The Business of HockeyDiscuss the financial and business aspects of the NHL. Franchise sales, valuations, TV contracts, ratings, expansion, relocation, the CBA and work stoppage discussion goes here.
Please Note the sarcasm smiley They are being helped with this tax-write off deal by the government. Change the location to Florida and people would be claiming this to be a subsidy. People would openly be wanting it to pass to force the re-location of teams etc.
No the teams don't get the tax write off its the companys that do its not limited to sports this includes going to a golf course or going to a play or festival your a company you get to write off many things again its not the team that get the write offs its companys that do.
This is more or less what I'm trying to grasp here. As I don't operate a large business what is the actual effective net gain/loss going on here? If a luxury box costs $100,000, then once it's written off as a business expense under the current tax regulations what is the actual effective cost of those tickets? And once the provincial regulations change, what is the effective dollar value difference in that cost?
The way coladin talks about it he makes it sound like businesses pay $100,000 for luxury box suites and then get to save $100,000 in taxes. I know that's not how it actually works, but I have a hard time understanding how the benefits to having a luxury box is no longer worthwhile because it costs an extra few hundred/thousand dollars.
Another thing I was wondering about, if this is happening in Ontario and the Senators are saying they won't be able to stay in business if it passes, under what conditions do the other Canadian or small market teams operate under?
I understand people don't like write offs thats fine but i have a bit of a issue when people say no to sports but don't seem to have any issue with the meal write off.
Please Note the sarcasm smiley They are being helped with this tax-write off deal by the government. Change the location to Florida and people would be claiming this to be a subsidy. People would openly be wanting it to pass to force the re-location of teams etc.
Well, according to kdb209 Florida business already get a tax deduction.
Do you honestly think Canadians want all American teams to relocate to Canada?
It seems you have some kind of complex. At best Canada could support 3 more teams (IMO)
Just be thankful Canadian hockey players have never shafted American teams like a few American basketball players have shafted Canadian basketball teams.
Quote:
Originally Posted by kdb209
No, they don't get them for free. It's a tax deduction - they save an amount equal to their marginal corporate income tax rate.
In the US, businesses may deduct up to 50% of entertainment expenses. If their marginal tax rate is 50% (significantly higher than most businesses), then the net result is they save 25% on the effective cost of the tickets.
I can't talk to deduction limits and tax rates in Canada.
What do you mean "non-financial"? The boxes are all completely financial. Itis all about the write off. Why would anyone get a box to watch a game if you don't benefit from the expense?
I am a VP of a Corporation. I know, i shouldn't be socializing with the likes of high school guys, but I love my hockey team and as a business owner who has seasons and utlilize these tickets for my business, I can see a lot of people getting out of the hockey expense without the tax write off. As I said earleir, I spoke to a few box owners who already stated that either they won't or the BOD won't allow it. They are not increasing prices on boxes when they can hardly find people to take them as it is.
You are bang on!
A few colleagues of mine looked in to a corporate box last year and we would split up the games and use them as a business expense. I can tell you with out a doubt that if the tax exemption was not there it would've made it a stupid economic decision. It wasn't worth it for the business to justify it as a non tax exempt expense. In the end we chose to defer for the next few years but with this news I would never consider buying corporate seats.
This is more or less what I'm trying to grasp here. As I don't operate a large business what is the actual effective net gain/loss going on here? If a luxury box costs $100,000, then once it's written off as a business expense under the current tax regulations what is the actual effective cost of those tickets? And once the provincial regulations change, what is the effective dollar value difference in that cost?
The way coladin talks about it he makes it sound like businesses pay $100,000 for luxury box suites and then get to save $100,000 in taxes. I know that's not how it actually works, but I have a hard time understanding how the benefits to having a luxury box is no longer worthwhile because it costs an extra few hundred/thousand dollars.
Another thing I was wondering about, if this is happening in Ontario and the Senators are saying they won't be able to stay in business if it passes, under what conditions do the other Canadian or small market teams operate under?
All that may be going away is the provincial corporate income tax deduction on 50% of the cost of the suite (not the Cdn federal deduction) - 50% * 4.5-12% = a 2.25% to 6% effective discount. In other words, not really a significant difference.
C & P from earlier in this thread:
Quote:
Originally Posted by barneyg
It's the same rule in Canada. According to the Canada Revenue Agency, luxury boxes count as entertainment expenses. As such, only 50% of the amount is deductible. Provinces have the right to use different rules but except for Alberta and Quebec (who administer corporate tax separately from the CRA), they usually don't. I checked for Ontario and they don't adjust federal taxable income for such entertainment expenses, i.e. end result = 50% deductible in Ontario too.
As for corporate tax rates, calculations are predictably complex but Ontario corporations face marginal rates from 16% (small businesses = 11% fed + 4.5% Ontario) to 31% (large listed companies = 19% fed + 12% Ontario).
Let's assume a luxury box in Ottawa costs $200k a year (I have no clue how much they actually cost). Because of the 50% rule, only $100k is deductible. This implies (using tax rates quoted above) tax savings between $16k and $31k, thus a net cost of $169k - $184k.
Posters who believe corporations only engage in such activities "because they can save taxes" should take a deep breath, read the paragraph again, and look at the big picture.
By the way, this is likely going to pass, and it's not a big deal. The federal government is not going to change its tax code just because Ontario does. There will be a small change on the "provincial tax" part of the T2 federal tax return (schedule 5/500). Back to the example above, Ontario-based corporations will lose the write off at the provincial level, i.e. they will lose a tax break between $4.5k and $12k on a $200k luxury box. Net cost goes from $169-$184 to $181k-$189k (remember they still get the federal write off). If you're still counting that's a 2.7%-7% increase in net cost. BIG DEAL.
It was put in place to benefit businesses ...the tax credit...
Deducting these business expenses is not something that was "put in place." Businesses are taxed based on their taxable income. Money from sales - money expended in making sales = net income. Without any specific legislation, business would subtract 100% of entertainment expenses. Legislators were at some point convinced that not 100% of these entertainment expenses were really for business purposes, so the allowable deduction was reduced to 50%. It's now being further reduced to 0%
Deduction and tax credit are two different things. This is a deduction.
Quote:
Originally Posted by RandV
This is more or less what I'm trying to grasp here. As I don't operate a large business what is the actual effective net gain/loss going on here? If a luxury box costs $100,000, then once it's written off as a business expense under the current tax regulations what is the actual effective cost of those tickets? And once the provincial regulations change, what is the effective dollar value difference in that cost?
The way coladin talks about it he makes it sound like businesses pay $100,000 for luxury box suites and then get to save $100,000 in taxes. I know that's not how it actually works, but I have a hard time understanding how the benefits to having a luxury box is no longer worthwhile because it costs an extra few hundred/thousand dollars.
Edit: See KDB post above.
Quote:
Originally Posted by wjhl2009fan
No the teams don't get the tax write off its the companys that do its not limited to sports this includes going to a golf course or going to a play or festival your a company you get to write off many things again its not the team that get the write offs its companys that do.
Actually Canadian tax law specifically prohibits deducting golf expenses in most cases. Yachting trips too.
There are so many write off out there that the governments would find themselves looking down lawsuits and in court to explain how a £5000 dinner can be written off 100 times over, but not tickets to a game?
Good luck with that lawsuit. Courts won't give it the time of day. If you have even a vague idea of the Canadian tax code (or the US tax code for that matter), you know that internal consistency doesn't really matter.
All that may be going away is the provincial corporate income tax deduction on 50% of the cost of the suite (not the Cdn federal deduction) - 50% * 4.5-12% = a 2.25% to 6% effective discount. In other words, not really a significant difference.
C & P from earlier in this thread:
Thanks, I read through the entire thread but somehow missed or overlooked C & P's post.
Deducting these business expenses is not something that was "put in place." Businesses are taxed based on their taxable income. Money from sales - money expended in making sales = net income. Without any specific legislation, business would subtract 100% of entertainment expenses. Legislators were at some point convinced that not 100% of these entertainment expenses were really for business purposes, so the allowable deduction was reduced to 50%. It's now being further reduced to 0%
Deduction and tax credit are two different things. This is a deduction.
Edit: See KDB post above.
Actually Canadian tax law specifically prohibits deducting golf expenses in most cases. Yachting trips too.
Sure but you can write off a big part of your meal so you could hit the golf course for 9 holes then go have a nice meal where you can write off 50%.
Good luck with that lawsuit. Courts won't give it the time of day. If you have even a vague idea of the Canadian tax code (or the US tax code for that matter), you know that internal consistency doesn't really matter.
That's a very, very good read.
You would create a huge issue if you said sure you can still write off your meals or go to a play or a festival but sorry no sports this would not go over well no court will or should stand by and say sure you can spend $5.000 for dinner but no you can't same the same on sports.
You would create a huge issue if you said sure you can still write off your meals or go to a play or a festival but sorry no sports this would not go over well no court will or should stand by and say sure you can spend $5.000 for dinner but no you can't same the same on sports.
I agree. But "creating a huge issue" is not the same as winning a lawsuit. That argument will not work in front of the courts because the government makes up the tax code and decides what expenses are deductible, at what rate tangible assets can be depreciated for tax purposes, etc.
I agree with you in the sense that allowing both luxury box expenses and $5k meals is more consistent than allowing one but not the other. However, disallowing both is also consistent, and if it came down to "creating a huge issue" i.e. making this a public debate, this would be the more likely outcome IMO.
I understand people don't like write offs thats fine but i have a bit of a issue when people say no to sports but don't seem to have any issue with the meal write off.
Although I would just as soon eliminate the write-offs for meals too, I have no problem distinguishing between a meal and drinks that perhaps cost $30-$100 per person at a time and a corporate box that costs $200,000 annually plus the price of the tickets and food and drinks, especially when many of us know very well that the boxes are not always being used strictly for "business" purposes for all events.
Quote:
Originally Posted by 2525
Jim Flaherty to Dwight Duncan: Hands off corporate tax breaks for NHL, pro sports tickets
The Globe & Mail article on the same story includes the following:
Quote:
“We have much bigger issues than that and I was quite frankly disappointed that this has been made into some sort of major issue,” said Mr. Flaherty.
...
Mr. Flaherty noted that he is being “lobbied constantly” by groups who want similar tax write-offs for golf fees incurred as a business expense, an idea he rejects.
So Flaherty recognizes that a line needs to be drawn somewhere and he doesn't want to move it to include golf fees, which presumably would include memberships for executives (priced at $100,000 and above) at private clubs where they sometimes entertain their business associates after a round of golf. Duncan simply wants to more the line in the other direction so that it doesn't include, amongst other things, corporate boxes (priced at $100,000 and above) where executives sometimes entertain their business associates during a hockey game.
Randy
Yes there are some cases where dinners and drinks come to around $400 and thats it but there are times where dinner and drinks cost far far more then in some cases they go out to a play in yes a private box you want to9 do away with write offs fine but you have to get rid of all of them not just pick a few that you don't like as for boxes at sports events in some markets they can be rented out by game and in some cases its includes food etc.
Randy
Yes there are some cases where dinners and drinks come to around $400 and thats it but there are times where dinner and drinks cost far far more then in some cases they go out to a play in yes a private box you want to9 do away with write offs fine but you have to get rid of all of them not just pick a few that you don't like.
Personally, I would just as soon get rid of all of these entertainment expenses. However, I can't see that ever happening, so I'd be quite happy with a compromise more restrictive than what exists today. And even if that meant that corporations could claim the food and drinks bill from a box each night it is used to entertain business guests without also being able to claim the $200,000 annual fee for the box itself, then that would still be a step in the right direction.
Personally, I would just as soon get rid of all of these entertainment expenses. However, I can't see that ever happening, so I'd be quite happy with a compromise more restrictive than what exists today. And even if that meant that corporations could claim the food and drinks bill from a box each night it is used to entertain business guests without also being able to claim the $200,000 annual fee for the box itself, then that would still be a step in the right direction.
Sure you could say the box can not be a write off but you would have to apply that to everything be it sports/thearters or festivals.
Well, according to kdb209 Florida business already get a tax deduction.
Do you honestly think Canadians want all American teams to relocate to Canada?
It seems you have some kind of complex. At best Canada could support 3 more teams (IMO).
How do Florida, Tennessee, and Texas businesses get this write off in their states when they don't pay state income tax to being with?
No I don't think all Canadians want many relocations (along with contraction) but a very vocal minority does and several of them work in the Media.
Don't deny the write-offs do help the teams sell tickets. Like I said switch the location to any Sunbelt state and have one of the NHL teams say it may lead to bankruptcy and several Canadians would be wanting the bill to pass, just to force the team into financial trouble. I don't want the bill to pass because it would hurt the Senators and they belong in Ottawa.
Sure you could say the box can not be a write off but you would have to apply that to everything be it sports/thearters or festivals.
And that is precisely what the Ontario government is proposing to do... eliminating the provincial tax write-off for "live events", whether they be sports, arts or cultural. So if an executive is treating customers to the upcoming Madonna concert at Scotiabank Place then that would be treated the same as if they were treated to an upcoming Senators game in the same box. We've mostly just heard about the sports angle on this because of the Senators president's claim, which I don't buy, that it could put the Sens out of business.
And that is precisely what the Ontario government is proposing to do... eliminating the provincial tax write-off for "live events", whether they be sports, arts or cultural. So if an executive is treating customers to the upcoming Madonna concert at Scotiabank Place then that would be treated the same as if they were treated to an upcoming Senators game in the same box. We've mostly just heard about the sports angle on this because of the Senators president's claim, which I don't buy, that it could put the Sens out of business.
I don't agree with a complete write off and no its not so much for the venues its for the companys there are many mid size and small companys that do need these types of tax write offs its fine if they were to say a company can't write of a box for the year or seats but can write them off for a set amount of games or just limit it to food and drinks and by arts and culture that would not just be evenst at arenas but events at places like the Nac.
How do Florida, Tennessee, and Texas businesses get this write off in their states when they don't pay state income tax to being with?
No I don't think all Canadians want many relocations (along with contraction) but a very vocal minority does and several of them work in the Media.
Don't deny the write-offs do help the teams sell tickets. Like I said switch the location to any Sunbelt state and have one of the NHL teams say it may lead to bankruptcy and several Canadians would be wanting the bill to pass, just to force the team into financial trouble. I don't want the bill to pass because it would hurt the Senators and they belong in Ottawa.
There is a difference when the gov gives money right to a team and offers tax write offs for company's sure this helps nhl teams but it helps cfl/ohl/lacrosse and the many other events etc.
Good luck with that lawsuit. Courts won't give it the time of day. If you have even a vague idea of the Canadian tax code (or the US tax code for that matter), you know that internal consistency doesn't really matter.
That's a very, very good read.
Actually I do. My previous employers where part of a group of businesses that took the BC government to arbitration a few years ago over a "tweek" they did that created an unfair advantage for a few businesses.
Onterio would need to nuke all entertainment deduction and not just sports. If they just picked on sports they could and would be called to the carpet to explain this action
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How do Florida, Tennessee, and Texas businesses get this write off in their states when they don't pay state income tax to being with?
Florida & Tennessee do have state corporate income taxes - Texas does not.
And, of course, all those businesses get the write off on Federal taxes, which are much higher than any state taxes - the Federal corporate rate may be as high as 35% (although few businesses pay that high an effective rate) vs 5-12% for State corporate taxes.
1. Every single team in the NHL (all major sports as a matter of fact) has tax write offs for their tickets.
2. Take away 15million in revenue from any team in the NHL, and many will fold.
3. "Wining and dining" a client is business 101
You can make this about more than what it is, but in reality, the tax write off is fair, common, and needed.
I also highly doubt it takes effect without some sort of alternative for the Sens, considering the players and staff alone probably end up shedding that much in salary to the Government anyways. It's a step sideways, with a step backwards because you lose a major sports franchise, and the possibility of them going to the finals and making the city/province a help of a lot more money than 15mil.
1. Every single team in the NHL (all major sports as a matter of fact) has tax write offs for their tickets.
2. Take away 15million in revenue from any team in the NHL, and many will fold.
3. "Wining and dining" a client is business 101
You can make this about more than what it is, but in reality, the tax write off is fair, common, and needed.
I also highly doubt it takes effect without some sort of alternative for the Sens, considering the players and staff alone probably end up shedding that much in salary to the Government anyways. It's a step sideways, with a step backwards because you lose a major sports franchise, and the possibility of them going to the finals and making the city/province a help of a lot more money than 15mil.
Its important to keep in mind this tax write off is not just for the nhl its also for other sports such as cfl/mls/nll/chl and the many festivals and so on.
“I’m just not into scapegoats, I’m not into side issues,” Flaherty told reporters.
This gave me a good laugh.
Quote:
Originally Posted by wjhl2009fan
Its important to keep in mind this tax write off is not just for the nhl its also for other sports such as cfl/mls/nll/chl and the many festivals and so on.
This.
I thought this tax break was costing the province $15 million total. If that were the case, the Senators would be losing a couple million at most, and even then, that is presuming all their corporate clients cancel (unlikely).
