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Impact of Foreign Tax Credits On Composer's Royalties

By Jeremy R. Kasha and Sandra A. Crawshaw

There has long been a dispute between songwriters and publishers as to whether songwriters are entitled to a proportional share of a publisher's savings resulting from foreign tax credits. A recent decision of New York's highest court, the Court of Appeals, resolved this issue in favor of the publisher. Under the ruling, absent express contractual language to the contrary, a songwriter is not entitled to share in the benefit of foreign tax credits taken by his or her publisher. Drafters and negotiators should take particular note of this development.

The plaintiffs in Evans v. Famous Music Corp., 2004 WL 330069, 2004 N.Y. LEXIS 261, were well-known composers and songwriters or their successors-in-interest ' including Ray Evans, Henry Mancini, Johnny Mercer and Richard Whiting. The plaintiffs sued their publisher, Famous Music Corp., for refusing to make accommodation for the benefits of foreign tax credits taken by Famous when calculating royalties due to the songwriters under their publishing contracts. The songwriters claimed breach of contract and breach of the implied covenant of good faith and fair dealing.

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