Cady Stanton (Tax Analysts): W&M Exploring Perceived Disparity in Sports Team Pay Deduction

The top House taxwriter said his committee is considering whether expanding an upcoming cap on top earner salary deductions to all sports teams — not just those owned by publicly traded companies — could serve as a solution for concerns about unfair competitive advantage.

House Ways and Means Committee Chair Jason Smith, R-Mo., floated the idea of expanding the section 162(m) limitation on executive compensation deductions for publicly traded corporations to include privately owned sports teams during a June 30 committee hearing on tax issues in the sports industry.

While the majority of professional sports franchises aren’t operated as publicly held corporations, for the handful in the United States that are — the Atlanta Braves, New York Knicks, and New York Rangers — the expanded limitation would likely apply to deductions for top players’ salaries, as they are typically the highest-paid employees of a franchise.

Smith said the teams have told lawmakers they’re worried the provision could put them at an economic and competitive disadvantage to other teams when the provision goes into effect, and the committee is considering options for “how best to level the playing field.”

“One approach would be to apply the 162(m) limitation to all sports teams, not just the publicly traded ones,” Smith said.