$750 Million a Year: The Tax Break Hidden Inside the Lakers Sale
Published on August 17th, 2026Written By: Dave Manuel
In 2018 the owner of the Los Angeles Clippers reported income of $656 million to the Internal Revenue Service and paid a federal effective rate of twelve per cent. A player on the team across the corridor reported a fifth as much and paid nearly three times the rate. A woman selling concessions in the same building paid a higher rate than the owner did. None of this was evasion, none of it was hidden, and none of it required anything more exotic than buying a basketball team - because the American tax code permits the purchaser of a sports franchise to write off around ninety per cent of the purchase price against his personal income, spread across fifteen years, as though the most reliably appreciating asset in the country were a piece of machinery slowly wearing out. With the Lakers changing hands this month at $12.5 billion, that provision is now worth roughly $750 million a year to somebody. This is how it works, where it came from, and what it is actually worth once you account for the part nobody mentions.
Sports-King Feature
The Depreciating Asset That Never Depreciates
Buy a sports team and the tax code lets you deduct around ninety per cent of it, over fifteen years, against income earned anywhere. How the 100/15 rule works, what it is worth on a $12.5 billion purchase, and the part of the story that is usually left out.
Deductible Share of PriceAbout 90%
Over How Many Years15
Lakers Deduction, Per Year$750M
Owner Rate vs Player Rate12 / 36
A note on how to read the meters. Every entry below carries one, and each is drawn to scale against its own longest bar, so the relative lengths are the argument rather than decoration. Green bars are amounts a taxpayer keeps or deducts, red bars are amounts paid or disallowed, gold sits in between. Where a figure comes from leaked tax filings it is described as reported, and where it is arithmetic on a public purchase price it is described as such. Everything in this file is lawful. That is the interesting part.
01
Federal effective income tax rate, 2018
The owner12.0%
A concession worker14.1%
The star player35.9%
Drawn to scale. Rates as reported from leaked IRS filings reviewed by ProPublica.Start with the number that makes the rest of this article necessary. In 2018 Steve Ballmer, the owner of the Los Angeles Clippers, reported income of $656 million and paid a federal effective rate of 12 per cent. LeBron James, then playing across the hall, reported $124 million and paid 35.9 per cent. And a woman working a concession stand in the same building reported a fraction of either and paid 14.1 per cent - a higher rate than the billionaire whose team she was serving, on an income roughly one fifteen-thousandth the size. Nothing about that is illegal. All of it follows from a single feature of the tax code, and the rest of this file explains it.
02
Share of a franchise purchase price that can be written off
Before 200450%
After 2004about 90%
The 50/5 rule became the 100/15 rule. Same asset, twice the deduction, over three times as long.When a business is bought, the purchaser can generally deduct the cost of the assets acquired over time, on the theory that assets wear out. Buildings decay, equipment ages, patents expire. Sports franchises were for decades a partial exception, and then in 2004 they became something closer to the opposite. Today a buyer may amortise roughly ninety per cent of the purchase price - not merely the arena fittings and the team buses, but the player contracts, the sponsorship agreements, the luxury suite deals, the goodwill, and the franchise itself - across fifteen years. Accountants call it the 100/15 rule. The industry calls it the roster depreciation allowance.
03
The original argument, as made to the Treasury
Value assigned to the playersup to 50%
Years to write it off5 years
The 50/5 rule. Adopted in the mid-century and codified in Section 1056, it governed until 2004.The idea was not invented by a tax lawyer but by a baseball owner. Bill Veeck reasoned in the nineteen forties that a ballplayer is a depreciating asset: his skills decline, he contributes less over time, and so the portion of a purchase price attributable to his contract ought to be deductible in the same way a machine tool is. It is not an absurd argument. Owners pressed it successfully, and the resulting roster depreciation allowance let a buyer assign up to half the purchase price to player contracts and write it off across five years. Before that ceiling existed the claims were considerably bolder: league financials that surfaced in a congressional investigation in the early nineteen seventies showed several NBA clubs asserting that more than ninety per cent of a franchise's value - in one case the entire hundred per cent - consisted of player contracts. What owners disliked was the ceiling. Every other industry, they argued, could amortise essentially all of its intangible assets. Why should sport be singled out?
04
Annual deduction on a hypothetical $3 billion purchase
Under the old 50/5 rule$300M
Under the 100/15 rule$200M
The old rule gave more per year. The new one gives far more in total, and for three times as long.In 1993 Congress passed Section 197, which allowed businesses to amortise intangible assets over fifteen years - and specifically excluded sports franchises from it. That exclusion lasted eleven years. The American Jobs Creation Act of 2004 repealed the old provision and folded franchises into Section 197 alongside everyone else, so that the deductible list now expressly includes any franchise, trademark, or trade name. The change followed lobbying by Major League Baseball, and the bill was signed by President George W. Bush - who had himself been part owner of the Texas Rangers. The arithmetic is worth pausing on, because it cuts both ways: the old rule allowed a bigger annual deduction over a short window, while the new one allows a smaller annual figure across a much longer one and captures roughly twice as much of the purchase price in total. On a large enough deal, the difference runs to billions.
05
Annual amortisation deduction, recent sales
Lakers, $12.5B$750M
Seahawks, $9.61B$577M
Commanders, $6.05B$363M
Broncos, $4.65B$279M
Ninety per cent of the purchase price, divided by fifteen. Deductions may be claimed on whatever schedule the taxpayer elects.Run the current market through the rule and the figures become difficult to hold in the head. The Lakers changed hands this month at a valuation of $12.5 billion. Take the ninety per cent that published reporting treats as the typical amortisable share, spread it across fifteen years, and that is a deduction of roughly $750 million a year, every year, until 2041. The Seahawks at $9.612 billion produce about $577 million annually. The Commanders about $363 million, the Broncos about $279 million. These are not estimates of profit or loss in any ordinary business sense. They are the paper cost of an asset that the buyer, the seller and every valuation service in the country expect to be worth considerably more in fifteen years than it is today.
06
Components of the purchase price
Franchise rightsyes
Player contractsyes
Sponsorship dealsyes
Suite agreementsyes
Goodwillyes
The arena leaseno
Section 197 covers the intangibles above. Certain lease interests remain outside it.The breadth of the list is the part that surprises people who work in other industries. Player contracts qualify as what the code calls workforce in place. Sponsorship agreements and luxury suite contracts qualify. Goodwill qualifies. The franchise itself - the bare right to field a team in the league - qualifies, and on a modern purchase it is by far the largest component of the price. What does not qualify is more interesting than it sounds: an interest under an existing lease of tangible property sits outside the provision, so an arena lease is not a Section 197 intangible. It is not that the cost vanishes - such an interest is written off separately, across the life of the lease rather than the standard fifteen years. A buyer amortises the team, the brand and the roster on one schedule, and the right to play indoors on another.
07
Where the deduction ends up
Stays inside the teamno
Flows to the owneryes
Most franchises are held in pass-through entities. The loss is reported on a Schedule K-1 and lands on the owner's personal return.A deduction is worthless if it is trapped. This one is not, because franchises are typically held in partnerships and limited liability companies rather than ordinary corporations. Such entities pay no federal income tax themselves; they issue each owner a Schedule K-1 reporting his share of the income or loss, and that figure flows onto his personal return. So the amortisation generated by a basketball team can reduce the tax owed on software dividends, hedge fund fees or anything else. This is the step that converts an accounting entry into money, and it is why the owner of a thriving franchise can truthfully report a loss.
08
Los Angeles Clippers, as reported for tax, 2014 to 2018
Losses reported$700M
Estimated tax savedabout $140M
Purchase price $2 billion in 2014, producing roughly $120 million of amortisation a year.The clearest documented example comes from ProPublica's review of leaked IRS files. Ballmer bought the Clippers in 2014 for $2 billion, then a record, generating something like $120 million of amortisation annually. Across the following five years the franchise reported $700 million of losses for tax purposes, saving him an estimated $140 million. During the same period the team was a valuable and growing business in the second-largest market in the United States, and its value has multiplied since. Ballmer's representatives have said he has always paid the taxes he owes, and he has stated publicly that he would personally be content to pay more. Both things are true at once, which is rather the point.
09
Carolina Panthers, before and after the 2018 sale
Before: annual profitsubstantial
After: reported lossabout $115M
David Tepper paid $2.28 billion in 2018, producing roughly $140 million of amortisation a year.The Panthers show the effect at the moment of transition, which is the cleanest way to see it. Before the sale the club reported a large annual profit. David Tepper bought it in 2018 for $2.28 billion, then a record for an NFL franchise, and the deduction that came with the purchase was worth roughly $140 million a year. The team promptly reported an annual loss of about $115 million. Nothing had changed on the field, in the stands or on the balance sheet in any economic sense. The franchise had simply acquired a new owner, and with him a new cost basis to write down.
10
What the arbitrage is actually worth
Deducted at ordinary ratesup to 37%
Repaid at capital gains ratesabout 20%
The spreadthe real prize
Deductions reduce cost basis, so a larger gain is taxed on sale. The advantage is timing and rate, not exemption.Here is the part almost every article on this subject leaves out, and leaving it out makes the story less impressive rather than more. Amortisation is not a gift; it is a loan against the eventual sale. Every dollar deducted reduces the owner's cost basis in the franchise, so when the team is eventually sold the taxable gain is correspondingly larger. What the owner actually captures is twofold: he defers the tax for years or decades, and he deducts at ordinary income rates while repaying at capital gains rates. On a large fortune that spread is worth an enormous amount. It is simply not the same thing as never paying, and anyone arguing about this subject should know the difference.
11
Deductions available against employment income
The ownerthe franchise
The playeressentially none
Unreimbursed employee expenses, including agent fees, ceased to be deductible for most taxpayers after 2017.Set this file beside the jock tax and the picture completes itself. A player is taxed by every state and city he plays in, at the top marginal rate, on income apportioned by duty days - and since the 2017 changes he cannot deduct the agent commission, the trainer or the accountant who calculates it all. The owner sitting a hundred feet away is deducting the entire franchise. Neither party is doing anything improper; both are following the code as written. But the code was written to treat one of them as a person earning wages and the other as a person acquiring a wasting asset, and the asset in question has appreciated roughly nineteen per cent a year for a century.
The Full Schedule
What the rule produces on every major franchise sale of the last few years. Annual figures are ninety per cent of the purchase price divided by fifteen - the share that published reporting treats as typically amortisable.
| Franchise | Year | Price | Annual Deduction | Through |
|---|---|---|---|---|
| Los Angeles Lakers | 2026 | $12.5B | About $750M | 2041 |
| Seattle Seahawks | 2026 | $9.61B | About $577M | 2041 |
| Boston Celtics | 2025 | $6.1B | About $366M | 2040 |
| Washington Commanders | 2023 | $6.05B | About $363M | 2038 |
| Denver Broncos | 2022 | $4.65B | About $279M | 2037 |
| Carolina Panthers | 2018 | $2.28B | About $137M | 2033 |
| Los Angeles Clippers | 2014 | $2B | About $120M | 2029 |
The two oldest rows are the check on the method. Published reporting has put the Panthers deduction at roughly $140 million a year and the Clippers at roughly $120 million; the ninety per cent model produces $137 million and $120 million. Where a real figure exists, the arithmetic lands on it.
The Arithmetic
What the return says against what the market says
This is the whole argument in one image. Amortisation exists because assets wear out. Sports franchises are the clearest example in American business of an asset that does the opposite, and does it reliably, because a league is a closed system with a fixed number of members and a growing pile of television money.
The Record Book
Why the Assets Do Not Wear OutThe theory behind amortisation is that what you bought degrades. A patent expires, a machine rusts, a customer list goes stale. The assets inside a sports franchise mostly regenerate. Player contracts are replaced by new player contracts; broadcast deals are replaced by larger broadcast deals; the franchise right does not expire at all, because leagues are closed systems that admit new members only when the existing ones vote to let them in. Tax specialists quoted on the subject have described the treatment as detached from economic reality, which is a polite way of putting it.
The Rule Cuts Both Ways on TimingIt is worth being precise about what 2004 changed, because it is usually described as a straightforward giveaway and the reality is more textured. The old regime allowed up to half the price to be written off across five years, which produced a larger annual deduction. The new regime allows nearly the whole price across fifteen, which produces a smaller annual figure but captures roughly twice as much in total and matches the deduction to a far longer holding period. For an owner planning to keep a team for decades, the second is worth vastly more.
The Building Is DifferentOne quiet exclusion tells you something about how the provision was drafted. Certain lease interests, including an arena lease, sit outside the section. So a buyer can amortise the team, the brand, the roster and the goodwill, but not the agreement that lets them play indoors. It is also why ownership structures so often separate the franchise from the venue and the media rights into different entities, each with its own treatment - and why any honest account of an owner's tax position has to look at more than the team.
Why the Records Are Public at AllAlmost everything specific in this file about individual owners traces back to one source: a trove of Internal Revenue Service filings obtained by ProPublica and published from 2021 as The Secret IRS Files. Franchise accounts are otherwise private, which is why the Green Bay Packers - the one publicly owned club, obliged to publish financials - have been so heavily used by economists for decades. Without a leak and a co-operative, there would be almost nothing to write.
Sports-King's Note
Now for the fine printEverything described in this article is lawful. It follows from provisions Congress enacted deliberately, principally the American Jobs Creation Act of 2004, which repealed the earlier rule limiting franchise amortisation and brought sports teams within Section 197 of the Internal Revenue Code alongside other businesses. That measure followed lobbying by Major League Baseball and was signed by President George W. Bush, a former part owner of the Texas Rangers. No individual named here has been accused of any wrongdoing, and the figures reported for particular owners come from Internal Revenue Service filings obtained and published by ProPublica, not from this publication's own review of any tax return. Representatives for Steve Ballmer have said he has always paid the taxes he owes, and he has stated publicly that he would be content to pay more. The annual deduction figures in the schedule above are ninety per cent of the purchase price divided by fifteen. That ninety per cent is the share ProPublica's reporting describes as typically amortisable, and it is an approximation rather than a rule: buyers allocate value between asset classes, may elect their own schedule within the fifteen-year period, and the amortisable proportion varies deal by deal. The figure is used here because it reconciles with the per-franchise numbers that have actually been published - it produces $137 million a year for the Panthers against roughly $140 million reported, and $120 million for the Clippers against roughly $120 million reported - whereas using the full purchase price overstates both. Sportico has separately described the Broncos purchase as carrying a write-off of about $3 billion, which is a smaller proportion again, so treat every figure in the schedule as an order of magnitude rather than a filing. The rate comparison in the first entry reflects federal effective rates for a single tax year and does not include state or local tax, which falls very differently on the parties involved. The treatment of losses at the personal level depends on rules about material participation and passive activity that are beyond the scope of this article and that vary by taxpayer. Nothing here is tax advice, and no reader should act on it without speaking to a qualified professional.
One Last Word
The argument for all this was never absurd. Bill Veeck was right that a thirty-four-year-old shortstop is worth less than a twenty-six-year-old one, and a tax system that ignored the decline would be ignoring something real. What has happened since is that the deduction stayed while the premise quietly inverted. The rosters still age. The franchises do not. A team bought today for twelve and a half billion dollars will be written down to nothing on paper by 2041, and on every piece of evidence from the last hundred years it will by then be worth a great deal more than twelve and a half billion dollars. Both statements will appear in the same set of accounts, and both will be entirely correct.
The hard numbers, for the road: a purchaser of a professional sports franchise may amortise roughly ninety per cent of the purchase price over fifteen years under Section 197 of the Internal Revenue Code, a treatment that dates to the American Jobs Creation Act of 2004 and that replaced an earlier rule permitting up to half the price to be written off over five years. The deductible components include player contracts, television and radio contracts, sponsorship agreements, luxury suite contracts, goodwill and the franchise itself; an interest under an existing lease of tangible property, such as an arena lease, is excluded from the section and written off over the life of the lease instead. On the $12.5 billion Lakers valuation that is roughly $750 million a year, on the $9.612 billion Seahawks sale about $577 million, and on the $6.05 billion Commanders sale about $363 million. Because franchises are typically held in pass-through entities, the resulting losses reach the owner's personal return on a Schedule K-1 and offset unrelated income. Leaked filings reviewed by ProPublica showed the Clippers reporting $700 million of tax losses between 2014 and 2018 and the Panthers moving from a large profit to a loss of about $115 million after their 2018 sale, and showed one owner paying a federal effective rate of 12 per cent in a year when a player paid 35.9 per cent and a concession worker in the same arena paid 14.1 per cent. The deductions reduce cost basis, so the benefit is deferral and the difference between ordinary and capital gains rates rather than permanent exemption.
