My title sounds like an old Johnny Carson “Carnac the Magnificent” or even a complex Jeopardy game show query….but please hang with me. I told my Sports Law class at Penn on Wednesday that the vote by NBA owners on whether or not to vote for Donald Sterling to sell his interest in the Los Angeles Clippers was very similar to a famous Supreme Court case involving Muhammad Ali, Clay vs. United States. In the case Ali was battling to stay out of prison for his refusal to be drafted and fight in the Vietnam War. His key argument was that he, as a member of the Nation of Islam, would not fight in any war other than a holy war. He proclaimed himself a conscientious objector. The Supreme Court justices disagreed. Their logic was, apparently, if you’d fight in a holy war why not the Vietnam War? As Bob Woodward recounts in his book The Brethren, the preliminary vote against Ali was 5-3 in favor of sending him to prison for his unwillingness to be drafted and fight in the Vietnam War. (Justice Thurgood Marshall had to recuse himself as he had been U.S. Solicitor General when the case first emerged).
We have noticed some fuss recently regarding the NFL’s tax exempt status. Some have decried how the NFL rakes in billions of dollars in revenue annually yet pays no income tax. They complain of Roger Goodell’s $30 million dollar salary as evidence of misplaced tax policy – even a US Senator has taken up the issue. Is there anything to this argument that the NFL is taking taxpayers for a ride?
It appears not. The NFL is a tax exempt business entity organized under IRC 501(c)(6) (26 U.S.C. § 501(c)(6)), dating back to legislation passed in 1966. That statute provides for an exemption of “business leagues, chambers of commerce, real estate boards, boards of trade, and professional football leagues . . . , which are not organized for profit and no part of the net earnings of which inures to the benefit of any private shareholder or individual.” Continue reading NFL’s tax exempt status – much ado about nothing?
Our SiriusXM Sports Business Radio show begins the day after the Martin Luther King Jr. holiday. I have been fortunate enough to spend much of my professional life focused on issues related to race…these days diversity…and sports. So this start date makes the issue a natural first show topic.
I would not begin to think that I know what Dr. Martin Luther King Jr. would dream for in sports achievement beyond the field of play. But what he would see is that corrective steps were taken by the NFL to prevent another hiring season where no African Americans get coaching or general manager jobs. The hiring of Lovie Smith and Jim Caldwell sounded that there was not a complete reversion back to the pre Rooney Rule days.
The following are my top 2013 business and legal stories having the greatest impact on the global sports business. I’m sure many would delete some of my choices and include others, but in teaching, research and practice, these are the events that, in no particular order, make the top of my list.
The Sale of IMG to William Morris: Much like the sale of the Dodgers last year size alone makes this transaction significant. The reported price of over $2.0 billion makes this a deal to keep an eye on. Like the sale of the Los Angeles Dodgers, critics are scrutinizing the wisdom of the purchase price.
Sport provides us with a vibrant window to reflect on some of the ethical decisions we make in business. A moment filled with ethical issues is the decision on who to hire. There are certainly legal lines to consider, but what about short of those legal lines and the decisions we make because we feel this man or woman can do the job regardless of “background” issues. The law can make some of those issues easy for us, but what about those issues where the law is silent or poses no constraints? I recently wrote an article called Lessons from Sports for the C-Suite in Ethisphere Magazine.
We have had the opportunity to look at some of the details of the Fantex type deals being signed by professional athletes. As has recently been in the press NFL stars Arian Foster and Vernon Davis have both signed deals with Fantex to receive an upfront payment for a percentage of their future earnings including player salary, endorsements and post career income. The pure finance view would be to look at the present value of the player earnings, that is are the dollars being offered today a fair advance on ten percent of the athlete’s future earnings or “brand income” as the prospectus labels it? Each deal is unique and the earning potential of each athlete is evaluated under standards established by Fantex. This is complex for many reasons. Continue reading Athletes Monetizing Future Earnings: Understanding the Complexities
Initial conversations about boycotting the 2014 Sochi Olympics surfaced regarding the support by the Russian government of Edward Snowden, the alleged leaker of NSA secrets. Now the conversation regarding boycott has shifted to anti-gay rights laws in Russia. Episode 6 of the Sports Law 10 Podcast focuses on the historic and legal impact of Olympic boycotts generally including those exercised or contemplated in the 1936 Berlin, 1976 Montreal, 1980 Moscow, 1984 Los Angeles games and more.
As summer practices begin to heat up for sport, particularly football, the role of the athletic trainer in the health and safety of the athlete comes to the forefront of those involved in sports. From the NFL down to Pop Warner navigation issues of communication with the trainer to the athlete, coaches, parents and physicians are often complex. A recent Podcast with Patricia Hofstra helps to clarify many of these issues.
Are you familiar with promotion and relegation? The concepts are foreign to those who are exclusively fans of the big four–NHL, NBA, NFL and MLB–U.S. based sports leagues. But fans of the Premier League know that there was a recent relegation of a team to a lower division even after they had won a major competition. In the podcast “What if Your Favorite Pro Team Gets Relegated to the Minors?” I discuss with London-based Duane Morris partner, Jonathan Armstrong, this whole notion of promotion and relegation.
Athletes need to be cautious about the characterization of income, especially when the income is earned in a foreign jurisdiction This is true for a variety of decisions from the timing of receiving income, to how the taxing authorities will ultimately characterize a payment. This is certainly the case with payments made to an athlete where there will be a distinction as to whether the payment is personal service income or a royalty fee. The tax consequences of the characterization are significant. Duane Morris partner Thomas R. Wechter of our Chicago office provides insights in this recent article.