The IRS says that the NFL champion New Orleans Saints didn't pay income taxes on an $8.5 million payment the franchise got from the
state of Louisiana in 2003.
The Saints say the state money was nontaxable "working capital" that was part of 10 years of "inducement
payments" given to the football team.
The tax court case, reports Forbes magazine, focuses only on the 2003 tax year, but "news reports and bond financing documents concerning the Superdome say such large payments have been made regularly. A similar tax treatment position taken by the Saints in other years would have afforded the team cumulatively a substantial economic edge."
How much of an edge?
The lawsuit filed by the Saints to fend off IRS collection says that at least part of the state money was to be used to "acquire
additional and higher-priced player contacts" to make the team "more competitive
in the NFL."
It won't change the outcome of Super Bowl XLIV, but you know that Indianapolis Colts fans who don't give a flip about taxes will be paying attention to this tax court case.
And on a non-Saints but definitely NFL tax-related topic, you also might want to read Andrew B. Delaney's "Taking a Sack: The
NFL and its Undeserved Tax-Exempt Status" (abstract available from SSRN; hat tip to TaxProf Blog).
Delaney, technology editor for the Vermont Law Review, looks at the special tax treatment of America's favorite sport and "concludes, more or less, that the NFL should stop blowing smoke up a certain orifice of the American taxpayer and start paying its taxes."
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