Havre de Grace Arts and Entertaiment District
Havre de Grace is the perfect location to create and sell your art. Located at the junction of the Susquehanna River and Chesapeake Bay, our setting has been an inspiration to artists for centuries. Decoy carvers replicate nature, water colorists capture the evening skies over the water and writers ﬁnd inspiration in the views. In the Spring of 2007, a group from the arts community led the effort to secure the ofﬁcial Arts & Entertainment (A & E) Designation by the State of Maryland. Because of our strong art community the State of Maryland awarded Havre de Grace an A & E Designation on July 1, 2008. The Havre de Grace Arts Collective, a 501(c)(3) non proﬁt corporation, oversees the A & E District and administers and promotes the A & E Programs.
Under the direction of the Maryland State Arts Council, the A&E Districts Program has become a model for states across the country interested in using metrics to demonstrate the economic impact of a thriving art and cultural scene in a community.
Havre de Grace is one of 25 designated A&E Districts across Maryland in 15 counties. These Districts can be found in rural communities, suburbs, small towns and large urban environments. Districts receive designation for a 10-year period and may reapply after the initial period.
The A&E designation offers incentives to animate existing infrastructure and attract artists to invest and create unique cultural environments which house galleries, studios, arts centers, events, festivals and complementary businesses – all of which impact revitalization, heighten public safety, engage communities and increase the quality of life.
In addition, Maryland legislation has provided three incentives for these districts: A property tax credit for renovations or new construction of A&E enterprises, an abatement of the Admissions and Amusements Tax for A&E enterprises, and an income tax subtraction for income derived from the sale of art by qualified residing artists. These incentives are designed to attract artists and entrepreneurs to locate and create within A&E Districts to revitalize underutilized properties and to animate existing infrastructure.
Frequently Asked Questions About the Arts & Entertainment District
*Property tax credits for renovations that create live-work space or arts and entertainment enterprises
*Income tax subtraction modification for income from artistic works sold by qualified resident artists
*Admissions and amusement tax exemption
Income Tax Subtraction: For qualifying artists residing in Maryland. If you create and sell your original artwork within any Maryland Arts and Entertainment District you can be eligible to receive an income tax abatement for the sale of your art.
Exemption from the Admissions and Amusement Tax: Exemption from the Admission and Amusement Tax gross receipts from any admissions or amusement charge levied by an arts and entertainment enterprise or qualifying residing artist in the A&E district
Real Property Tax Credits: Property must be located within the A&E district. Before renovation, property must have been a manufacturing, commercial, or industrial building
The property must be wholly or partially constructed or renovated for use by a qualifying residing artist or arts and entertainment enterprise. The real Property tax credits will be in the following amount over a ten year period: 100% in the ﬁrst and second year 80% in the third and fourth year 60% in the ﬁfth and sixth year 40% in the seventh and eight year 20% in the ninth and tenth year.
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.
A for proﬁt or not for proﬁt entity dedicated to the visual or performing arts.
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.
If a qualifies artist has a company in the district that reproduces another artist’s work, does the income from the sales of the reproductions qualify for the modiﬁcation?
TG § 10-207(v)(2) provides that the income eligible for the subtraction modiﬁcation is the amount of income derived from the publication, production, or sale of an artistic work that the artist wrote, composed, or executed in the arts and entertainment district. TG § 10-207(v)(1) provides that in that subsection, “artistic work” has the meaning stated in Article 83A, § 4-701 of the Code, which is “an original and creative work, whether written, composed, or executed, that falls into one of the following categories:…” A reproduction is not an original work; therefore, a reproduction is not an “artistic work” for the purposes of TG § 10-207. Income from the sale of a reproduction is not income derived from the sale of an “artistic work”; therefore, income from the sale of a reproduction does not qualify for the subtraction modiﬁcation under TG § 10-207(v)(2).
A county or municipal government may grant by law a property tax credit against county and municipal property taxes for up to 10 years for a qualiﬁed property in an Arts and Entertainment District. It is up to the local governments to determine in their ordinances the amount and duration of the credit. The early A&E districts followed the “Enterprise Zone Credit” model to grant credits on the difference between the new assessment on the property after renovations or construction and a base year assessment the year before the improvements are made. The examples listed below illustrate how the credit works under this type of credit provision.
An artist (painter) purchases a new studio/loft condominium residence in a former federal government ofﬁce building converted into artists; residences and work space in the Havre de Grace A&E District. The artist pays $405,000 for the unit, and the property has a new full market value of $385,000 according to the Department’s assessment. The unit had a base year assessment in the prior year before the improvements were made of $55,000. The artist will receive a property tax credit equal to the local taxes on $330,000 of eligible assessment ($385000 assessment minus a $55,000 base year assessment). The actual tax savings to this artist in silver Spring are $3,191.10 ($330,000 assessment times a local tax rate of $0.967).
A developer buys a commercial building in Havre de Grace previously used as a shoe manufacturing facility for $150,000. The existing assessment is $90,000 on the land and $60,000 on the improvements. Because of local ﬁre regulations, the predominantly wood structure is demolished. The developer then builds a new mixed-use facility that will be used for an artist supply store, a coffee house with a space for performing artist, and ofﬁce space for a small graphic arts ﬁrm. For ease of discussion, each of the three respective uses occupy one third of the total usable space. The Department places a new total full market value on the building and the land of $750,000. If all of the uses were qualiﬁed under the law as an A&E purpose, a credit would be granted on $660,000 of assessment ($750,000 total assessment minus $90,000 base year assessment on the land). The reason why the credit is granted on the newly constructed premises is because of the change in the law in the 2005 session and because the particular property was zoned for commercial use at the time of demolition. Based on three different uses in the new building, here is how the new credits will actually be applied. One-third of the total assessment equals $250,000, and this amount is eligible because of its use as an artist supply store. The second section of the building is used as a coffee shop with a performing artist space but only $25,000 of assessment represents the value of the performing artist space. The ﬁnal one-third of the building to be occupied by a graphic arts ﬁrm is not eligible for any A&E credit because “industry-related” uses are excluded under the law at Article 83A. § 4-701(a)(2) (iii). The total amount of A&E credit for this mixed-use building would be granted on $242,000 of assessment ($250,000 for the supply store; $25,000 for the small performing artist space, and the deduction of $33,000 of base assessment from the total $90,000 base year assessment on the land). Multiplying the $242,000 of eligible assessment times the local tax rate of $0.967 equals $2,340.14 in actual tax savings.