On May 22, 2025, the House of Representatives passed the draft tax legislation (the “Revised House Draft Bill”). The Revised House Draft Bill contains certain changes to the original bill that was released on May 12, 2025 by the House Ways and Means Committee (the “Original House Draft Bill”). As summarized in our previous blog post, there were two proposed changes in the Original House Draft Bill that would have particularly impacted the sports industry, if enacted:
- Amortization of a professional sports franchise and related intangible assets (acquired as part of an acquisition of an interest in, or assets of, a team) would be limited to 50% of the adjusted tax basis of those assets. Current law permits amortization of 100% of the adjusted tax basis. The amortization would continue to be spread over a 15-year period. This change would be effective for assets or interests acquired after the date of the enactment of the tax legislation.
- Any income arising from a sale or license by a tax-exempt organization of its name or logo would be treated as “unrelated business taxable income” (“UBTI”), which would be taxable income for the tax-exempt organization and, in most cases, subject to the 21% corporate tax rate. Under current law, royalties received by a tax-exempt organization from an unrelated payor are not treated as UBTI, and therefore, not taxable to the tax-exempt organization. The proposed change would be effective for tax years beginning after December 31, 2025.
The Revised House Draft Bill dropped the proposed change to treat income arising from a sale or license by a tax-exempt organization of its name or logo as UBTI, but retained the proposed change to limit the amortization of professional sports franchise and related intangibles that are acquired as part of an acquisition of an interest in (or assets of) a team. The Revised House Draft Bill will be reviewed by the Senate and is subject to further revision and amendment as the budget reconciliation process continues. The two changes summarized above may or may not be included in the final tax legislation. Congressional Republicans have previously stated that their goal is to have tax legislation finalized by July 4, 2025.
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