New Tax Bill Could Save Sports Owners Millions: Admittedly, I write very little about tax law, mostly because I don't understand it. Thankfully, Duff Wilson of the New York Times explains how one sentence in the new congressional tax bill could save the owners of professional sports teams millions of dollars:

The measure allows owners to write off the full value of their franchises over 15 years; under current tax law, they can write off only the value of players' contracts over three to five years.



The change might give a $2 billion windfall to pro sports owners, as bankers estimated it would add about 5 percent to the value of professional franchises, which was estimated at $41 billion over all by Forbes magazine in 2002. The actual effect will vary from team to team.



The Congressional Joint Committee on Taxation contends that the new provision will increase taxes paid by teams over the next 10 years, particularly in the first few years.



But Martin A. Sullivan, a former committee tax analyst, writing for Tax Notes, a nonpartisan publication, said the change would almost certainly mean that team owners would start paying less in taxes within a few years and into the future and that franchise values would rise.



Robert Willens of Lehman Brothers in New York estimated that the Jets, purchased for $635 million in 2000, would have been worth at least $690 million if the new tax rules had been in effect at that time.



The change affects only newly acquired franchises, but by making them more valuable in a future sale, it allows existing owners to set higher prices and borrow more money at better rates. Teams with larger television contracts are expected to benefit the most by writing off the value of those contracts against profits. Sports franchises were put under separate tax rules in 1993.



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You can read my original post on this topic here. I think I explained it pretty well.

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