Perks of team ownership
One of the biggest tax advantages of buying a sports team is the ability to write off at least part of the purchase price — which can be billions of dollars — against taxable income over 15 years.
This is similar to other businesses. For example, buyers of factory equipment can deduct their purchase costs over time. The big difference with sports teams, however, is owners can write off intangible assets, such as TV deals and player contracts, that are unlikely to go down in value in the future.
It can be argued that amortization potential is baked into the purchase price of sports franchises. If owners were suddenly unable to write off these intangible assets, it could affect team valuations.
“The effect of this, if it does happen, could be pretty devastating to the value of sports teams,” CNBC’s senior sports reporter Mike Ozanian said on a Feb. 7 broadcast.
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Learn MoreWhat about tax revenue?
It’s hard to imagine billionaire owners losing too much sleep over a tax bill.
“You don’t buy a sports team and hope to become wealthy; you’re a wealthy person and you buy a sports team,” Eric Nemeth, a tax partner at Varnum law firm, told Bloomberg. “It’s an elite club.”
The real question might be how much would ending these tax breaks help everyday Americans?
Garrett Watson, director of policy analysis at nonpartisan think tank Tax Foundation, estimates limiting deductions would have a relatively small effect — raising as little as hundreds of millions of dollars to at most a figure in the “low billions” over a decade, he told Bloomberg.
Nemeth also believes that existing owners would unlikely be hurt much by a tax change because the government would have difficulty applying it retroactively.
Any gains in tax revenue from team owners, however, might be wiped out by Trump’s other proposals. The nonpartisan think tank Committee for a Responsible Federal Budget estimates Trump’s recent tax priorities could reduce revenue by $5 trillion to $11.2 trillion overall over the next 10 years.
Hopefully the picture becomes clearer as Trump’s next tax bill takes shape.
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