August 03, 2004
Congress mulls giving $2B tax break to sports teams
Talk about a lesson to read the fine print. The New York Times reported yesterday that a bill already passed by both the U.S. House and Senate would give sports franchise owners a $2 billion tax break by allowing them to depreciate the full purchase price of their teams.
The quick and dirty summary: For almost 50 years, sports teams have been taking advantage of a tax rule that allows them to "depreciate" their players over time, as if they were worn-out industrial machinery. (There are several problems with this - young players generally improve with time, teams already claim as an expense the costs of scouting and otherwise acquiring new players, etc. - but the IRS hasn't complained thus far.) Since it's essentially unknowable how much of a team's value is contained in its players, Congress finally acted in 1976, saying that over the course of five years, owners could write off as depreciation 50% of the price they paid for the team. The bill currently before Congress would ramp that all the way up to 100%, spread out over 15 years. The result, according to the Times, would be "a $2 billion windfall to franchise values," at the expense of the federal treasury.
The bill is headed for a conference committee of the House and Senate, with a final vote in both houses expected sometime in September. If you'd like to share your feelings on this with your elected representatives, you know where to reach them.
