Atlanta Braves Face Unique Tax Challenge Due too Public ownership
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MLB’s Only Publicly Traded Team Could Face Multimillion-Dollar Tax Hike
The Atlanta Braves, Major league Baseball’s sole publicly traded franchise, is grappling with an impending tax rule that could cost the team millions. A new provision restricting tax deductions for highly compensated employees puts the Braves at a disadvantage compared to privately owned teams.
Tax rule Disadvantage for Publicly Owned Teams
The looming tax regulation will limit the ability of public corporations to deduct salaries exceeding $1 million for their top five highest-paid employees. For Atlanta Braves Holdings Inc., this impacts star players like Matt Olson, Austin Riley, and Ronald Acuña Jr.
Private Teams Dodge the Tax Bullet
Privately held teams, such as Steve Cohen’s New York Mets and John Middleton’s Philadelphia Phillies, are exempt from this rule.These teams can fully deduct the salaries of their star players, creating an uneven playing field. The mets, as a notable example, can deduct the entirety of Juan Soto’s record-breaking $765 million contract.
Potential $19 Million Tax Hit Looms
In 2027, the Braves’ five highest-paid players are projected to earn a combined $96 million. The new tax rule could result in an estimated $19.1 million tax increase for the team, based on a 21% corporate tax rate. in 2024,the team paid $4.2 million in federal income taxes.
Braves Seek Congressional Intervention
The Braves, facing a competitive disadvantage, have hired lobbyists to advocate for congressional intervention before the 2027 tax deadline. They are attempting to address the inequity before it considerably impacts their financial standing and ability to compete for top talent.
Additional Impacts and Considerations
Douglas Schwartz, a tax expert at Nossaman LLP, notes that the Braves will be at a disadvantage when pursuing free agents, as they will need to factor in the additional tax burden on top of the contract amount. The Toronto Blue Jays, the only other MLB team owned by a publicly traded company, do not anticipate important impact from the US tax provision.
Atlanta Braves Face Unique Tax Hurdle Due to Ownership Structure
The Atlanta Braves baseball team could face a significant and unique tax burden starting in 2027 due to a provision in the tax code impacting publicly traded companies. This stems from a rule change initially aimed at curbing excessive executive pay, but now applicable to a broader range of high-earning employees.
Tax Hike Looms for the Braves
A change to the tax code, set to take effect in 2027, limits the deductibility of employee compensation exceeding $1 million for publicly held companies. Because of its unique corporate structure, the Atlanta Braves are poised to be the only Major League Baseball team directly affected by this tax hike.
Lobbying Efforts Underway
the Braves have engaged lobbyists to address the issue, arguing that Congress likely did not consider the implications for their specific situation when enacting the rule. However, sources familiar with discussions in Washington suggest that republicans and Democrats may be unwilling to change the rule, as it generates revenue from large corporations.
Historical Context: Curbing Executive Pay
Efforts to limit corporate tax write-offs for high salaries date back to the Clinton administration, reflecting concerns about corporate greed during a time of economic anxiety for middle-class voters. The rule initially targeted executive pay but was expanded under President Biden to include the five highest-paid employees, with the change set to begin in 2027.
strategies to Mitigate the Impact
Companies can employ tax strategies to offset the increased tax burden, such as strategically timing losses.Another option is to go private, which reduces oversight and regulation. though, taking the Braves private might prove challenging given current market conditions and the complexities of sports franchise sales.
Challenges in the Market
While sales of sports franchises in other leagues have recently broken records, the market for baseball teams hasn’t been as lucrative. Recent sales, like that of the Baltimore Orioles to private equity figures David Rubenstein and Michael Arougheti, demonstrate that baseball teams may not fetch the same high prices as teams in other leagues.
Braves’ unique Predicament
Without a successful lobbying effort or a move to go private, the Atlanta Braves might potentially be uniquely burdened with a tax bill that other MLB teams do not face. This situation highlights the unintended consequences of broader tax policies on specific industries and corporate structures.
U.S. Job Growth Surges Past Expectations in March, Unemployment Dips
WASHINGTON (AP) — The U.S. labor market demonstrated surprising resilience in March, adding a robust 303,000 jobs and lowering the unemployment rate to 3.8%, according to a report released friday. This figure significantly surpassed economists’ predictions of around 200,000 new jobs, signaling continued economic strength despite persistent inflation and high interest rates.
Key Sectors Driving Employment Gains
The healthcare sector led the charge in job creation, adding 72,000 positions. Leisure and hospitality followed closely, contributing 49,000 jobs, indicating sustained consumer spending on services. Government employment also saw a significant increase, with 71,000 new jobs added, reflecting investments in public services and infrastructure.
Unemployment Rate Remains Low
the unemployment rate edged down to 3.8% from 3.9% the previous month, hovering near historic lows.This indicates a tight labor market where available jobs are plentiful compared to the number of job seekers. The labor force participation rate, which measures the proportion of the population working or actively seeking work, remained steady, suggesting that people are still motivated to join the workforce.
Wage Growth Moderates slightly
Average hourly earnings rose by 0.3% in March, bringing the year-over-year increase to 4.1%. While still elevated, this figure represents a slight moderation in wage growth compared to previous months, potentially easing concerns about a wage-price spiral that could further fuel inflation.
Federal Reserve’s Policy Implications
The strong jobs report is likely to influence the Federal Reserve’s monetary policy decisions. While the Fed has been closely monitoring inflation, a robust labor market could provide leeway for maintaining current interest rates for longer then initially anticipated. Policymakers will carefully assess upcoming inflation data to determine the appropriate course of action.
Expert Analysis and Economic Outlook
Economists are interpreting the latest jobs data as a sign of continued economic resilience. Despite concerns about a potential slowdown, the labor market continues to demonstrate strength. However, some analysts caution that the pace of job growth is unsustainable in the long run, and a gradual cooling of the economy is still expected.
Looking Ahead: Future Economic Indicators
The next few months will be crucial in determining the trajectory of the U.S. economy. Investors and policymakers will be closely watching inflation data, consumer spending patterns, and further labor market reports to gauge the overall health of the economy and to anticipate future policy adjustments by the Federal Reserve.
Given the Blue Jays are also publicly traded,why do they anticipate a lesser impact from this tax rule compared to the Braves – are there structural differences in their ownership or accounting practices?
Atlanta Braves Tax Challenge: Q&A
Here’s a breakdown of the Atlanta Braves’ unique tax situation,answering key questions and providing additional context:
What’s the core issue for the Atlanta Braves?
The Atlanta Braves,being a publicly traded company,face a tax disadvantage. A new tax rule limits deductions for salaries exceeding $1 million for their top-paid employees. This puts them at a disadvantage compared to privately owned MLB teams.
Who is affected by this tax rule?
This rule impacts the Braves’ highest-paid players, including stars like Matt Olson, austin Riley, and Ronald Acuña Jr. Their salaries contribute to the tax burden.
How does this affect the Braves’ ability to compete?
The additional tax burden could make it more expensive for the Braves to sign or retain top talent in the future, as they’ll need to factor in the tax implications on top of the contract amount. The financial strain could hinder their ability to compete with teams that do not face this disadvantage.
How much could this cost the Braves?
In 2027, the Braves could face an estimated $19.1 million tax increase based on current salary projections and a 21% corporate tax rate.
What are the Braves doing about it?
The Braves have hired lobbyists to advocate for congressional intervention. They are trying to get the tax rule amended to address the inequity before it significantly impacts their financial standing.
Are other teams affected?
Yes, the Toronto Blue Jays are also owned by a publicly traded company, but the article states that they do not anticipate a major impact from the US tax provisions.
What strategies could the Braves use to mitigate the impact?
The Braves could explore tax strategies, such as carefully timing losses. Another potential option,though challenging,would be to go private.
Why is this happening now?
The rule,intended to curb excessive executive pay,was expanded under President Biden to include the five highest-paid employees. The change is set to take effect in 2027.
Interesting Trivia:
The New York Mets, owned by Steve Cohen, benefit from this tax rule because they can fully deduct the salaries of their highest-paid players, such as Juan Soto.
Keep an eye on how the Braves navigate this tax challenge, as it could reshape their competitive landscape.
