Tax Benefits & Incentives
To ensure a vibrant cultural life in the downtown area, the Chestertown Arts and Entertainment District offers several place-based tax abatements for artists, entrepreneurs and landlords. These benefits go into effect January 1, 2016, as follows:
INCOME-TAX SUBTRACTION FOR ARTISTS
To qualify for the state income-tax benefit, an artist must:
- own or rent residential property in Maryland,
- create artistic work in any of the State’s 24 A&E Districts,
- and have generated income from the sale or performance of that artwork within this or another Maryland A&E District.
The tax deduction is actually an income tax “subtraction modification.” That means that artists who create and sell work within the districts are not taxed by the State on the income derived from those sales. Also exempt from the State tax is work created in the District and sold through the Internet, or by mail order or catalogs, so long as the work is shipped from within an A&E District.
Included in the state’s definition of artistic works are
- a book or other literary product,
- a play or performance of a play,
- a musical composition or performance,
- a painting or other picture,
- a sculpture,
- traditional or fine crafts,
- the creation of a film or acting in a film,
- the creation or performance of a dance,
- the creation of original jewelry or clothing design.
This tax benefit applies only at the state level; artists continue to pay the full amount of federal income tax. To take advantage of the program, artists submit Maryland State Tax Form 502AE when they file their state income-tax returns.
PROPERTY TAX CREDITS FOR PROPERTY OWNERS
Building and lot owners can receive property tax credits for the renovation or construction of arts related spaces within the boundaries of the A&E District. Only the increase in the assessed value of the property after its renovation or construction for a certified arts use is eligible for the property tax credit.
Chestertown and Kent County committed to the fullest possible exemption the program allows: a 100 percent property-tax abatement on the improvement value, and for a full 10 years. That means, for tax purposes, the owner is taxed on the original value of the renovated space for 10 years.
ADMISSION & AMUSEMENT TAX EXEMPTION
Local admission and amusement taxes are levied on the gross receipts for admission fees at recreational venues such as movies or concerts, entertainment cover charges at bars, and the rental of sports facilities and equipment. The Chestertown A&E District provides a 10-year exemption from this tax for those certified arts and entertainment activities occurring within its borders. (There is currently no business in the District that qualifies for this exemption.)