July 05, 2007

Michigan sports subsidy: The breakdown

With the kind assistance of Detroit Free Press reporter Chris Christoff, I've tracked down the text of the Michigan tax bill (PDF here) that includes new tax breaks for local sports teams. The relevant sections, with analysis below:

Sec. 410. (1) For tax years that begin on or after January 1, 2008 and end before January 1, 2013, an eligible taxpayer may claim a credit against the tax imposed by this act equal to the following:

(a) For the 2008 through 2010 tax years, 65% of the eligible taxpayer's total tax liability imposed under this act not to exceed $1,700,000.00.
(b) For the 2011 tax year, 45% of the eligible taxpayer's total tax liability imposed under this act not to exceed $1,180,000.00.
(c) For the 2012 tax year, 25% of the eligible taxpayer's total tax liability imposed under this act not to exceed $650,000.00.

(2) As used in this section, "eligible taxpayer" means a taxpayer that satisfies each of the following:

(a) Is, collectively or individually, including through affiliated companies, an owner, operator, manager, licensee, lessee, or tenant of more than 1 facility or stadium, including grounds and ancillary facilities, that has a capacity of at least 14,000 patrons and is primarily used for professional sporting events or other entertainment.
(b) The owner, operator, manager, licensee, lessee, or tenant as described in subdivision (a) has made a capital investment of not less than $250,000,000.00, collectively or individually, including through affiliated companies, into the construction cost of a facility or stadium for which the taxpayer qualifies for this credit.
(c) The owner, operator, manager, licensee, lessee, or tenant as described in subdivision (a) has not received proceeds from a state appropriation, a public bond issue from a local unit of government or public authority, or a state or local tax or fee to assist in the construction or debt retirement of the facility other than a state or local tax or fee from a public entity for road or infrastructure assistance.

What this all means is that the Detroit Tigers, Red Wings, and Pistons apparently don't need to spend additional money on renovating their current buildings to be eligible for the tax credit - all they need to do sit back and continue to exist. The value of the tax cut is capped at $6.93 million per entity, meaning if all three teams were to max out their credits, the state would be out a little over $20 million that it otherwise would have collected.

As for how the Tigers get to qualify even after receiving at least $115 million in public money, that's still unclear, but I'm sure one of those clever qualifiying clauses has something to do with it - maybe in Michigan, Ferris wheels count as "infrastructure"?