On July 4, 2025, President Trump signed into law the One Big Beautiful Bill Act of 2025 (OBBBA), a sweeping piece of legislation that extends and modifies many provisions of the Tax Cuts and Jobs Act (TCJA), which were previously set to expire at the end of 2025.
The OBBBA also introduces new tax provisions that will have broad implications across industries including professional sports teams and their owners and investors. Generally speaking, the OBBBA extends several TCJA provisions, including lower individual and corporate tax rates, bonus depreciation, and the 20% deduction for qualified business income (QBI). These extensions provide continued tax planning certainty for sports franchises structured as pass-through entities or corporations.
Three key points for sports franchises and their owners and investors are:
- Not included was a House proposal that sought to limit the amortization of sports franchises and related intangible assets (e.g., player and broadcasting contracts) to 50% of the adjusted tax basis. Under current law, owners may amortize 100% of the adjusted tax basis of a franchise over 15 years under IRC §197. This limitation was ultimately excluded from the final version of the OBBBA. The exclusion of the proposed amortization cap is a win for sports team owners and investors. Maintaining full amortization allows for greater upfront tax deductions, improving cash flow and after-tax returns on franchise acquisitions. This is especially relevant in an environment of rising franchise valuations and increased private equity interest in sports assets. Owners considering acquisitions, restructurings, or capital investments should evaluate their tax models to reflect the continued availability of full amortization.
- If you're planning to build a new stadium, arena, field, park or other sports facility, now is the time to consider locating it in a designated Qualified Opportunity Zone (QOZ) including newly eligible rural zones to take advantage of the enhanced tax incentives under the OBBBA. The OBBBA makes the QOZ program permanent and introduces more flexible gain deferral rules, a rolling 5-year deferral window, and a permanent 10% basis step-up after five years. These benefits can significantly improve after-tax returns on stadium-related investments, especially when paired with mixed-use development or community revitalization projects. Strategic site selection in a QOZ could permit owners and investors to achieve long-term savings and potentially attract additional capital through Qualified Opportunity Funds.
- If you own or invest in a sports franchise through a partnership, S corporation, or other flow-through entity, the OBBBA extends the 20% Qualified Business Income (QBI) deduction under Section 199A, which was previously set to expire at the end of 2025. This deduction can significantly reduce your effective tax rate on eligible income from your franchise operations. For sports teams structured as pass-throughs, this means continued access to a powerful tax benefit, especially valuable in high-income years or during periods of expansion. Owners should address this calculation to ensure their income qualifies and to optimize entity structure, compensation, and capital allocations to fully leverage this deduction.
This important tax development will undoubtedly create opportunities for many in the US market. It has particular economic incentives for those in the field of sports who engage in careful planning.
Please contact your Withers attorney to assess how the OBBBA's provisions can maximize after-tax returns for your sports-related investments.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.
