the amount of qualified concert tour equipment rented or purchased
LeRoy said a better way to incentivize economic development is to give a fledgling company a tax break that diminishes over time as the company grows such as the one provided in the Local Economic Revitalization Tax Assistance Act, which provides gradually decreasing tax breaks for commercial and industrial properties in specific areas to incentivize the redevelopment of aging or deteriorated properties.
“You don’t increase tax credits,” LeRoy said. “That’s special interest capture.”
READ: Rock Lititz: The promise of 500 jobs 10 years ago turned into 1,500 today
Only Rock Lititz
Larry Miller, a longtime observer who directs the music business program at NYU has called Rock Lititz an incomparable facility that has become the go-to place for live event, production rehearsal and design.
Aument and others said when it was created that the tax credit would not only bolster Rock Lititz’s attractiveness as an industry hub but spread the benefits to the rest of the state because to qualify for the tax break musicians also have to perform at two venues in the state.
The law says that to qualify for the tax credit a performer must use a rehearsal facility that meets at least six of eight criteria, including:
Has a minimum of $8 million in land or structure, or a combination of land and structure.
Has a permanent grid system with a capacity of 1 million pounds.
Has a built-in power supply system available at a minimum of 3,200 amps without the need for supplemental generators.
Has a height from floor to permanent grid of a minimum of 80 feet.
Has at least two sliding or roll-up access doors with a minimum height of 14 feet.
Has a perimeter security system which includes 24-hour, seven-days-a-week security cameras and the use of access control identification badges.
Has a service area with production offices, catering and dressing rooms with minimum of 5,000 square feet
Is located within one mile of a minimum of two companies which provide concert tour equipment for use on a tour.
The law also provides that the rehearsal facility not be built for actual concerts.
In its 2021 study, the IFO noted only one rehearsal facility meets the qualifications for the tax credit.
“The credit provides a substantial benefit to the only Pennsylvania qualified rehearsal facility,” the IFO wrote in the report. The IFO has not published another in-depth analysis of the tax credit since then.
To receive the tax credit, the production company must also perform at two venues in the state. An LNP | LancasterOnline analysis, the majority of the tax credit awardees performed in large venues in Philadelphia and Pittsburgh.
The 2021 IFO study found that the tax credit might give greater incentive for less established performers to make a tour more viable. Data obtained by LNP | LancasterOnline, however, found that the performers who were awarded credits were well established.
The IFO found the state lost 65 to 85 cents on every dollar it gave out as a subsidy for using Rock Lititz.
The IFO said it could not determine whether the tax credit made a difference in whether the music stars would have used Rock Lititz.
“To the extent that the spending would have occurred regardless of the program, the tax credit is a windfall and has negative economic implications because the state could have used the funds for another purpose,” the IFO wrote. “In the case of the EEEP Tax Credit, the IFO was unable to determine the incentivized share of spending due to the limited program history (two years, 15 recipients and the COVID-19 pandemic) combined with a lack of applicable research from other states or academics.”
Andrea Shirk, Rock Lititz president and CEO, acknowledged in an email to LNP | LancasterOnline that Rock Lititz is currently the only rehearsal venue in the state that meets the law’s specifications.
“With over 50 years of experience behind them, successful Lititz-based entertainment entrepreneurs envisioned a better, more client-focused way to meet the needs of the live entertainment industry,” Shirk wrote. “They took a huge risk in building a single-purpose rehearsal studio, and with the support of local and state government, their vision has created an industry hub that continues to bring jobs and tax-payers to Pennsylvania.”
Shirk wrote that the EEEP program helps the entire state by creating an incentive for production rehearsals to come to the state and then perform here.
“In addition to Philadelphia’s and Pittsburgh’s large venues, performance venues such as those in Hershey, Allentown and other markets benefit from the tax credit’s requirement of performing in two Pennsylvania venues,” Shirk wrote. “In turn, the owners and employees of that area’s restaurants, bars, retail, hotels and more receive a boost from the concert-goers’ attending the performances. The positive effects are far-reaching, going well beyond the Pennsylvania vendors who serve the technical and creative needs of productions.”
LeRoy doesn’t buy the argument that increased consumer spending is a reason to have tax credits like the EEEP.
People do not have more time or more money with which to recreate or shop just because they have another way to be entertained or shop, the Good Jobs First executive said. The only way people can have more leisure time or money is if they have more discretionary income, he said, in effect arguing for economic development that leads to well-paying jobs.
Rock Lititz has contributed to the region’s job force by supporting by its own estimate about 1,500 good-paying jobs at 35 companies.
READ: Who has rehearsed at Rock Lititz in the last decade? Here's who we know
Legislature expands tax credit
In 2021, the IFO report suggested the legislature eliminate the requirement that a tour must rehearse at a qualified rehearsal studio and allow the rehearsal to occur at any Pennsylvania studio. When a revision to the law came this year that advice was not taken.
In October, the state legislature overwhelmingly voted for a revision of the EEEP tax credit that increased the amount an individual can be awarded to $5 million and introduced a new way for Rock Lititz customers to get the tax credit — making a charitable donation to a music performance nonprofit. The bill was signed by Democratic Gov. Josh Shapiro on Oct. 29.
Aument did not respond to requests to discuss the revisions or the tax credits. Cutler voted against the bill, a spokesperson said, because it contained provisions for an unrelated matter. He viewed the revisions as mechanical in nature, the spokesperson said.
The revision also increased the maximum amount of taxes that can be offset with the tax credit from 50% to 75%.
The new law also gives the Department of Community and Economic Development discretion to award advance credits and award unused credits from previous years.
John C. Bear, a consultant who brokers the tax credits, said in an email to LNP | LancasterOnline that the financial requirements for the award level tiers were modified in the new law.
“Some applicants may see an increase in the amount of their award,” he wrote.
But since the program cap remains at $24 million, there would be no new net increase in tax credit sales.
Since 2017, Bear, a former Republican state representative and current Manheim Township commissioner, has served as a chairman of a joint political action committee called "Building a Stronger Pennsylvania" organized by Aument and Cutler.
Asked if the EEEP revision to offer tax credits for charitable donations would benefit Rock Lititz’s new school for live events, Jill Brown, a spokesperson for Rock Lititz, said the revisions “are intended to provide funds to Pennsylvania's non-profit organizations that support workforce development in the state's live event industry.”
The school, Academy of Live Technology at Rock Lititz, is a for-profit business that has partnered with the nonprofit Pennsylvania College of Art & Design,
“The EEEP's desired impact will be felt throughout the live event industry as it utilizes funds to support charitable work that addresses workforce challenges facing the live events industry in Pennsylvania,” Brown said.
