As we near the end of the first month of Joe Biden’s presidency, it may be interesting to investigate further what Biden’s impact on the sports may be. Beyond the previously highlighted potential changes in environmentally-mind legislation, the current administration may invoke impactful financial regulations.
First, let’s take a look at the existing landscape. In 2017, when players knelt during the national anthem in protest against police brutality, Donald Trump extended his attack on the National Football League to tax policy. He took to Twitter citing the NFL’s “massive tax breaks” and, as a result, highlighted the stadium-subsidies that exist at state and local levels. Some of these subsidies rely on the ability to issue municipal bonds and generate income, which is then exempt from federal taxes, allowing owners to take advantage of cheaper financing. The foundational assumption here is that the federal government shouldn’t indirectly tax local governments on projects that support public infrastructure. However, the delineation of what is in the public’s interest, and therefore can be exempt from federal taxes, lacks clarity. Although most states have restrictions rooted in the Public Purpose Doctrine that bar them from using public money to support private enterprise, the extent to which sports stadiums are in the public’s interest has been a malleable issue.
The 1954 Supreme Court ruling in Berman v. Parker may help contextualize why this issue is such a debate. In this landmark case, the Court unanimously ruled that the term “public purpose” may be extended to uses that serve “public welfare,” including those private uses that promote “public safety, public health, morality, peace and quiet, [and] law and order.” Therefore, the legal definition of “public interest” is subject to contestation. During the time of Trump’s tweet in 2017, subsidies for sports stadiums had cost the federal government $3.7 billion since 2000 (follow this link for a closer look at which stadiums were financed with tax-exempt municipal bonds). Under this system, fans may even be unknowingly financing the construction of their rival team’s new stadium. Many suggested that Trump’s tweets did not mean much since his administration’s actual tax plan did not reflect the same energy.
Unsurprisingly, stadium subsidies are a highly contested issue and have received pushback over the years from both the House and the Senate. Furthermore, in 2015, the Obama administration’s budget included a provision aimed at changing how tax-exempt bonds are issued in hopes of dismantling these stadium subsidies. Six years later, and the sports industry continues to benefit from stadium subsidies. For example, the most expensive Minor-League Stadium in history set to become the Pawtucket Red Sox home may cost taxpayers upwards of $150 million.
Another particularly timely example comes from reigning Superbowl Champions and the first team to host their own Super Bowl appearance, the Tampa Bay Buccaneers. To better prepare for a football season during the pandemic, Raymond James Stadium received upgrades to health and safety measures that cost over $10 million of federal funds. Notably, the Florida Supreme Court holds a history of allowing public funding to go towards recreational, entertainment, and tourism projects (e.g., Rowe v. Pinella Sports Auth., State v. City of Miami, State v. Orange County Indus. Dev. Auth, and more). However, this case comes with a bit of a twist since the funds came from the Coronavirus Aid, Relief, and Economic Security (CARES) Act as the upgrades aimed to address public health concerns and decrease infection risk. Some of the upgrades included touchless equipment ranging from sinks and soap dispensers to ticket scanners and credit card readers as well as a new parking lot PA system. However, in an article published last week, The Hill notes that these upgrades were not completed until most of the season was over, calling into question whether fans’ health and safety were the sole priority.
Regardless, the added layer of the pandemic and CARES Act only complicates the public interest question when it comes to private enterprise related to sports infrastructure. Phil Mattera, research director at Good Jobs First policy resource center, noted last fall, “The Trump Administration is paying little attention to how CARES Act funds are being spent or the track record of the companies receiving the aid.” Although not much has changed in terms of stadium subsidies since Obama’s efforts in 2015, the turnover of administrations in the White House could present new possibilities and restrictions, especially regarding CARES Act fund monitoring. The case of the Tampa Bay Buccaneers and how they have benefited from CARES Act funds highlights the potential for impact on the industry.
Regarding tax policy, the Biden administration has conveyed that changes are incoming. The official Biden Harris campaign website systematically defines their plans to put more pressure on big corporations. These changes will, of course, affect the wealthiest members of the sports industry, such as team owners and other executives, as they may consider fluctuations in capital gains tax, estate tax, and gift tax when making decisions. Sportico reported in October that the NFL sent out a memo to all executives across the 32 teams reminding them to inform the league of any ownership transactions before the end of the year. Although the league denies that the upcoming election had anything to do with the memo, Sportico emphasized that NFL owners and their families could have saved millions by making changes before the turnover towards Democratic leadership and the tax changes it may entail. Under the Biden administration, there is an increased likelihood that plans to end stadium-subsidies may re-energize.