Tax reform could limit baseball trades this summer

Odd things can happen when a political party rams through a major change in tax law because it needed a political victory — any political victory — at any cost.

The “tax reform” law was created in secret and passed with almost no time allowed for inspection.

Now, sports teams are worried they won’t be able to trade players without taking a major tax hit.

“This is a change we hope was inadvertent, and we’re going to lobby hard to get it corrected,” the chief legal officer of Major League Baseball tells the New York Times.

The change they’re worried about adds one word to the code — real — that had previously allowed farmers and other businesses to exchange assets without a tax hit. Now, like-kind exchanges are limited to “real property.”

When player contracts are traded from one sports team to another, the teams will have to pay capital gains taxes because people have value and aren’t real estate. This particularly hits baseball teams hard at the trade deadline every summer when teams that are out of the pennant race trade valuable stars to good teams in exchange for mere prospects of little immediate value.

The confusion is only one of many side effects of the new tax law, which sped through the House and Senate in less than two months at the end of last year, resulting in a series of changes that were both intentional and inadvertent. Republicans say they weren’t trying to hamstring sports teams: The change in the like-kind provision, Senate staff members said, was simply an attempt to broaden the United States tax base.

But that is little consolation to the teams who now join restaurateurs, independent agriculture businesses and multinational corporations on a long list of entities affected by the law in ways they did not see coming, and who now face long odds to secure changes or clarifications.

Major League Baseball and N.B.A. officials expressed hope that Congress would revisit the provision, which is one of many parts of the law that could raise their taxes or hurt their revenues.

Complicating the problem is that nobody really knows how to place a value on a trade in baseball.

Unless Congress takes another run at cleaning up a hastily written and passed tax bill, the Times suggests there could be fewer trades in baseball this year.

  • Kellpa07

    If you like your centerfielder, you can keep your centerfielder.

  • Nato Coles

    *cue someone posting about how the ACA was “rammed through” despite months of open hearings, because it wouldn’t be a comments section without whataboutism*

    Seriously though, if this it true then they need to fix this. But Congress is so dysfunctional, I’m skeptical. Both of the teams I root for are prime candidates for a midseason upgrade if things go well – if in July the Twins don’t add an elite bullpen arm to solidify a hypothetical-but-expected run for the AL Central championship citing this as a reason, well… there’s always November 2018.

  • BJ

    >Republicans say they weren’t trying to hamstring sports teams: The change in the like-kind provision, Senate staff members said, was simply an attempt to broaden the United States tax base.

    So it wasn’t against our friends the billionaire owners of sports ball teams, it was to get taxes from everyone! Republicans should fear editing the tax code for this. In fact they should run on how much it raises the federal government!!!

  • Jim in RF

    Extend Dozier.

  • wjc

    Here’s a prediction. The GOP will try to put together a “non-controversial” set of fixes. The Dems will respond, “You mean like the “non-controversial” changes we wanted to make to the Affordable Care Act that you wouldn’t let us make?” The GOP will say “Totally different.” The Dems will say “Yeah, right. Don’t think so.” And nothing will get done.

  • AmiSchwab

    trump is a genius isn’t he

  • Jack Ungerleider

    Dovetailing with the previous post on Minor League players pay, the solution is simple. (I invite the legal minds in the group to shoot this down, because I know there has to be a problem with it. 8^)
    1. Restructure MLB and the affiliated Minor League clubs in to a single organization making all players employees of said organization. At least all players that are “40 man roster” players.
    2. The baseball teams remain independently owned and the services of the players is provided by way of contract from MLB to the team. Basically MLB will provide 40 players to each team under a basic services contract. The actual players provided to each team is at the discretion of the MLB office.
    4. Minor league teams are allowed to employee “independent contractors” who perform the duties of a baseball player. Their contracts are held by the team.
    5. Player movement between teams is now simply a reassignment of which 40 players are provided to each team.

    • wjc

      Why would MLB do this if it raises their costs? Unless they are forced to.

  • Jack

    If corporations can be people, then people can be real property. I’m sure that’s what Mitt Romney would say.

    • jon

      corporations are people, people are property, and congress is on perpetual auction to the highest bidder.