Sports Skills
The owners might have a good argument to make, according to Laura Howell-Smith, managing director at Deloitte Tax LLP. The regulations seemed to narrowly define performance in the field of athletics to services by people who actually participate in an athletic event, she said. For example, it appears Congress was trying to prevent, say, a baseball player from forming a pass-through corporation that merely sold his own services, Howell-Smith said.
Team owners don’t necessarily have sports skills themselves and aren’t performing services in the field of athletics, she said. Franchises also make money not just from ticket sales but from selling TV rights, merchandise, concessions and myriad other business lines, according to Howell-Smith.
Ultimately, owners fighting to get the break are in the bizarre position of essentially arguing that sports make up a relatively small part of how a sports franchise makes money.
Major League Baseball Commissioner Rob Manfred this month wrote a letter to the IRS saying that the activities of baseball players “make up a de minimis amount of the total activities of all employees of a professional sports franchise.”
Minor League
At a recent American Bar Association panel with Treasury officials in Atlanta, one member of the audience went even further, arguing that minor league baseball fans don’t go to games to watch baseball.
“It’s really just the place you go to drink beer and have fun,” the attendee said. “You’re not paying your ticket to watch them play.”
Audrey Ellis, the Treasury official on the panel, seemed dubious.
“I would be hard pressed to say that’s not the field of athletics,” she said.