Abstract
Major professional sports in America, according to several estimates, is a $225 billion industry. While fan interest may wax and wane as athletes and organizations are beset by scandal and, even worse, mediocrity, the enterprise of sports continues to thrive and to occupy a disproportionate share of the public consciousness. Sports leagues today are immensely profitable businesses – more interested, perhaps, in the bottom line than the box score. Yet, somewhat anomalously, the purveyors of sport claim to be providing a public service – to the fans and to the communities in which they play. Sports leagues and franchises routinely assert that they, more so than most private enterprise, are entitled to a sizable share of the public fisc to finance their expansion. State and local governments have responded in unprecedented ways; during the 1990s alone, taxpayers shelled out approximately $11 billion to fund new sports facilities for the owners of major American sports franchises.
As the sports industry has come to rely on public funding for its rapid growth, the Internal Revenue Service (“IRS,” or “Service”) has attempted to ensure that these increasingly complex and profitable businesses are timely and accurately paying their taxes. The tax law tirelessly attempts to keep pace with the sophisticated economic transactions that are now the hallmarks of the business of American sports. This paper will examine selected United States federal income tax issues that arise in sports, with a nearly exclusive emphasis on the franchise (as opposed to the athlete) as taxpayer.
While sports owners inevitably grapple with ordinary issues of business taxation, the peculiarities of sports involve a unique set of problems that may require particular scrutiny. Part II of this paper will address issues relating to prepaid income and the timing of income recognition associated with common sports transactions, as well as a 2004 Revenue Procedure that may offer greater flexibility and tax planning alternatives to sports franchises. Part III examines the singular role of certain intangible assets in the tax profile of sports teams and chronicles the evolving tax treatment of player contracts. In this area, recent legislative and regulatory action stands to affect significantly the valuation of sports franchises and the structuring of their acquisitions. Part IV takes a bit of a digression and briefly addresses the well publicized topic of the “record home-run ball.”
Recommended Citation
Holo, Robert and Talansky, Jonathan
(2010)
"Taxing the Business of Sports,"
Florida Tax Review: Vol. 9:
No.
1, Article 4.
Available at:
https://scholarship.law.ufl.edu/ftr/vol9/iss1/4