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Baseball Teams Aren’t Really In The ‘Athletics’ Business And So Shouldn’t Have To Pay Taxes: Baseball

Baseball Teams Aren’t Really In The ‘Athletics’ Business And So Shouldn’t Have To Pay Taxes: Baseball

By Terry Foote (Batrolo Colon) [CC BY-SA 2.0 ], via Wikimedia Commons

Baseball as we know and don’t really love it couldn’t exist without the active connivance and assistance of governments from Capitol Hill to City Hall. There are all those shiny new stadiums paid for by taxpayers that benefit the teams’ billionaire owners but essentially no one else. There are congressmen eager to let minor leaguers be treated as wage slaves. And, of course, there’s baseball’s antitrust exemption underlying all of it, barring people from suing baseball over team relocations and—combined with a 1998 law codifying the 1922 Supreme Court ruling that gifted baseball, and only baseball, that exemption—giving Major League teams control over their minor leaguers even in absence of a contract.

This, however, is not enough for the MLB. They’d like to be exempt from most taxes, as well, and who wouldn’t? The only problem is that Congress was a little hasty and a little sloppy in throwing together the 1,000-page tax heist that no one read before voting on it. This extended to the 20% deduction for pass-through businesses, but Republicans wanted to make sure to maximally screw over workers, and so added them to the list of potential pass-through business owners ineligible for the full deduction, along with lawyers and doctors and hedge fund managers, under the theory that only true corporations should get a break, and not anyone doing something so crass as selling their labor for money. Unfortunately for MLB, rather than specifically write “physically-gifted minorities who play games for a living,” or even just the word, “athletes,” Paul Ryan’s crack team used the word “athletics.” And to the IRS, baseball teams sure look to be in the athletics business.

Not so, says baseball commissioner Rob Manfred. As it turns out, baseball is such a small part of the baseball business as to be essentially irrelevant. In fact, Manfred seems to posit, baseball teams could stop playing baseball today (an outcome that, after last night, I am heartily in favor of) and no one would even notice. All those billions would keep rolling in anyway, at the vastly reduced rate to which they are entitled.

Baseball owners are pushing back. Mr. Manfred argues that a baseball team’s income isn’t just profiting from players’ on-field performance and that the regulation runs counter to Congress’ intent.

“In fact, in most cases, the activities of a major league professional athlete make up a de minimis amount of the total activities of all employees of a professional sports franchise,” he wrote.

Unfortunately for Manfred & co., the people who threw together the word-salad tax law together in a series of all-nighters don’t really remember what they were thinking while doing it.

Mark Prater, who was the lead Senate staff author of the provision, said he doesn’t recall explicit conversations about whether pro teams would qualify.

Baseball, Inc., is gonna keep trying, though. Manfred promised to follow up with a more complete explanation of how little baseball matters to baseball. Perhaps a discussion about how standing on grass or sitting on a bench for three-and-a-half hours a night can’t really be described as “athletic,” anyway. Or that the law really only intended to cover the Oakland Athletics, which is fine, since they don’t make any money anyway. Oh, and while we’re talking about handy exemptions, baseball could really use one from human-trafficking laws. Quickly.

Sports Illustrated has learned that the U.S. Department of Justice has begun a sweeping probe into possible corruption tied to the recruitment of international players, centered on potential violations of the Foreign Corrupt Practices Act….

One particularly remarkable document shows that Dodgers executives in 2015 went so far as to develop a database that measured the perceived “level of egregious behavior” displayed by 15 of their own employees in Latin America. That is, using a scale of 1 to 5—“innocent bystander” to “criminal”—front-office executives assessed their own staff’s level of corruption. Five employees garnered a “criminal” rating.

MLB’s Pitch to IRS: Let Us in on Tax Law’s New Break [WSJ]
The Evidence That Persuaded U.S. Department of Justice to Investigate MLB Recruitment of Foreign Players [SI]

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