Tax Bill Could Raise Sports Teams' Value
Mon Aug 2, 3:48 PM ET Add Politics - U. S. Congress to My Yahoo!
By ALAN FRAM, Associated Press Writer
WASHINGTON - Many professional sports teams could increase in value by millions of dollars under a provision Congress included in legislation revamping corporate tax laws, tax and sports finance analysts said Monday.
The exact impact of the language would vary for each franchise. Minor league teams in faltering financial health could lose money because their tax deductions might be worth less under the new rules than under current law, the analysts said.
Profitable franchises could find their values enhanced by many millions of dollars because under the proposed legislation, they would be able to write off far more in taxes than they can today when they sell their teams.
"At the end of the day, there is no doubt it raises franchise values," said Robert Willens, a managing director of the investment bank Lehman Brothers.
Willens said the provision could add 5 percent to the value of many sports teams. Aaron Barman, who heads the sports finance group of Raymond James & Associates, said profitable National Football League teams could see their value rise by 5 to 6 percent.
"It's going to vary widely depending on the particular sport," Barman said. "But generally speaking, the proposed legislation should be a positive" to many teams' values.
The language has been inserted into other bills in recent years but never enacted. Major league baseball has been among the strongest advocates lobbying for the change, congressional aides said.
In 2002, Forbes magazine estimated that American major sports franchises totaled $41 billion in value. A 5 percent increase would mean a $2 billion boost in their cumulative value.
In April, the magazine estimated that the New York Yankees are worth $832 million. The lowest-valued team, the Montreal Expos, is worth $145 million, the magazine estimated.
The language would let owners deduct the entire value of their sports franchises — including broadcasting contracts, players' contracts and concessions — from their income taxes over a 15-year period.
Under current law, only players' contracts can be written off, but only up to half a franchise's value and only for the duration of those contracts, generally just a few years.
The provision is in both House and Senate versions of a bill aimed at ending corporate tax breaks that international trade courts have ruled is an illegal export subsidy for U.S. companies.
The sweeping bills have become laden with tax provisions for many specific industries. The two chambers hope to approve a compromise version of the measure and send it to President Bush (news - web sites) after lawmakers return from their summer break in September. Because the sports language is in both bills, it probably will be in the compromise.
The language was included by the bills' authors, Senate Finance Committee Chairman Charles Grassley, R-Iowa, and House Ways and Means Committee Chairman Bill Thomas, R-Calif.
Congress' Joint Tax Committee, which is the official analyst of tax legislation for lawmakers, says the provision would raise $382 million for the government over the next decade.
It was included because "it's the right policy choice" and because lawmakers "were looking to bring down the overall cost of the legislation," said Christin Tinsworth, Thomas' spokeswoman.
Lehman Brothers' Willens said, however, the language would lose money over the longer run because the tax written off by teams eventually would exceed deductions they would be entitled to under current law.
After many years of uncertainty and battling between taxpayers and in the Internal Revenue Service (news - web sites), tax laws were rewritten in 1993 to let companies write off intangible property, such as copyrights, over 15 years.
Sports teams were exempted from that law and have faced continued disputes over their tax liabilities. The current legislation would end that exemption.