Tax Reform Targets Sports Team Ownership

The legislation, passed by the House under the title "One Big Beautiful Bill Act," includes a proposal to cut in half a key tax deduction long favored by professional sports team owners.

Currently, team owners are allowed to deduct 100% of intangible assets—such as player contracts, naming rights, and sponsorship deals—over a 15-year period. The new bill proposes limiting this deduction to 50%, a change that could generate nearly $1 billion in added tax revenue over the next decade. But for investors and franchise owners, the implications go far beyond taxes.

The deduction has historically served as a major incentive for high-net-worth individuals and private equity firms to invest in sports teams. These tax breaks often help offset operating losses and improve post-deal return metrics. Cutting the deduction in half could significantly impact the financial attractiveness of future franchise acquisitions, potentially slowing the pace of team sales or reducing final sale valuations.

Key Financial Impact

Today, franchise buyers can amortize a large portion of their purchase—often up to 80%—as intangibles, gaining hundreds of millions in tax deductions annually. Under the proposed law, a $6.1 billion purchase could see its deductible drop from $325 million to $162.5 million per year. For highly leveraged or return-sensitive investments, that’s a substantial hit.

Comparative Overview of Amortization Deductions

To illustrate the potential impact, consider the following comparison of amortization deductions under current law versus the proposed changes:

Note: This example assumes 80% of the purchase price is allocated to intangible assets, amortized over 15 years.

As the legislation progresses to the Senate, stakeholders in the sports investment landscape should monitor developments closely. The proposed tax changes could reshape the financial dynamics of sports franchise ownership, influencing investment strategies and valuations moving forward.

Private Equity Sponsors Face Headwinds

PE sponsors have increasingly entered the sports world, capitalizing on stable returns and brand prestige. Yet, the proposed tax change directly threatens one of the key financial levers these firms rely on: aggressive amortization to boost post-tax profits.

From the latest PE150 data, leagues like MLB, NBA, and MLS already show strong PE participation:

• MLB: 10 PE-backed teams, 8 PE-affiliated
  

• NBA: 9 PE-backed, 11 PE-affiliated
  

• MLS: 7 PE-backed, 8 PE-affiliated
  

If passed, this bill may:

• Dampen appetite for minority stakes, especially in high-valuation leagues like the NFL (just now opening to PE).
  

• Drive deal restructuring to account for tighter cash flow models.
  

• Push PE toward emerging segments, such as women's leagues and global sports, where valuations—and tax impacts—are lower.

Potential Impact on Franchise Valuations

This change could have several implications:

• Reduced Tax Incentives: The current full deduction has made sports franchises attractive investments by allowing owners to offset significant portions of their taxable income. Halving this benefit may reduce the financial appeal of owning a team.
  

• Pressure on Franchise Valuations: With diminished tax advantages, prospective buyers might reassess the value they assign to franchises, potentially leading to a cooling effect on the rapid appreciation of team valuations witnessed in recent years.
  

• Impact on Deal Structures: Private equity firms and other investors may need to reevaluate their deal models, considering the reduced tax shields, which could affect leverage ratios and return projections.

Industry Response

The sports industry has expressed concerns over the proposed changes:

• Lobbying Efforts: NFL owners, during recent meetings, were reportedly encouraged to contact senators to oppose the inclusion of this provision in the Senate version of the bill.
  

• Perception of Targeting: Some team executives view the measure as punitive, suggesting it specifically targets wealthy team owners.
  

• Potential Cost Pass-Through: Experts warn that owners might offset increased tax liabilities by raising ticket prices, merchandise costs, or other fan-related expenses.

The reaction from team owners and leagues has been swift. NFL executives reportedly encouraged owners to contact lawmakers to oppose the measure. There’s growing concern that the bill unfairly targets the sports industry and may even lead to increased ticket prices or fan-facing costs, as owners look to absorb the tax hit elsewhere.

As the bill heads to the Senate, the sports investment community is watching closely. If passed, this could be one of the most impactful policy shifts in sports finance in recent memory—reshaping valuations, altering acquisition models, and prompting more strategic scrutiny in every major sports deal going forward.

For current owners and future investors alike, the game may be changing.

Sources & References

ESPN. (2025). How could the new GOP tax bill affect your favorite team? https://www.espn.com/nba/story/_/id/45425353/potential-trades-top-2025-nba-draft-pick-cooper-flagg-dallas-mavericks 

Herrick. (2025). Sports Owner Tax Perk in Crosshairs As Bill Moves Forward. https://www.herrick.com/news/sports-owner-tax-perk-in-crosshairs-as-bill-moves-forward/ 

New York Post. (2025). Trump’s spending bill to slash tax breaks for sports team owners. https://nypost.com/2025/05/27/business/gop-bill-to-slash-tax-breaks-for-sports-team-owners-in-half/ 

Sports 150. (2025). Scoring Money: The Economics of Sports. https://www.sport150.com/p/scoring-money-the-economics-of-sports 

TSR. (2025). House bill takes aim at tax break for sports owners. https://www.spokesman.com/stories/2025/may/26/house-bill-takes-aim-at-tax-break-for-sports-owner/