In 2002, when Major League Baseball approved the sale of the Boston Red Sox for $380 million, few headlines focused on what made the deal so financially appealing: the ability to write off hundreds of millions in intangible assets — from player contracts to broadcast rights.
For decades, these kinds of deductions quietly served as one of the most powerful levers in American sports finance. But now, that financial playbook is under serious threat.
A new U.S. tax reform proposal — titled the One Big Beautiful Bill (OBBB) — has cleared the House of Representatives and, if passed by the Senate, could dramatically alter the landscape of sports franchise ownership in the United States. The changes center around a provision that limits how much of a franchise’s intangible value can be amortized (i.e., deducted from taxes), reducing a key benefit that has long underpinned billion-dollar valuations in the sports sector.
What’s Changing: The End of Intangible Asset Deductions?
Under current U.S. law, owners of sports franchises are allowed to deduct the value of intangible assets — including branding, player contracts, and broadcast rights — over 15 years. These deductions reduce taxable income and improve post-acquisition returns.
The OBBB, passed narrowly in the House on May 22, proposes a new rule: beginning January 1, 2026, owners can only amortize 50% of the adjusted basis of these intangible assets.
While the bill doesn’t specifically target sports franchises, the language aligns with their accounting structures — and the implications are direct. According to the Joint Committee on Taxation, this adjustment is expected to generate nearly $1 billion in new tax revenue over the next decade.
Impact on Franchise Valuations and Deal Structures
This is more than a tax tweak — it’s a potential reshaping of the sports investment model:
- Post-Tax Returns Decline: With fewer deductions, buyers will see lower after-tax returns, especially in deals heavily reliant on media rights and licensing revenue.
- Valuation Pressure: Investors may lower offer prices to maintain IRR (Internal Rate of Return) targets, especially in PE-backed or leveraged deals.
- Credit Challenges: Franchise cash flows could look riskier on paper, impacting debt service ratios and borrowing capacity — particularly for mid-sized investor groups or newer entrants.
For big-name billionaires like Steve Ballmer or institutional-backed buyers, this may be manageable. But for smaller syndicates or private equity firms without significant balance sheet strength, reduced tax flexibility may tilt the playing field.
Lobbying Push and Political Uncertainty
Lobbyists for major U.S. sports leagues have already mobilized, arguing the clause amounts to a “targeted penalty” on high-profile investors. The Senate now has the option to amend, delay, or strip out the amortization clause altogether — but until then, dealmakers are preparing for a change.
A similar scramble occurred in 2017, when Trump-era reforms pushed private equity firms to fast-track acquisitions to retain favorable tax positions.
Strategic Implications: What This Means for the Sports Market
If the bill passes in its current form, here’s what we could expect:
- Short-Term Deal Acceleration: Expect a spike in franchise acquisitions before January 2026 as buyers rush to lock in current tax advantages.
- Exit Windows for Current Owners: Some owners may choose to cash out while valuations are high, especially those without long-term strategic operating synergies.
- New Ownership Models: Expect longer hold periods, more creative financing structures, and a greater focus on operating income over speculative asset appreciation.
- Sponsor & Fan Impact? It’s too early to say whether owners will offset tighter margins with price hikes — via tickets, sponsorship rates, or broadcast rights — but in highly commercial leagues, the temptation will be there.
Rethinking Value in the Next Era of Ownership
At 365247 Consultancy, we work with sports investors, clubs, and financial stakeholders to adapt to structural changes like this.
Here’s how buyers and sellers can respond smartly:
- Pre-2026 Positioning: If you’re considering a franchise sale or acquisition, move decisively. Early positioning could mean millions in retained tax value.
- Model with Reduced Amortization: Start building scenarios now based on tighter post-tax returns — particularly for leveraged structures or growth-stage sports assets.
- Shift to Operational Value Creation: With tax plays shrinking, ownership ROI will increasingly depend on building media ecosystems, maximizing digital monetization, and activating brand IP year-round.
- Collaborate with Legal & Tax Teams Early: Deal structures will matter more than ever — align with advisors who understand sports-specific accounting and the regulatory trajectory.
Whether you’re a league, PE firm, or ownership group preparing for acquisition or exit — we help you anticipate, adapt, and thrive. Book your intorductory call.
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