IRS and NHL

[alecfromtherock]

The NHLPA would not acknowledge Mr. Arthur Levitt’s report on the finances of the NHL, saying the NHL lost less money then the report said.

Yet the PA did not give the NHL their figures on how much the NHL lost last season, and have no intention of ever doing so.

A forced audit by the Internal Revenue Service(and its cousin Revenue Canada) would give a loss figure that few could dismiss.

Some say that Mr. Levitt was only given the books the owners wanted him to see so they could force their will in the next CBA.

Hiding books and statements from the IRS would be a crime if the 30 teams were being audited, owners could end up in jail for something that serious (It would not be a slap on the wrist punishment Todd Bertuzzi received from the courts)

It is very unlikely that the NHL as a whole made money last season, just how much did they lose?

A 1% loss of $2.1 billion revenue turns out to be $21,000,000

Should the IRS audit the NHL teams?

Click to read more...

 

[GKJ]

The PA has no obligation to give any financial reports to the teams since they are not a team they are the union, they are getting paid.

 

[kerrly]

The NHLPA would not acknowledge Mr. Arthur Levitt’s report on the finances of the NHL, saying the NHL lost less money then the report said.

Yet the PA did not give the NHL their figures on how much the NHL lost last season, and have no intention of ever doing so.

A forced audit by the Internal Revenue Service(and its cousin Revenue Canada) would give a loss figure that few could dismiss.

Some say that Mr. Levitt was only given the books the owners wanted him to see so they could force their will in the next CBA.

Hiding books and statements from the IRS would be a crime if the 30 teams were being audited, owners could end up in jail for something that serious (It would not be a slap on the wrist punishment Todd Bertuzzi received from the courts)

It is very unlikely that the NHL as a whole made money last season, just how much did they lose?

A 1% loss of $2.1 billion revenue turns out to be $21,000,000

Should the IRS audit the NHL teams?

I don't think the IRS and Revenue Canada can do audits unless they are for their own use. I think its very unlikely that they could do an audit and have those figures used in the CBA negotiations. Of course it would possibly be different if they did one last season for their own use, and the NHL asked to see those figures to use in their negotiations, but there is no way you could ask them to do it for negotiations. Although I do understand your point because it would be almost impossible to dispute their numbers.

 

[cneely]

Taxable income does not neccessarily equal net income.
Tax rules allow deductions that would not normally be taken in business, and disallows normal business expenses.

For example, for tax purposes, you can write off 30% of some capital assets, despite the fact that they may last you 10 years. Conversely, you can only claim 50% of any meal expenses.

Sometimes, the difference between taxable income and accounting income can be great.

 

[JRgavemeaNTC]

Respected Audit Firm

The league got Levitt to audit their books, but Levitt has NO legal duty to remain unbiased. The NHL could always retain a large audit firm (KPMG, E&Y, PWC) to audit their financials. These companies have a legal duty to be straight down the middle, not to mention hundreds of millions of dollars worth of reputational goodwill at stake.

 

[shadoz19]

The league got Levitt to audit their books, but Levitt has NO legal duty to remain unbiased. The NHL could always retain a large audit firm (KPMG, E&Y, PWC) to audit their financials. These companies have a legal duty to be straight down the middle, not to mention hundreds of millions of dollars worth of reputational goodwill at stake.

Agreed, besides book income does not necessarily equal taxable income

 

[HarryStrand]

For example, for tax purposes, you can write off 30% of some capital assets, despite the fact that they may last you 10 years. Conversely, you can only claim 50% of any meal expenses.

That's news to me. I am a professional operating as a professional corporation in Canada, and have been advised by Revenue Canada that taking my clients out for lunch is not a legitimate expense, my personal meal expenses are not tax deductable, and my hired staff cannot claim meal expenses of any kind. I wonder why Revenue Canada lied to me

Thanks for the great news. I'm going to add up how much I spent on meals last year and claim 50% of the total.

 

[Slice9505]

Taxable income does not neccessarily equal net income.
Tax rules allow deductions that would not normally be taken in business, and disallows normal business expenses.

For example, for tax purposes, you can write off 30% of some capital assets, despite the fact that they may last you 10 years. Conversely, you can only claim 50% of any meal expenses.

Sometimes, the difference between taxable income and accounting income can be great.

All true, however your alternative minimum tax (in this case corporate AMT) will usually preclude you from having book income and taxable income that are substantially different in many cases.

Regardless, whether book income or taxable income are used as the source for analysis is a moot point in my opinion. The overall financial heath of each NHL team from will require an analysis of financial data over the course of many years in order to determine it's viability in the current market system. Even if you take your allowable accelerated depreciation for tax purposes in early years, you're going to have a higher taxable income in subsequent years related to those same capital assets which is why a multi-year analysis should be required.

I'm sure that the financial statements of each team are already audited, it's more a matter of whether the NHL and each owner is willing to make them public information. History suggests no and I can't blame them for that.

 

[Charge_Seven]

I don't think the IRS and Revenue Canada can do audits unless they are for their own use. I think its very unlikely that they could do an audit and have those figures used in the CBA negotiations. Of course it would possibly be different if they did one last season for their own use, and the NHL asked to see those figures to use in their negotiations, but there is no way you could ask them to do it for negotiations. Although I do understand your point because it would be almost impossible to dispute their numbers.

Not totally true...if all the owners go to jail for tax evasion, I think that elevates the players point a bit :lol

 

[cneely]

That's news to me. I am a professional operating as a professional corporation in Canada, and have been advised by Revenue Canada that taking my clients out for lunch is not a legitimate expense, my personal meal expenses are not tax deductable, and my hired staff cannot claim meal expenses of any kind. I wonder why Revenue Canada lied to me

Thanks for the great news. I'm going to add up how much I spent on meals last year and claim 50% of the total.

Not sure who told you that, or why. Meals and entertainment are reduced by 50% when claimed, but are certainly deductible.

http://www.cra-arc.gc.ca/tax/business/topics/solepartner/allabout/businessexpenses/meals-e.html

 

[YellHockey*]

That's news to me. I am a professional operating as a professional corporation in Canada, and have been advised by Revenue Canada that taking my clients out for lunch is not a legitimate expense, my personal meal expenses are not tax deductable, and my hired staff cannot claim meal expenses of any kind. I wonder why Revenue Canada lied to me

Maybe its because there is no "Revenue Canada". You should have been advised by the Canada Revenue Agency (CRA).

 

[cneely]

All true, however your alternative minimum tax (in this case corporate AMT) will usually preclude you from having book income and taxable income that are substantially different in many cases.

I'm certainly not a tax professional, but aren't you assuming a loss here?

Regardless, whether book income or taxable income are used as the source for analysis is a moot point in my opinion. The overall financial heath of each NHL team from will require an analysis of financial data over the course of many years in order to determine it's viability in the current market system. Even if you take your allowable accelerated depreciation for tax purposes in early years, you're going to have a higher taxable income in subsequent years related to those same capital assets which is why a multi-year analysis should be required.

A one year audit of book income, assuming reasonble depreciation, would give you a decent snapshot of the surrent economics of the game. Assuming no major swings in either revenue sources, or costs, one could project similar results over several years.

I'm sure that the financial statements of each team are already audited, it's more a matter of whether the NHL and each owner is willing to make them public information. History suggests no and I can't blame them for that.

I'm sure with debt covenants, and stakeholder concerns would cause all of the companies to pay for an annual audit.

 

[Bring Back Bucky]

That's news to me. I am a professional operating as a professional corporation in Canada, and have been advised by Revenue Canada that taking my clients out for lunch is not a legitimate expense, my personal meal expenses are not tax deductable, and my hired staff cannot claim meal expenses of any kind. I wonder why Revenue Canada lied to me

Thanks for the great news. I'm going to add up how much I spent on meals last year and claim 50% of the total.

Harry, it does sound like you got bum advice. As a self-employed individual, I've been writing off my client lunches for years. As long as you fit the CCRA definition of self-employed, I don't know where they get off telling you otherwise.

 

[HarryStrand]

Maybe its because there is no "Revenue Canada". You should have been advised by the Canada Revenue Agency (CRA).

My inquiry was in 1998, and the name change occurred in the fall of 2000, I believe.

 

[cneely]

My inquiry was in 1998, and the name change occurred in the fall of 2000, I believe.

The good news, is that you can also write off the $50 I'm going to bill you for consulting fees.

 

[triggrman]

I think the main differences the PA has with the owners are what is considered "hockey income" a tax audit of the Nashville Predators wouldn't help the PA a bit. A tax audit of all of Leopold's Nashville based business would.

Example all the arena, suite and signage revenue falls under his company Powers Management which makes a ton of money, while having very little overhead.

The Nashville Predators make money from tickets sales (minus suites) and broadcasting rights, but has a huge expense (players) and probably loses money.

All in all CL makes a money in this market, it's just not all hockey only revenue.

 

[cneely]

I agree, but exactly how much of that arena revenue should be allocated to the hockey team? I mean, the Preds should not benefit from the fact that Leopold made a million dollars from having a Motley Crue concert.

 

[shadoz19]

The good news, is that you can also write off the $50 I'm going to bill you for consulting fees.

Nice

 

[YellHockey*]

My inquiry was in 1998, and the name change occurred in the fall of 2000, I believe.

If you're relying on information that is over six years old, you deserve to be overpaying your taxes.

 

[kerrly]

Not totally true...if all the owners go to jail for tax evasion, I think that elevates the players point a bit :lol

The owners are not evading taxes. The only thing here, is that the players are not agreeing what the owners are declaring as NHL revenues. Completely different from tax evasion.

 

[triggrman]

I agree, but exactly how much of that arena revenue should be allocated to the hockey team? I mean, the Preds should not benefit from the fact that Leopold made a million dollars from having a Motley Crue concert.

This is the root of the problem is it not?

 

[cneely]

This is the root of the problem is it not?

I would think the sticking point would be items like parking, and concession sales while the NHL games are on. In Boston, for example, concession sales go to Deleware North, and not to the Bruins.

 

[triggrman]

In Nashville, Central Parking gets the parking revenue or the majority of it.

 

[arnie]

The NHLPA would not acknowledge Mr. Arthur Levitt’s report on the finances of the NHL, saying the NHL lost less money then the report said.

Yet the PA did not give the NHL their figures on how much the NHL lost last season, and have no intention of ever doing so.

A forced audit by the Internal Revenue Service(and its cousin Revenue Canada) would give a loss figure that few could dismiss.

Some say that Mr. Levitt was only given the books the owners wanted him to see so they could force their will in the next CBA.

Hiding books and statements from the IRS would be a crime if the 30 teams were being audited, owners could end up in jail for something that serious (It would not be a slap on the wrist punishment Todd Bertuzzi received from the courts)

It is very unlikely that the NHL as a whole made money last season, just how much did they lose?

A 1% loss of $2.1 billion revenue turns out to be $21,000,000

Should the IRS audit the NHL teams?

First, it wouldn't work. The question isn't simply how much but rather how. If the Rangers sell their TV rights to the MSG network, then they make less profit. But the MSG makes more. The queastion is how much should the TV rights go for a fair market. Neither IRS nor Revenue Canada will tell you.

Second, the players don't care how much the NHL really made or lost. That's why they didn't look at the Levitt report, even to criticize it in deail. They want no cap and don't care what the real revenue is. They don't want a cap, period.