One side effect of the tax law passed earlier this year by Congress: small businesses are scaling back their commitments to spending on sporting events because tax deductibility for season tickets and group events has been reduced or eliminated.
The tax-law changes don’t appear to affect larger corporations spending money at the ballpark. Instead, the tax-law changes affect smaller corporations, which are typically set up as LLCs or S corps, and it’s not clear whether entertaining at the ballpark will continue to be a deductible business expense. From the Wall Street Journal:
A-Tech Consulting Inc. in Orange, Calif., won’t hold its annual client-appreciation day at the Los Angeles Angels’ stadium this year because it isn’t certain if the cost of the event, which employees also attend, is still deductible, said Chief Executive Casandra Williams. For team building, employees now serve meals once a month at a foundation that serves at-risk youth.
“We have season Rams tickets, the invoice is sitting on my desk,” said Ms. Williams, who hasn’t yet decided whether to write the check to the National Football League team. “Do we do this, or do we not? What is our return on investment?”
Joseph Hines, chief executive of Voice & Data Networks Inc., a Minneapolis technology company, had to sell off extra seats when three of the six business-owners who share four season tickets to Minnesota Twins baseball games bailed out because they could no longer deduct the expense. Mr. Hines said he is likely to hang onto the seats but is “very, very worried” about his ability to sell some of them. “Business appetite is low,” he said.
Groups are the financial backbone of any sports enterprise. And while there are plenty of groups where the deductibility of a ballpark event isn’t an issue — like a church group or a family outing — there is a lot of group spending that will be affected. We’ll see at the end of the season how this shakes out.