Covington’s sports tax practice is unparalleled, as we serve as the lead outside tax counsel to the NFL, Major League Baseball, the NHL, the NBA, Major League Soccer, the United States Tennis Association, the United States Olympic Committee, and various teams, including the Boston Red Sox.
Covington’s tax lawyers are intimately familiar with every aspect of the sports industry, from sponsorship and broadcast agreements to player signing bonuses to franchise acquisitions. We combine our deep and broad knowledge of the business of sports with our technical expertise in tax law. Our clients include leagues and teams; corporations, partnerships, and individuals; and domestic and foreign entities.
A substantial part of our work involves assisting clients in structuring their major transactions and daily operations in the most tax-efficient manner. Examples of such planning and transactional projects have included:
- Creation of the NHL Network and the related structuring of various cross-border licensing and broadcast relationships;
- Structuring 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;
- Establishment of the U.S. Open Series, a series of professional tennis tournaments leading up to the U.S. Open;
- Advice to Chris Cohan regarding his sale of the Golden State Warriors, to the NHL regarding its purchase and sale of the Phoenix Coyotes, and to the USTA in its acquisition of the Western & Southern Financial Group Masters tournament;
- Advising numerous leagues and teams on the terms of their stadium financing programs, including the use of personal seat licenses and tax-exempt bonds;
- Establishing multi-entity, multi-jurisdictional, tax-efficient organizational structures; and
- Developing compensation arrangements for both executives and athletes.
Equally important, we devote a significant part of our practice to representing leagues, 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 IRS National Office as well as the IRS Technical Advisors for the Sports Industry.
Representative matters in the controversy area include:
- Representation of a professional sports club in a $275 million dispute with the IRS regarding stadium financing, player contracts, and broadcast agreements;
- Representation of a different club at IRS Exam and Appeals on various issues, ranging from fringe benefits to the sale of the franchise, ultimately resulting in a refund to the club;
- Successful representation of two different leagues and two leagues’ for-profit affiliates in recent IRS audits;
- Buffalo Bills v. United States – Obtained a tax refund for the Buffalo Bills relating to employment taxes on player salary, bonus, and severance payments;
- Frequent lobbying of state and local taxing authorities to secure the elimination or reduction of tax imposed on visiting clubs and players; and
- Negotiation with the IRS National Office of an extremely favorable industry-wide settlement regarding the tax treatment of acquisitions of professional sports franchises and related assets.
In all of these matters, we work in concert with our colleagues in the corporate, litigation, and IP practices to ensure a multi-faceted and fully integrated approach to our sports clients’ tax issues.
Accolades
- Partner Jeremy Spector is recognized as a leading tax expert by The Legal 500 (2009), which states that Mr. Spector is "highly recommended for his sports-related tax expertise; he offers 'superb legal advice and practical business guidance.'"
- Chambers USA notes Covington’s "dominant presence in the sports industry."
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