Related Practices
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Covington serves as the lead outside tax counsel to the four major US sports leagues – the NFL, Major League Baseball, the NHL, and the NBA – and provides ongoing tax advice to the United States Tennis Association, Major League Soccer, the United States Olympic Committee, and numerous professional sports clubs, including the Boston Red Sox. We are intimately familiar with tax issues specific to every aspect of the sports industry, from sponsorship and broadcast agreements to player signing bonuses to franchise acquisitions.
A substantial part of our work involves assisting our sports clients in structuring their major transactions and daily operations in the most tax-efficient manner. Equally important, we devote a significant part of our practice to representing teams and their owners throughout the IRS audit and Appeals processes, in front of state taxing authorities, and in litigation – arenas in which we have had particular success. We serve as the lead industry representative in dealings with the Internal Revenue Service’s task force on professional sports.
Representative Matters
Examples of our sports-related tax planning projects include:
- The creation of tax-efficient structures to carry out new media, entertainment, and business opportunities, including the NFL Network, the World Baseball Classic, the US Open Series, and the regional sports network combining the Orioles’ and Nationals’ broadcast rights.
- Designing the financing structures for new stadiums and arenas, including the use of tax-exempt bond financing and innovative structures such as personal seat licenses.
- Handling complex franchise acquisitions and dispositions, such as John Henry’s sale of the Florida Marlins and simultaneous acquisition (as lead investor) of the Boston Red Sox, Fenway Park, and NESN as a tax-free transaction.
- Designing cross-border licensing and broadcast arrangements, including the broadcast and licensing arrangements for the NHL and NFL Europe.
- Establishing multi-entity, multi-jurisdictional organizational structures for taxable and tax-exempt activities.
- Developing compensation arrangements for both executives and athletes.
Examples of our tax advocacy projects in the sports industry include:
- Ongoing representation of a sports club in a $275 million dispute with the IRS regarding stadium financing, player contracts, and broadcast agreements.
- A tax refund for the Buffalo Bills in litigation relating to employment taxes paid on player compensation.
- Successful negotiation with the IRS of an industry-wide settlement addressing the tax treatment of sports franchise acquisitions.
- Frequent lobbying of state and local taxing authorities to secure the elimination or reduction of the tax imposed on visiting clubs and players.
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