Spring is a basketball junkie’s dream March madness, followed by Euroleague and NBA playoffs. Israeli high-tech companies are at the forefront of helping teams and star players achieve the highest levels of individual and team success. At the OurCrowd Summit we spoke with representatives of RSPCT (www.rspctbasketball.com) that uses high precision shot tracking to improve player shooting and team decisions. RSPCT currently works with seven NBA teams (including the Indiana Pacers and Philadelphia 76ers) and a number of US college, as well as Euroleague teams.
This technology can not only enhance on-court performance, it also has entertainment applications. The TNT network used it during its coverage of the All-Star three-point competition to provide viewers with a unique augmented reality experience. Viewers were able to track balls in flight and identify where they would hit and even predict shooting patterns. It provided a deeper look into the players skills and ability.
Professional sports franchises are businesses impacted by all aspects of the tax law, including, sometimes, even the international provisions and treaties. Changes in the law can impact the economics of sports business in unintended ways. This was highlighted in last year’s tax reform.
One interesting consequence is how player trades are taxed. Prior to the 2017 tax reform, under tax code Section 1031—if certain conditions were met Taxpayers could postpone paying tax on the gain of a sale if the proceeds are reinvested in similar business property. Previously, when teams executed a trade, they could apply the like-kind exchange exception, and the trading teams didn’t have to recognize gain or loss for federal tax purposes, excepting cash, Tax reform effectively limits these exchanges to real estate transactions. Thus, in player-for-player trades, teams now have to recognize gain and pay tax on a traded player’s contract. If a team trades a higher value player with a relatively low salary—there can be a high potential tax bill.
Another consequence, that more directly impacts players, is the near elimination of the deduction for state and local taxes. This is especially painful because many states and even cities impose taxes on the athletes for the portion of their salary attributable to the games played there (thus a football player might be required to pay tax on 1/16th of his salary to California, a high tax state, even though he lives in Texas a no income tax state). Federal, state and local taxes are also imposed on athletes and performers from overseas. In such cases, there are various tax treaty, withholding and compliance issues to consider.
The US licensed lawyers and CPAs in MasAmeica’s business boutique services can provide the US tax solutions for the Israeli high-tech industry. In fact, its staff has handled tax and business matters for the Detroit Pistons (NBA) and the Tampa Bay Lightning (NHL). Contact us for a consultation.
MasAmerica has no relationship with any company mentioned in this post.