A TAXING SITUATION : A Proposal to Eliminate Tickets as a Business Deduction Is Threatening to Upset the Economics of Several Sports

If there is tax reform, and if it does include the elimination of that corporate perk known in board rooms everywhere as the deductible ducat, then you will likely have some elbow room at Dodger Stadium next year.

Furthermore, it may be just you and Jack Nicholson, front row at a Laker game. There’ll be no long beer lines at the Sports Arena, no waiting list for your own luxury suite, at $30,000 per, at Anaheim Stadium.

Yes, friends, if President Ronald Reagan’s proposal to eliminate tickets to sports events as a business deduction gets approval in the fall session of Congress, sports could very well be returned to you real fans, you folks who pay for your own tickets and don’t go partners with the IRS every time the Celtics come to town.

Once more, sports will belong to you poor miserable boobs who file the short form.

Of course, if you believe everybody connected with the business of sports these days, there are only about two dozen of you who have ever had to pay for your own ticket or who never enjoyed a nice write-off in the midst of a hot pennant chase.

You thought the Coliseum looked vast before? Wait until the guys in the three-piece suits, in town to do a little business, disappear into some other tax deduction, where the Cracker Jack still counts as a business expense on the ol’ debit ledger.

Here are some figures from the accountants of sport:

--Major league baseball says that 46% of season-ticket sales were generated by corporations. The Dodgers, however, say that as many as 80% of their season tickets get snapped up by business every year.

--The National Hockey League says 62% of its tickets go to business.

--The National Basketball Assn. puts the figure at 51% of season-ticket sales.

--The National Football League has a similar figure for season-ticket sales, although virtually all of the luxury suites are listed in the names of businesses.

Think about it. Last time you were at a game, didn’t you notice a lot of business getting done--contracts signed, votes taken, companies merged, minutes read? Oh, sure you did.

The one thing that has come out of all this alarm over the tax proposal is the news that the business of America is no longer business, as President Calvin Coolidge once said. Now, according to all the surveys, the business of America is going to sporting events.

Here, apparently, is the real cry of board rooms everywhere: “Take me out to the ball game!”

But that’s going to stop, or at least a lot of it will, if business loses the tax write-off it has so long enjoyed.

The expense of entertaining clients or business associates at sporting events has always been deductible, meaning that, depending on such things as tax brackets, the pair of season tickets at Dodger Stadium that would cost you short-formers nearly $1,000 really costs business just a fraction. You would buy a season ticket, too, if you could get that kind of break.

Since, up to now, you real--not three-piece suited--sports fans haven’t been buying those tickets, and since you probably never will, sports is understandably concerned at the potential loss of so many three-piece-suited season-ticket buying fans. Panicked would be a good word, too.

Russell Granik, executive vice-president of the NBA, has said: “We think this proposal is profoundly unfair and discriminatory and unreasonably picks on sports and other business. It would have a severe negative impact on the NBA and all professional sports.”

Lee MacPhail, head of major league baseball’s Players Relations Committee, has said: “If they are not able to take the normal business deduction for this, it’s going to drastically affect the season-ticket sales.”

John Ziegler, president of the National Hockey League, is on record as saying: “The NHL is opposed to such legislation. We were opposed to it when it was proposed by the Carter Administration and we are still opposed to it. The league fears that it could be harmful to some teams, arenas and the people employed by both.”

Bill Giles, president of the Philadelphia Phillies, established the tone for all the franchise owners with this: “This proposal clearly threatens the economic viability of sports franchises, many of which are already losing money.”

The proposal would affect more than just the traditional major league sports. At a golf tournament such as the Los Angeles Open, about 70% of the funds are generated by corporate sponsors, some of which spend more than $80,000 for hospitality tents, tickets, dinners, pro-am spots and so on. All deductible, of course.

Said Jim Cook, who puts together the World Series of Golf, among other tournaments: “It would be disastrous if it passes.”

Robert Leo of the Los Angeles Junior Chamber of Commerce, director of the Los Angeles Open, a charity tournament, is really concerned. “There are two ways of giving,” he said. “One is through donations and the other is through marketing. If marketing was eliminated, we’d have to retool to respond because our sponsors have, in the past, gone the marketing route. Traditionally, corporate giving is not as high.”

Now if you’re a cynic--if you use the short form--you might wonder, as does Reagan, whether this business-deduction business is at all necessary, whether you really need a circus tent at the Riviera Country Club to get your business done.

Well, who really knows? Business gets done in strange ways. There was a time, you may remember, when business couldn’t get done without three martinis, so there you go.

The business point of view is that lots of business gets done in informal situations such as Raider games. Good will is exhibited, contacts made, customers entertained. And it’s a relatively cheap thrill, too.

“It’s a good business investment,” said one corporate executive. “The clients enjoy it, people come to expect that as business entertainment and it’s not a real expensive way to entertain.”

Cynics may question whether it is a necessary way to entertain. Why not have the guy over to your house, watch some Monday night football?

But the point is not whether business needs the write-off on its season tickets but whether sports needs the season tickets that get written off. Business may very well be conducted in circus tents that are not actually on site at a country club. But will golf tournaments continue to be held if they are?

First, what does sports anticipate business doing if the proposal passes as written? Mostly, nobody knows. A spokesman for the Rams says the club has adopted a wait-and-see policy. “We just can’t tell,” he said.

Bill Hardekopf, ticket manager at USC, can’t tell either. “We haven’t run up against too many unique questions,” he said. “We’ll have to wait and see if it passes.”

He knows, however, that as much as half of his market is what he calls the corporate segment, “people coming back to rub elbows with the alums.” Knowing that, he anticipates “a slight dropoff, with a great number of substantial companies renewing.”

At the Forum, where the Lakers have just won an NBA championship, there are no signs of a soft corporate segment. “This is a bad time to ask, right (after) we’ve won a world championship,” said Steve Chase, Forum director of marketing. “Most people know that government likes to send up trial balloons and that this (tax proposal) might change 15 times.”

Chase said that the demand for season tickets, to the Lakers and Kings, has been continuing apace, down a little from the 1984 Olympic year but certainly up to the standard of the previous year. Even sales of the super-expensive Senate seats, good for all Forum events, “are going true to form.” And Chase said that probably 98% of those are bought by businesses.

Chase is not as concerned as some of sports’ moguls are. “First of all, most people (season-ticket holders) have very good seats,” he said. “The fact they’re tax deductible is a nice advantage but I don’t think it’s a major reason. I doubt that they’d be willing to give them up.”

Still, he’s a little concerned. “If passed, it won’t do any good and it might do some harm,” he said. “If corporations do, in fact, cancel seats, because of the loss of deductibility, prices will have to go up. That’s a loss of income unless everybody in the less expensive seats pays more.”

On the other hand, said Chase, the corporations that do bow out, might bow back in before too long. “All it takes is for one large accounting firm to entertain clients that way and then the next guy has to do the same. They’d all be doing it again.”

But why should sports know how business is going to react if business doesn’t know. Calls to large companies in the Southland produced such responses as: “That would be premature,” and “We could only speculate.”

One large-company spokesman said: “We can not comment on particulars of the tax package until it is passed as a whole.”

Reminded that the question merely involved buying tickets to baseball games, he was unmoved. “We can not comment.”

A spokesman for Hughes Aircraft did say: “The company will buy fewer tickets in the event the tax proposal passes.”

That’s all Hughes would say but compared to the range of corporate comments elicited on the subject, that one comment proved to be a veritable gem.

Probably a better way to determine corporate policy is to talk to Fred Ross of the Front Row Center ticket agency, a broker for sports as well as entertainment tickets.

According to Ross, it’s all speculative at this point but, all the same, he’s had recent conversations with three businessmen who write off their Laker season tickets.

“They are fans and use the tickets themselves but they hold the tickets in the company name,” he said. “They don’t want to lose the rights to the tickets because they’re damn good seats. By the same token, (because of the tax proposal) they’re interested in selling a portion of the season ticket to us.

“Unless these guys can find a market for some of their tickets, they probably won’t renew them. I’d like to have them (for resale) but I have to think, these guys are dumping them. I don’t know if I can sell them.”

Ross, who estimates that 25% of his business is done with other businessmen, predicts dire consequences if the proposal is passed. “It will hurt our business and it will hurt a lot of businesses,” he said. “Whether or not the general public will buy the tickets that suddenly become available, that’s questionable. A season ticket is still a luxury and most were for business purposes. If the tax plan goes through, sports will hurt.”

Ross, who normally buys a number of Senate seats at the Forum every year, even though he says the near-$6,000 price is inflated, plans to cut way back this year in anticipation of a softening of the corporate market. “I feel that our sales will drop off and I can’t eat too many tickets.”

But nobody knows whether the proposal will pass and nobody really knows what will happen if if it does. Certainly, some companies of less than Fortune 500 status will cut back or entirely eliminate the purchase of tickets to sporting events if the tickets are no longer tax deductible. Just as certainly, many large companies will continue to entertain this way.

And if they don’t?

Then they will entertain some other way, some other deductible way.

“The way it is now, a lot of business is done around sporting events because the atmosphere is conducive to carrying on relationships,” said Cook, who arranges for tax deductible corporate sponsorships at several major golf tournaments.

“They’re not buying tickets and hospitality centers for fun. It’s business and it’s a business deduction. Without the business deduction offered by sports tickets, they’ll stop doing business there and they’ll do business somewhere else. Where it’s deductible.”

If that happens, the rest of us can enjoy our new space at stadiums and arenas around the country. And we can watch a game without some businessmen interrupting our seventh-inning stretch with a sudden spread-sheet analysis, or whatever businessmen do that used to get deducted.

Of course, you may have to buy a slightly more expensive ticket if, as the tax proposal insists, the business of America goes elsewhere. And then where will you go?