6 hours Ago
NEW YORK: The Atlanta Braves, the country’s only publicly traded Major League Baseball (MBL) team, is facing off against the US tax code in a lonely battle that threatens to cost the franchise millions. A little-known tax rule soon to go into effect will restrict public entities from deducting the salaries paid to their highest compensated employees. For Atlanta Braves Holdings Inc, those employees are players – including first baseman Matt Olson, third baseman Austin Riley and former National League Most Valuable Player Ronald Acuna Jr.
Privately held teams like the New York Mets, owned by Point72 Asset Management founder Steve Cohen, and billionaire John Middleton’s Philadelphia Phillies, won’t get hit by the tax. The Mets, for example, can deduct every dime paid to outfielder Juan Soto, a free agent lured from the New York Yankees with a record-setting US$765mil 15-year contract. The team’s five most generously compensated players are set to collectively earn US$96mil in 2027, the year the new rule limiting salary deduction for all but US$1mil of each of the top five most highly compensated players’ pay.
That amounts to a potential US$19.1mil tax hike on the Braves, assuming a 21% corporate tax rate. The team paid US$4.
2mil in federal income taxes in 2024, according to a regulatory filing. The company had pre-tax loss in 2024 of about US$36mil, when revenue was US$662mil. Representatives for the Braves declined to comment.
The Braves will be at a significant disadvantage under the tax code, according to Douglas Schwartz, a Nossaman LLP partner who specialises in tax matters. The team would be particularly harmed when pursuing free agents because they’d have to factor in the additional tax burden, in addition to the contract amount when competing for top talent, he said. The only other major league team owned by a publicly traded company is the Toronto Blue Jays.
Rogers Communications, a Canadian entertainment conglomerate with nearly US$20.6bil in annual revenue, doesn’t expect any meaningful impact from the US tax provision, according to company spokesman Zac Carriero. That leaves the Braves without any MLB allies in this fight, which requires congressional intervention before 2027 tax returns are due if they hope to dodge the new tax.
The team hired a pair of lobbyists in February to bend lawmakers’ ear about the rule, according to federal filings. There is, however, one other professional sports entity affected by the 2027 tax hike: Madison Square Garden Sports Corp, which owns the National Basketball Association’s New York Knicks and the National Hockey League’s New York Rangers. That may not give the Braves the most politically sympathetic bedfellow.
The company, run by billionaire James Dolan, has been criticised for a state tax deal cut in the 1980s that has exempted them from US$1bil in property taxes. A spokeswoman declined to comment. The Braves’ lobbyists may not find a receptive audience in Congress, according to a person familiar with the talks in Washington.
Republicans like the tax because it raises much-needed revenue from a relatively unpopular source: big companies whose top employees earn millions. Democrats like it for the same reason, said the person, who asked not to be identified to discuss confidential conversations. The tax code generally allows companies to write off employee compensation as a business expense.
But efforts to curb those write-offs for multimillion-dollar salaries date back to former President Bill Clinton’s first term, after he’d campaigned on reining in corporate greed at a time when middle-class voters were reeling from jobs being moved offshore. The rule initially only applied to executive pay, not employee compensation, but it was broadened to include the five highest worker salaries as part of former President Joe Biden’s pandemic relief bill, with a delayed effective date until 2027. Companies can lessen the blow by employing sophisticated tax techniques, including timing other losses to offset the higher tax bills, according to Deb Lifshey, a managing director at Pearl Meyer, an executive compensation and leadership consulting firm.
— Bloomberg.
