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Monday, July 30, 2018

As Companies Lose Tax Deduction for Tickets, Baseball May Pay the Price

One point not mentioned in the article: Much involving the rush for new facilities (in baseball and other sports) in the last few decades has involved trying to increase luxury boxes, and to otherwise appeal to this corporate audience. If they stop buying tickets, does the demand for new facilities decline?

Also as a side-note: I’ve used the print version of the headline rather than the online one- felt it was a lot clearer, and it didn’t violate Betteridge’s Law.

Tyler Graffeo, the president of Interstate Truck Center, generated a lot of business while entertaining clients in luxury suites at Royals baseball and Chiefs football games in Kansas City, Mo., the past three years.

But on Jan. 1, something changed that helped push Graffeo to give up at least one of those suites. Built into the Tax Cuts and Jobs Act, which went into effect this year, was a provision stripping out the 50 percent deduction for business entertainment expenses from the tax code.

Until this year, the $200,000 spent on the seats in a suite at the Royals’ Kauffman Stadium effectively cost the business $100,000, and a concern like Interstate Truck Center saw the expense as an investment in happy clients. The team, of course, funneled that money toward its profit margin, general expenses and player payroll.

 

QLE Posted: July 30, 2018 at 08:22 AM | 18 comment(s) Login to Bookmark
  Tags: revenues, stadium issues, taxes, tickets

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   1. Bote Man Posted: July 30, 2018 at 09:20 AM (#5717878)
From the article:

In fact, Major League Baseball and the other leagues are more focused on the confusing “like-kind exchanges” portion of the same legislation, which seeks to place a taxable value on traded players’ contracts and may result in teams having to pay a tax on certain trades.
   2. bfan Posted: July 30, 2018 at 11:15 AM (#5717929)
Business entertaining does not need to be subsidized by the general public. I am happy they did away with this deduction, and if it forces sports (and concert) ticket prices to lower levels that reflect the true cost that people are willing to pay for that type of entertainment, then all the better.
   3. Sean Forman Posted: July 30, 2018 at 12:05 PM (#5717961)
Until this year, the $200,000 spent on the seats in a suite at the Royals’ Kauffman Stadium effectively cost the business $100,000, and a concern like Interstate Truck Center saw the expense as an investment in happy clients. The team, of course, funneled that money toward its profit margin, general expenses and player payroll.


I'm not an accountant, but I own a business and this isn't right. The $100k wasn't free money to the business, but it could be used to offset the tax they would have paid anyways, so the savings is more like $20k given a 20% corporate tax rate which they would have paid if they'd just pocketed the $200k.
   4. TomH Posted: July 30, 2018 at 12:24 PM (#5717970)
Hurrah for this tax code change.
   5. McCoy Posted: July 30, 2018 at 12:29 PM (#5717971)
Yeah, it is misunderstood.

Business entertaining does not need to be subsidized by the general public. I am happy they did away with this deduction, and if it forces sports (and concert) ticket prices to lower levels that reflect the true cost that people are willing to pay for that type of entertainment, then all the better.

It wasn't subsidy but in fact a tax. The government taxes my profits and the government has decided that "business entertainment" isn't a true cost that can be fully deducted from revenue. If I'm a Burger King the cost of my burger patties is fully deducted from my revenue before I'm taxed. If I buy a fan for the restaurant I deduct it before getting taxed. If I shop my competitors I didn't get to fully deduct the cost of that from my revenues before I get taxed.

Costs of doing business shouldn't be taxed. So what if that leads to businesses spending more on "costs"? That's a good thing. We'd rather the government used that money to buy stealth bombers and fly Trump to Mar a Lago?
   6. AuntBea calls himself Sky Panther Posted: July 30, 2018 at 01:06 PM (#5717989)
The government taxes my profits and the government has decided that "business entertainment" isn't a true cost that can be fully deducted from revenue.
To some extent, they decided this a long time ago. That's why the deduction was only 50% and not 100%.

The tax policy issue is primarily one of whether "business entertainment" (as actually practiced by those who would take a deduction for it, rather than in some idealized sense), is really a cost of doing business. You've assumed the conclusion.
   7. Bote Man Posted: July 30, 2018 at 01:22 PM (#5717998)
Advertising is a necessary cost of doing business, unless the business relies solely on word-of-mouth. I'm not so sure business entertainment is a necessary cost of doing business, since it is optional how and where such entertainment happens.
   8. AuntBea calls himself Sky Panther Posted: July 30, 2018 at 01:36 PM (#5718009)
Bote Man's post reminded me that the tax code actually uses the qualifiers "ordinary" and "necessary" for business deductions. Obviously that leaves a lot of room for interpretation, but it's clear that not just any expense related to a business is deductible.
   9. villageidiom Posted: July 30, 2018 at 02:50 PM (#5718044)
The tax policy issue is primarily one of whether "business entertainment" (as actually practiced by those who would take a deduction for it, rather than in some idealized sense), is really a cost of doing business.
The headline suggests an expectation that it will no longer be seen by companies as a necessary cost without the subsidy.

All that aside, even if it were a necessary cost, it can only be borne by businesses large enough to afford it, or businesses in which the owner is good with spending company profits on personal enjoyment. Subsidizing larger businesses' efforts to get even larger is not cool. As for the latter... Hey, your business, your choices, but I'm the type of client who wants to see the money I'm paying being put to use for me not you. That stuff is a bad look, to me.

I know a guy who owns a landscaping company. He was also a little league coach, then a Babe Ruth league coach, as his son progressed. Wouldn't you know it, the landscaping company had extra space in a warehouse so they installed an indoor batting cage - y'know, so "the employees could have some fun in their down time", like an office might have a ping-pong table or whatever. I talked to one of the guys who worked for him, and sure enough, the employees never had down time to use the cage - but the owner's kid was in there every damn day from age 9. My son was on his team one year, and a few times the guy scheduled practices at the warehouse.
   10. You Know Nothing JT Snow (YR) Posted: July 30, 2018 at 03:06 PM (#5718059)
As long as my company can keep our 4 season tickets at Fenway I don't care what shakes out. I've only been here a year and a half but I quickly became the go-to person for taking guests to ballgames because I know so much useless baseball stuff.
   11. Bote Man Posted: July 30, 2018 at 03:13 PM (#5718064)
I bet you regale them with how much revenue-sharing money the Red Sox have to squander on lesser teams, huh???
   12. You Know Nothing JT Snow (YR) Posted: July 30, 2018 at 03:19 PM (#5718066)
Oh I make sure they don't leave the park without knowing that Bud Selig and George Mitchell conspired to protect the most juiced-up team in baseball from facing the music for their chicanery.
   13. Misirlou doesn't live in the restaurant Posted: July 30, 2018 at 04:53 PM (#5718114)
We'd rather the government used that money to buy stealth bombers and fly Trump to Mar a Lago?


They're going to buy stealth bombers and fly Trump to mar-a-lago regardless.
   14. What did Billy Ripken have against ElRoy Face? Posted: July 30, 2018 at 04:58 PM (#5718116)
How about they take Trump on a stealth bomber and drop him on Mar-a-Lago?
   15. bfan Posted: July 30, 2018 at 05:37 PM (#5718130)
We'd rather the government used that money to buy stealth bombers and fly Trump to Mar a Lago?


No; I would much rather it be spent in monthly checks sent to an able-bodied person who is on disability because he/she got in front of the right administrative judge who didn't care what he/she decided, because it was someone else's money he/she was spending (agreeing to provide). Or for studies on the sex habits of fruit flies; you know-really important stuff.
   16. Bhaakon Posted: July 30, 2018 at 07:11 PM (#5718173)
We'd rather the government used that money to buy stealth bombers and fly Trump to Mar a Lago?




They're going to buy stealth bombers and fly Trump to mar-a-lago regardless.


And pay for it no small part with borrowed money to boot.
   17. ERROR---Jolly Old St. Nick Posted: July 30, 2018 at 07:35 PM (#5718182)
We'd rather the government used that money to buy stealth bombers and fly Trump to Mar a Lago?

Let's compromise and buy Trump a Russian state funeral and let him lie in state in the Kremlin. With an eternal flame Golden Shower to mark the occasion.
   18. A Baseball Fan Posted: July 30, 2018 at 10:30 PM (#5718269)
Oh no, not the $9 billion baseball industry

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