The Law

PUBLIC LAW 113-29-AUG. 12, 2013

PUBLIC LAW 113-29

113TH Congress

An Act

To provide compensation to State’s suffering from the loss of a prominent revenue gathering stream via taxation on the movement of sporting facilities.

Be it enacted by the Senate and House of Representatives of the United States of America in Congress assembled,

Section 1: Short Title

This Act may be cited as the “Sport Taxation Post-Exportation Act”.

Section 2: Taxation Purposes

1. Taxation of Importers of Professional Sporting Facilities, Teams, and Individuals

1. IN GENERAL.—Professional sports have become a major revenue stream for municipalities and States in the last half century. As such, when a professional sports team relocates, the export location is often left with a severe deficiency in revenue, an increase in unemployment due to a decrease in tourism, and a facility that is not suitable for other activities.
2. AUTHORITY.—Under the Commerce Clause, the Congress has the authority to regulate interstate trade.  The movement of monies via professional sports teams, sports franchises, current professional athletes, and professional athletic training centers—hereafter referred to as “the organizations”—when crossing state lines, has a significant impact on the economies of the individual States and the Nation in general. Relocation within State lines from one municipality to another has a general effect on the national economy and, while intrastate in nature, is subject to regulation due to its significant impact.

1. In Federal Baseball Club of Baltimore, Inc. v. National League of Professional Baseball Clubs et al. (1921) a majority of the Supreme Court held that Major League Baseball does not constitute interstate trade as outlined by the Anti-Trust Acts of July 2, 1890, c. 647, § 7, 26 Stat. 209, 210, and of October 15, 1914, c. 323, § 4, 38 Stat. 730, 731.
2. Seeing the rapid accelerated growth of MLB and other professional sports and recognizing the significant impact these organizations have on the national, State, and municipality economies
1. Recognizing that the MLB had a revenue in excess of $7.5 billion in 2012 and the NFL had a revenue in excess of $9.5 billion in 2012.
2. Recognizing that these revenues are projected to increase dramatically in the following years
3. Recognizing the tourism, merchandising, advertising, and restaurateur business associated with these organizations constitutes a significant impact on the national, State, and municipality economies
3. The Congress eliminates the classification of professional sports leagues and their franchises as exempt from a classification of interstate trade under the Sherman Act, as
1. Sporting exhibitions are no longer merely “state affairs”, as exhibitions have influence and affect transactions across state lines.
2. Sports organizations earn significant revenue allowing for interstate influence.
3. Sports organizations market and advertise across interstate lines and sales of tickets regularly take place across state lines.
4. Professional sports organizations shall be considered interstate trade and shall be subject to the federal tax code under the Internal Revenue Service and pertinent State and municipal tax codes.

3. INTERSTATE TAXATION.—Following relocation across state lines, the organization shall owe taxes to the import State and municipality. The aforementioned organizations shall also owe taxes to the export State and municipality at a graduated rate. For a period of five years, the organization shall owe taxes to the export State and municipality, beginning at 50% of the export tax rate and to decrease to 40%, 30%, 20%, and 10% the following years. This graduated tax rate shall be in effect to transition the export State and municipality and allow locations to establish a new revenue stream.

9. If the organization is exporting from a State and/or municipality with no income tax, the organization shall use the import State and/or municipality’s tax rate to determine the graduated tax rate to be paid to the export State.

4. INTRASTATE TAXATION.—Following relocation within state lines, the organization shall owe taxes to the import municipality. The aforementioned organizations shall also owe taxes to the export municipality at a graduated rate. For a period of five years, the organization shall owe taxes to the export municipality,
5. beginning at 50% of the export tax rate and to decrease to 40%, 30%, 20%, and 10% the following years. This graduated tax rate shall be in effect to transition the export municipality and allow locations to establish a new revenue stream.
6. INTERNATIONAL TAXATION.—Following international relocation, the organization shall be assessed a standard duty of 150% the previous year’s export State and municipality taxation rates.  This duty shall then be paid to the export State and municipality over a five year period in the manner described above.

Section 3: Definitions

1. Definitions for the Purpose of this Act

1. CURRENT.—Shall describe athletes currently engaged in for-profit professional sports. Shall not apply to athletes participating in benefits, charity, or legacy events.
2. PROFESSIONAL.—Shall describe athletes engaged in sports as a primary livelihood or for pay—including gifts, promotions, and sponsorships—in excess of $50,000 gross income per annum.
3. SPORTS.—Shall describe events that include coaches, practices, competitions during a defined season, and a governing organization. Shall describe events that have competition as the primary goal.
1. This definition shall not affect the enforcement of other statutes, including but not limited to Title IX or the tax code.
2. Franchises incorporated under a larger governing body (i.e. MLB, NFL, etc.) shall not be exempt from this tax structure. The governing body shall incur no additional taxation for movement of its franchises or subsidiaries; instead these shall be paid by the individual franchise.

Section 4: Appeals and Exemptions

1. Appealing the Foundations Set Forth in this Act

1. Affected parties may appeal the tax requirements outlined in this Act upon enactment if they believe they do not fall into the parameters set forth here.

2. Exemptions to this Act

1. Any organizations that relocated prior to the enactment of this Act shall not be liable for tax payments to the export State or municipality. Organizations that have relocated within the five year mark before enactment are not liable for any payments to the export State or municipality.
2. Organizations undergoing bankruptcy or liquidation are not liable for payments to the export State or municipality.
3. Accredited colleges and universities are exempt from the parameters outlined above.
4. Leagues consisting exclusively of minors, or of those who were minors at the beginning of the season, are exempt from the parameters outlined above.
5. Olympic athletes shall not be exempted from the provisions outlined above.

9. Olympians shall be exempt from taxation on monies earned while engaged in sports at the Olympics.

6. Athletes traded by a professional sports team or free agents that sign with a professional sports team are exempt from the outlined provisions and should not be held to any additional tax requirements.
7. This Act shall not affect the taxation of ticket sales, nor shall it infringe up the spectation of these sports.

(c) Inclusion of Amendment SA750 by Mr. Coburn pertaining to overexemptions for sports.

       (1) Findings.--Congress makes the following findings:

i. The National Football League (NFL), National Hockey League (NHL), PGA Tour, and Ladies Professional Golf Association (LPGA) each have league offices that are registered with the Internal Revenue Service as non-profit organizations under section 501(c)(6) of the Internal Revenue Code of 1986.

ii. League-wide operations of the NFL, NHL, PGA Tour, and  LPGA generate an estimated $13 billion in annual revenue, and these businesses are unmistakably organized for profit and to promote their brands.

iii. According to the Internal Revenue Service, section 501(c)(6) of the Internal Revenue Code of 1986 is for groups looking to promote a ``common business interest and not to engage in a regular business of a kind ordinarily carried on for profit''.

iv. According to the Internal Revenue Service, businesses that conduct operations for profit on a ``cooperative basis'' should not qualify for tax-exempt treatment under section 501(c)(6) of the Internal Revenue Code of 1986.

(2) Elimination of Specific Exemption for Professional Football Leagues.--Paragraph (6) of section 501(c) of the Internal Revenue Code of 1986 is amended--

i. by striking ``, or professional football leagues (whether or not administering a pension fund for football players)'', and

      ii. by inserting ``or'' after ``real-estate boards,''.

(3) Special Rules Relating to Professional Sports Leagues.--Section 501 of the Internal Revenue Code of 1986 is amended--

       i. by redesignating subsection (s) as subsection (t), and

       ii. by inserting after subsection (r) the following new subsection:

``(s) Special Rules Relating to Professional Sports Leagues.--No organization or entity shall be treated as described in subsection (c)(6) if such organization or entity-

``a. is a professional sports league, organization, or association, a substantial activity of which is to foster national or international professional sports competitions (including by managing league business affairs, officiating or providing referees, coordinating schedules, managing sponsorships or broadcast sales, operating loan programs for competition facilities, or overseeing player conduct) and

       ``b. has annual gross receipts in excess of $50,000.''

      

Section 5: Effective Date

Except as provided otherwise, the amendments made by this Act shall take effect on the date of enactment of this Act.

Approved August 12, 2013.