Sports Franchises Lose Huge Tax Savings Under New IRS Regulation (1)

Pro sports franchise owners will lose out on millions of dollars in tax savings due to a new Internal Revenue Service rule.

The IRS issued a final regulation Jan. 18 that lumps sports teams in with other kinds of services that don’t qualify for a 20 percent income tax deduction. Sports interests called foul—claiming athletes make up a small part of a team’s business—but the IRS said the main thrust of sports is the service those athletes perform.

A different interpretation would have meant big money to teams organized as pass-through entities, such as limited liability companies and limited liability ...