Trump Bill Advances as Team Owner and College Tax Breaks in Peril

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2 days ago

The omnibus 'One Big Beautiful Bill Act' passed by the House of Representatives Thursday morning takes aim at team owners' coveted ability to write off most of the purchase price of a sports team, with a clause that would remove billions of dollars from being deducted on taxes.
'The bill itself, vis-a-vis sports teams ownership, isn't really a great thing,' Irwin Kishner, a partner at the law firm of Herrick, Feinstein, said on a phone call. 'You could argue the valuations of sports teams would be less than they were prior to that tax treatment.'
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The bill, now numbered H.R. 1, covers a multitude of spending priorities including border security, defense and taxation, among others. The legislation also takes a hatchet to amortization, which is the depreciation of non-tangible assets often termed goodwill. Typically, 90% or more of a team's purchase price is goodwill, which excludes physical assets a team might possess, such as its stadium and weight room equipment.
'Team owners were allowed to deduct 100% of the purchase price over 15 years, and now they're only allowed to deduct 50% over 15 years, if it comes to law,' Robert Raiola, director of the sports and entertainment group at PKF O'Connor Davies accounting firm, said on a phone call.
Amortization is an accounting principle meant to assess a decline in value over time, like its cousin depreciation, which is meant to account for physical assets wearing out, such as machinery. In sports, values don't typically decline. The 1973 New York Yankees sale to George Steinbrenner is believed to be the last time a franchise from the big four U.S. leagues traded hands at a loss.
The amortization of team values is an under-the-radar tax benefit that is a key part of the calculus used in the decision to buy a U.S. sports franchise­—and it plays a role in the skyrocketing prices paid for franchises in recent years. For example, under existing law, a team owner paying $1.6 billion for a franchise where $1.5 billion is intangible goodwill could deduct that $1.5 billion over 15 years. That $100 million annual deduction of taxable income probably saves the average team owner $40 million in actual taxes, assuming a 40% blended federal and state tax rate. Those deductions do raise the taxable income if and when the team is sold—all $1.5 billion would be a gain to be taxed—but not paying taxes today is preferable to paying them in the distant future.
The proposed law, which now moves to the Senate, means team owners would still get a $20 million annual tax savings under the example above. As drafted, it would cover all professional sports teams, and specifies football, hockey, soccer, baseball and basketball as examples. The amortization reduction applies only to new purchases after the bill becomes law, so any revenue bump to the federal government would be muted by the fact current team owners will be exempt under the proposal.
'The general public doesn't really feel sorry for these people either way, but for the owners themselves, it has a huge impact,' Kevin Thorne, managing partner of tax-focused Thorne Law Group, said on a phone call. 'I think it's going to be changed by the time it goes fully through [the Senate and reconciliation process]. A lot of people are going to be getting phone calls on The Hill.'
Two years ago Congress eliminated the ability of team owners to immediately depreciate the value of tangible assets of their franchises.
Tax benefits 'are a big part of the calculus' of buying a team, Kishner said. 'But it's still a regulated asset in that supply is less than demand and people have historically done very well owning these franchises.'
H.R. 1 also seeks to tax college athletic department licensing revenue. Typically, all nonprofits must pay income tax on revenue from activities not central to their tax-exempt status to avoid giving charities a competitive advantage over for-profit businesses.
Yet under current law, income from the sale or licensing by a college of its name and logo is exempt from unrelated business income taxation. This money can be significant: Ohio State University's athletic department for example, made $34.1 million in licensing and advertising revenue in the latest reported year, according to the Sportico College Sports Finances Database. Athletic department logos of seemingly every college in the U.S. are widely licensed for apparel and other goods. That money would now be subject to the 21% corporate tax rate—at the same time the NCAA is proposing expanded scholarship limits and direct payments to athletes.
Another clause in the budget as passed would allow health savings account money to be used to pay for gym membership, capped at $500 a year per person and $1,000 per family. Publicly traded gym operators Planet Fitness (PLNT) and Life Time Group Holdings (LTH) were up modestly in trading today, outpacing the broader market.
H.R. 1 passed the full House by a vote of 215-214 with one abstention, and it will likely see changes in the Senate, despite the Republicans' six-seat advantage. Senate Majority Leader John Thune has set a July 4 target date to pass the legislation. The bill, weighing in at more than 1,100 pages, will now be referred to the Senate finance and budget committees, which may propose amendments that will need to be reconciled with the House version. Both bodies will need to approve by majority vote a final version before it can be sent to President Trump to be signed into law.
With assistance from Michael McCann
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