Money

Are Estate Taxes the Real Reason for the NFL Lockout?

By Julie Garber, About.com GuideApril 5, 2011

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For those of you who have been reading my blog for a while now, you're probably quite familiar with my love of football. So with the NFL lockout in place, I've been watching intently for any news about the status of the 2011 - 2012 season (come on guys, I really, really want to see my beloved Steelers play the 49ers in San Francisco this year!). Over the past couple of months as part of the owners vs. players debate I've heard some grumblings on behalf of the owners about how the NFL's strict ownership rules force NFL families to sell the franchise when an owner dies in order to pay the estate tax bill. This is apparently one of the main reasons why owners want to keep more of their profits instead of sharing them with the players - to have some extra cash to pay estate taxes. You only need to consider what happened with the Miami Dolphins after Joe Robbie died, what happened to the Washington Redskins after Jack Kent Cooke died, and what happened to the New York Jets after Leon Hess died for some examples.

Under current NFL rules, a single family must own at least 30% of a team, with one person owning at least 10%. According to Forbes, the average value of an NFL team was $1 billion in 2010, which means that a 30% ownership stake would be worth about $300 million and a 10% stake would be worth about $100 million (OK, for those of you reading this who are in the estate planning field, I know that I'm not factoring in discounts for lack of control and marketability, but with numbers so large and an estate tax exemption of only $5 million, a 10% owner is still looking at a very hefty estate tax bill). Since in most cases the heirs of a 10% owner (let alone a 20% or 30% owner) won't have enough cash to pay that hefty estate tax bill when the IRS comes knocking, a proposal has been introduced to reduce the 30% ownership requirement down to 25%. This, in turn, will allow the family to sell a 5% ownership stake in the team in order to raise some cash to pay the estate tax bill.

Of course, as Mike Florio points out in his article, League considers adjusting ownership rules to account for estate taxes, "Such a move would provide a one-generation stopgap on the problem, however. Once a family drops to 25%, the estate tax would have to be paid the next time a person owning a piece of the team passes."

Instead of looking to the NFL for relief, I think that NFL owners should be calling their Congressional members to push for complete repeal of the estate tax. (In case you didn't know, this actually happened in 2010 and will undoubtedly allow the heirs of George Steinbrenner to hold on to MLB's New York Yankees for many generations.) In fact, quite a few bills have already been introduced that would mandate permanent repeal of the estate tax, the most recent being H.R. 1259, "The Bipartisan Death Tax Repeal Permanency Act." So here is my totally self-serving plea to NFL owners - put your support behind permanent repeal of the estate tax so that your players can play some football this season and I can go to San Francisco.