In 2002, Major League Baseball approved the sale of the Boston Red Sox for $380 million. Less publicised than the price was what made the deal so financially attractive: the ability to write off hundreds of millions in “intangible assets” like player contracts and media rights. For years, this accounting strategy helped American sports owners reduce their tax bills. That era may soon be over.
A provision in the recently passed One Big Beautiful Bill (OBBB), a major tax and spending proposal endorsed by Republicans, could significantly alter how sports franchises are valued and sold in the US.
The bill, which cleared the House by a 215–214 vote on May 22, includes a clause that limits how much of a franchise’s intangible value can be deducted from taxes.
The tax rule owners don’t want to lose
Under current US tax law, sports team owners can deduct the value of intangible assets over 15 years. These assets include naming rights, player contracts, brand goodwill, and broadcasting agreements. In high-value franchise sales, these deductions can be worth hundreds of millions of dollars in tax relief.
The OBBB introduces a change that limits this practice. Though the bill does not mention sports franchises by name, it alters the treatment of intangible asset deductions in a way that directly affects them. The provision applies to acquisitions completed after January 1, 2026 and restricts amortisation of intangible assets to 50% of the adjusted basis.
Section 110000 of the bill reiterates any changes to the tax code are to be interpreted as amendments to the Internal Revenue Code of 1986. Other sections, including 110005 and 110006, specify changes to how deductions are calculated and how income thresholds interact with those deductions. These mechanisms are consistent with the language used in franchise accounting strategies.
According to the Joint Committee on Taxation, the clause affecting amortisation deductions is expected to raise $991 million in new revenue over the next decade.
Valuations and cash flow under pressure
The reduced tax benefit could affect how investors approach future franchise deals. Under the current tax code, amortisation of intangible assets allows owners to deduct large portions of a team’s acquisition cost over time, improving post-tax returns and increasing the appeal of buying high-value clubs.
If passed, the OBBB would cut the allowable deduction in half for acquisitions completed after 1 January 2026. Reportedly, several advisers working with private equity groups said the change could make some acquisitions less attractive by reducing the scale of post-acquisition tax relief. The ability to offset taxable income from media rights, merchandise sales or stadium revenues is a key part of many buyers’ financial models.
Analysts quoted in Pillsbury Law’s industry note also warned that tighter post-tax returns may alter acquisition strategies. Buyers may respond by adjusting how they structure deals, extending holding periods, or lowering their valuation multiples to protect internal rate of return (IRR) targets. This is particularly relevant for private equity firms, which often use structured credit and leverage to finance sports assets.
A reduced amortisation allowance would also affect debt-service coverage ratios, a key metric for lenders. Without the same level of deductible expenses, franchise cash flows may appear riskier to credit providers, potentially increasing borrowing costs or limiting the amount of debt investors can raise against a deal.
While many large franchise buyers are well-capitalised or backstopped by institutional funds, smaller consortiums or new market entrants may find it harder to compete on price without the same tax efficiency, which could affect market dynamics in upcoming franchise sales.
Pushback from the league offices
As reported by the New York Post, sports team owners have begun lobbying efforts in the Senate to remove or modify the amortisation clause.
Lobbyists for major leagues are seeking to preserve the existing tax treatment, viewing the proposal as a “targeted penalty on high-profile asset holders”.
A spokesperson for the House Ways and Means Committee, quoted in Politico, defended the provision. “This is about closing unjustified loopholes that disproportionately benefit high-net-worth investors,” the spokesperson said.
What if it passes?
If the Senate passes the bill with the amortisation clause intact, there could be several knock-on effects, though most remain speculative at this stage.
One possibility is a short-term rush in franchise transactions before the rule takes effect in 2026, as buyers seek to lock in the current tax benefits. This occurred in the private equity sector in 2017, ahead of the Trump-era tax reforms, when firms accelerated dealmaking to preserve existing deduction structures.
Longer term, if the change reduces post-tax returns on sports investments, it may prompt some current owners—particularly those without deep operating synergies or legacy attachments—to consider selling while valuations remain high. This would be consistent with behaviour seen in other industries where favourable tax regimes have been scaled back.
Whether or not the cost of reduced tax flexibility would be passed on to fans through higher ticket prices, sponsorship fees, or broadcasting costs is less clear. In heavily commercialised sports markets, franchise owners may look for revenue offsets, but price-setting is also constrained by market competition, league policy, and fan tolerance.
What happens next?
The bill is now under consideration in the Senate, where the narrow House vote suggests there may be space for further negotiation or amendments. The amortisation clause could be revised or stripped out altogether, depending on political pressure and procedural strategy.
If passed without changes, the new rule would not necessarily reduce the appeal of owning a team, but it would reduce the tax advantages that have helped drive deal-making in the sector for decades.
