Sports Fights a Taxing Battle : Reagan Plan to Cut Ticket Deductions Has Created a Stir

The biggest battle in sports these days is not in the World Series or the Super Bowl. It’s in the White House and Congress over deductions for business entertainment, including corporate ticket purchases.

Baseball, basketball, football, hockey and golf say that Reagan Administration proposals to eliminate or limit the deductions would cut deeply into ticket sales, driving up prices, hurting attendance and squeezing budgets already stretched by ballooning salaries.

They miss no opportunity to lobby.

Baseball Commissioner Peter Ueberroth even coupled an announcement of the end of the baseball strike with a pointed plea for relief from the tax proposal. Since negotiators had reached quick agreement as urged by Congress and Reagan, he suggested, Congress and Reagan should return the favor by exempting ticket sales from the tax rewrite.

Not everyone on Capitol Hill sees it that way.

“If you’re considering taxing people’s Medicare benefits and freezing their Social Security cost-of-living increases, how can you justify deducting the cost of baseball tickets?” said Rep. Fortney Stark, D-Calif., a member of the tax-writing House Ways and Means Committee. “In cases like this, you have to look at what’s most important.”

Some insiders, however, say that Congress will come up with a compromise package that will allow businessmen to deduct a moderate amount--perhaps $20 per person--for an outing. Reagan’s proposal was for a $25 total limit for business meal deductions, no matter how many people were included.

“I look for similar treatment of meals and entertainment after this is worked out,” said Clete Uhlenhopp, chief legislative aide to Ways and Means member Henson Moore (R-La.). “Nobody’s doing the fine-tuning on that idea yet, but that’s what a lot of members would probably find acceptable.”

But even if a compromise is found for individual ticket purchases, many companies say they will reconsider buying season tickets or luxury boxes now written off as a business expense.

That could hurt.

Baseball says that more than 46% of its gate receipts come from business spending. The NBA says its share is 51%. The NFL’s is about 50%, the NHL’s better than 60%. In tennis, it’s about 50% and in golf about 70%.

Corporate income can be the difference between making a little money and losing a lot of money, said Dick Glover, vice president and chief administrative officer of the NBA’s Washington Bullets.

“The key to a profitable sports franchise is up-front sales that you know you have coming in before the season starts,” he said. “We anticipate losing 30% to 50% of those advance season tickets if the tax plan passes. Only the most wildly successful franchises, of which we aren’t one, can survive it without raising ticket prices.”

The NBA’s executive vice president, Russell Granik, said the tax proposal is “profoundly unfair and discriminatory and unreasonably picks on sports and other business. It would have a severe impact on the NBA and all professional sports.”

Jim Cook, who coordinates the NEC World Series of Golf, said the proposal “would be disastrous if it passes. . . . The way it is now, a lot of business is done around sporting events because the atmosphere is conducive to carrying on relationships. . . . 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.”

Jerry Hurley, executive vice president of the National Club Assn., said golf clubs will lose nearly one-fifth of their revenue if the tax reforms become law.

“Our figures show that clubs will lose 18% of their revenue and that 5,000 clubs will have to lay off 81,000 full-time employees if the bill passes,” he said.

Nevertheless, Frank Hannigan, senior executive director of the U.S. Golf Assn., said it is unrealistic to expect golf to be exempted.

“If you can’t write off sky boxes in Giants Stadium in the Meadowlands, you won’t be able to get an exclusion for golf,” Hannigan said.

The NFL professes to be less concerned because of its lucrative television contract that splits profits evenly among its teams. And popular football teams who regularly make the year-end playoffs aren’t concerned about the proposed tax bill at all.

“We’re sold out of season tickets with a waiting list of 6,000 people,” said Joe Gordon, spokesman for the NFL’s Pittsburgh Steelers. “I think the firms in the Pittsburgh area would buy tickets if there were no tax deduction at all. It’s a wise business investment for them even without it.”

Former Sen. Birch Bayh, a lobbyist for the NBA, agrees. But he says it’s precisely because a box seat is a perfect place to discuss a business deal that its cost should be deductible.

“If a company takes an ad out in the Washington Post, it may deduct the cost of that ad as a business expense,” Bayh said. “Well, a lot of smaller companies can’t afford advertisements, but they can afford to treat customers to a ballgame and get the same points across.”

Team executives and lobbyists are virtually ignoring one Administration proposal to lengthen by a year or two the time during which any company can depreciate vehicles, equipment and buildings.

In the case of sports franchises, players also are depreciated as they grow older and their skills are likely to diminish.

Reagan shortened the depreciation periods in 1981 to benefit corporations but lengthened most of them in 1982 and 1984.

“We’ve lived with those changes before, and we can handle what’s been offered now,” said one American League baseball executive who asked not to be identified. “Just don’t let the government kill the entertainment deduction.”