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Sports Entertainment Strikes Out Under the New Tax Bill


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6/3/2018
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Sports Entertainment Strikes Out Under the New Tax Bill

The boys of summer have been back for a few months now, and early estimates are that attendance is down considerably.  Much of the drop-off is attributable to the weather and a cold wet start to spring.  But, how much of that drop-off is due to the Tax Cuts and Jobs Act?

Under the Tax Cuts and Jobs Act, sporting event tickets are no longer deductible.  Business entertainment occurring outside the office is now a no-no when it comes to tax planning.

Sales and business development has always been a face-to-face sport.  And, nothing helps to cement a bond and form a bridge between two companies doing business together than when representatives of those businesses who share a love for local teams and sport in general get together to talk shop and enjoy a game together.  So, how will the elimination of meals & entertainment related expenses under the TCJA effect business entertainment, and what effect will it have on the sport’s business?

Some of the big spenders on sports tickets and other business perks are banks, financial services, airlines, automakers, telecoms and media.  Lobbying firms, marketing conglomerates, and other players also spend heavily on this type of networking.

What is still deductible?

One area where deductibility remains is hosting employee-centered events.  Think the annual employee-appreciation getaway to Aruba.  But, under the new tax law, you might want to pick a local restaurant … as much of that Aruba getaway wouldn’t pass muster.  The availability of even these deductions is very limited and subject to a variety of complex rules.

Qualified employee recreation is still fully deductible provided it is for the benefit of the employees and does not discriminate to the benefit of shareholders, officers, or other highly compensated employees earning over $120,000.  Recurring events may not qualify and are subject to special rules.

Annual or periodic conferences which people regularly travel to outside the office may also be subject to clawback, and this will be the subject of an upcoming article.

What about meals?

Meals are still deductible in a more limited fashion, as discussed in other articles on this website.  The IRS is expected to crackdown to make sure there is a clear business purpose and to more stringently enforce the limitations on these deductions versus in-office employee accommodations.

More guidance is expected this summer, but even thought he 50% deduction for entertainment has gone away, meals connected with a business entertainment outing are expected to probably still be deductible.  Thus, a steak dinner at a high-end steakhouse is probably still a valid business activity, but skybox seats are not.

And so the boys of summer go on, but will corporate America be watching?

Year-over-Year Attendance

Rk

Tm

2017 G

2017 Attendance

2017 Attend/G

2018 G

2018 Att

2018 Attend/G

YoY Diff

YoY Diff/G

1

ARI

30

682,703

22,757

30

760,776

25,359

78,073

2,602

2

ATL

26

756,112

29,081

26

792,388

30,476

36,276

1,395

3

BAL

27

748,528

27,723

27

523,822

19,401

-224,706

-8,322

4

BOS

28

992,340

35,441

28

957,054

34,181

-35,286

-1,260

5

CHC

26

1,006,526

38,713

26

968,952

37,267

-37,574

-1,445

6

CHW

27

546,495

20,241

27

435,658

16,135

-110,837

-4,105

7

CIN

28

612,692

21,882

28

499,739

17,848

-112,953

-4,034

8

CLE

29

638,419

22,014

29

547,792

18,889

-90,627

-3,125

9

COL

25

855,847

34,234

25

853,239

34,130

-2,608

-104

10

DET

30

836,580

27,886

30

596,315

19,877

-240,265

-8,009

11

HOU

29

809,592

27,917

29

1,027,912

35,445

218,320

7,528

12

KCR

29

764,255

26,354

29

577,787

19,924

-186,468

-6,430

13

LAA

30

1,084,755

36,159

30

1,118,858

37,295

34,103

1,137

14

LAD

31

1,385,013

44,678

31

1,410,986

45,516

25,973

838

15

MIA

28

573,298

20,475

28

295,888

10,567

-277,410

-9,907

16

MIL

29

833,826

28,753

29

966,356

33,323

132,530

4,570

17

MIN

25

543,267

21,731

25

555,589

22,224

12,322

493

18

NYM

27

812,544

30,094

27

798,396

29,570

-14,148

-524

19

NYY

31

1,203,965

38,838

31

1,280,767

41,315

76,802

2,477

20

OAK

30

512,799

17,093

30

477,502

15,917

-35,297

-1,177

21

PHI

28

764,029

27,287

28

704,284

25,153

-59,745

-2,134

22

PIT

30

706,693

23,556

30

488,783

16,293

-217,910

-7,264

23

SDP

34

852,510

25,074

34

863,992

25,412

11,482

338

24

SEA

30

710,405

23,680

30

724,913

24,164

14,508

484

25

SFG

25

1,043,247

41,730

25

970,850

38,834

-72,397

-2,896

26

STL

28

1,205,353

43,048

28

1,153,415

41,193

-51,938

-1,855

27

TBR

24

365,280

15,220

24

337,508

14,063

-27,772

-1,157

28

TEX

30

972,915

32,431

30

830,988

27,700

-141,927

-4,731

29

TOR

29

1,096,651

37,816

29

775,797

26,752

-320,854

-11,064

30

WSN

27

839,128

31,079

27

785,124

29,079

-54,004

-2,000

 

Total

850

24,755,767

29,124

850

23,081,430

27,155

-1,674,337

-1,970

https://www.baseball-reference.com/leagues/MLB/2018-misc.shtml

https://www.forbes.com/sites/maurybrown/2018/04/12/heres-the-real-reasons-mlb-attendance-is-down/#f005c1536f23

http://www.philly.com/philly/sports/phillies/mlb-attendance-phillies-marlins-2018-20180501.html

https://twnn33vdng1q02nyjt10w160-wpengine.netdna-ssl.com/wp-content/uploads/kpmg_ticketmanager_tax_law.pdf

http://www.chicagotribune.com/business/ct-biz-tax-law-entertainment-deduction-2018041-story.html



Category: Tax Law


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