Members raise competitive-parity concerns over 162M deduction limits for publicly traded teams

Several members used the Ways and Means hearing to flag an upcoming change to the tax code that will expand limits on deductible compensation and could uniquely affect the handful of professional sports franchises owned by publicly traded firms.

Section 162(m)/162M was discussed at length: it limits deductibility of compensation above $1 million for certain corporate executives and was amended in recent legislation to capture additional highly compensated employees at some firms. Members including Representative Maloney and others argued that the change, as currently structured, would disadvantage publicly held franchises by disallowing deductions for some of their highest-paid players while privately held teams retain full deductibility.

Robert Raola, the CPA witness, said the provision will raise costs for affected franchises and recommended, if any change is made, that Congress apply comparable rules to all teams to avoid arbitrary competitive imbalances. "It seems unfair to just tax the publicly held companies and not the other companies," Raola said. Several members asked staff to examine legislative fixes that would equalize tax treatment across ownership types and to analyze potential competitive effects on payroll and local investments.

Committee members also tied this discussion to broader policy questions about whether league labor markets and collective-bargaining agreements should be treated differently in the tax code, and whether tax rules intended for executive compensation should be adapted for the athletics business model.

No legislative action was taken at the hearing; members requested follow-up cost estimates and legal analysis from committee staff.