Atlanta and Oakland – (Exclusive to ZennieReport.com) Congress should amend IRS 26 U.S. Code 142 to add “ sports, entertainment, and tourism” facilities to the list of land uses allowed under Private Activity Bond tax law. Facilities that focus on sports, entertainment, tourism, have dramatically grown in number and value, with total estimates well into the trillions of dollars, and total employment well into the tens of millions (consider that one NFL Football game translates into as many as 2,000 jobs on game day).
As America has entered the second generation where service-related business activities have dominated our economy in a way manufacturing did in the 20th Century, edifices that house sports, entertainment, and tourism functions have become as much the engine of our economy in the 21st Century.
Right now, IRC § 141(e) defines a qualified private activity bond as any private activity bond as follows: The bond must be one of the following types:
• an exempt facility bond (IRC § 142(a)),
• a qualified mortgage bond (IRC § 143(a)),
• a qualified veterans’ mortgage bond (IRC § 143(b)),
• a qualified small issue bond (IRC § 144(a)),
• a qualified student loan bond (IRC § 144(b)),
• a qualified redevelopment bond (IRC § 144(c)), OR
• a qualified 501(c)(3) bond (IRC § 1455).
The IRS List Should Include Sports, Entertainment and Tourism Development
The problem at hand is that commonly, sports, entertainment and tourism development were only able to receive tax-exempt financing via being part of a “ a qualified redevelopment bond”. But such a arrangement is increasingly subject to hyper-political situations where the economic benefit of the project is often misunderstood or mischaractertized by special-interest groups.
By contrast, the same sports, entertainment and tourism development, that clears such road-blocks is regularly seen as a major contributor to a city or county’s improved economy. As one example, the construction of Cowboys Stadium in Arlington, Texas, has put that city, once only known as the home of The University of Texas at Arlington, squarely in the national conversation regarding sports events of national and international stature, and an estimated 300 events annually.
The Star Puts Frisco, Texas On The Map
But, beyond Cowboys Stadium in Arlington, Texas, the development known as “The Star” in Frisco, Texas, has transformed the idea of a professional sports practice facility into an economic development engine in its own right.
In “Did the Dallas Cowboys Crack the Economic Development Code?” in Propmodo.com, December 14, 2021, the author, Kyle Hagerty writes:
“The Star is the latest work of Jerry Jones, showing why he has been able to create the most valuable sports team on planet Earth. Working with a rapidly growing Dallas suburb about 40 minutes North of the city, Jones and Frisco imagined the “$5 Billion Mile,” a stretch along the Dallas North Tollway composed of 4 mixed-use developments totaling $5.4 billion in capital investment across 549 acres.
At its center is The Star, a 91-acre mixed-use facility. Designed by Gensler, the facility features 396,000 square feet of offices, a 12,000 seat practice field, 200,000 square feet of retail, a 60,000 square foot luxury gym, and a 300-room Omni hotel. Shortly after opening, The Star welcomed the Texas HQ of Kuerig Dr. Pepper Inc to a 350,000 square foot built-to-suit office. On Friday, The Star hosts football games for Frisco school sports.
The Star is surrounded by Frisco Station, a 242-acre mixed-use development. If you want to connect with the Cowboys, your best bet is heading to Frisco, not the stadium. Visitors are welcome at daily practice sessions, you may even catch a sight of Jerry flying in via helicopter. “Some teams can’t even get [the incentives we received] for the stadium, but we’re getting it for a practice facility,” Jones told the Dallas Business Journal. “But why? Why is because look at what it is driving in the economic stimulus. It is real. It is so tangible. What we have done has impacted the city of Frisco with the Star.”
“Did the Dallas Cowboys Crack the Economic Development Code?” in Propmodo.com, December 14, 2021
Women’s Sports Popularity And The Rise Of NIL Spending Pushes Sports Economic Development
Recently, what turned out to be the largest attended women’s sports event was held in Nebraska and 92,000 fans cheered on the University of Nebraska women’s volleyball team at a game inside the school’s football stadium. That broke the record previously held by the Rose Bowl in Pasadena, California when 90,185 fans came to the 1999 Women’s World Cup final between the U.S. Women’s National Team and China. That was the game that made Santa Clara’s Brandi Chastain famous when she celebrated her game-winning penalty kick by pulling off her jersey then sliding to her knees in her black sports bra.
The Need To Increase Private Activity Bond Limits To Fit The Needs Of The Sports And Entertainment World
Tax-Exempt Private Activity Bonds have unusually low limits and unreal restrictions that are from the 20th Century. Considering the rising importance of sports and entertainment and tourism facilities, the national tax-exempt private activity bond limit should be set at $30 billion for any project that has over 20 percent of its cost paid for by a public subsidy. Moreover, this category of exempt facility bonds should not subject to state volume caps.
Exempt Sports And Entertainment Projects Should Allow Gambling Uses
Sports gambling is now legal nationwide slowed only by individual state policy. But even with that, more than 30 states in the United States of America allow sports gambling. The current exempt private activity bond law prohibits gambling structures. The proposed sports, entertainment, and tourism tax-exempt private activity bond law should allow gambling uses as long as they are part of a combination sports, entertainment, and tourism project.
The Bond Issuance Cost Limit Should Be Raised From 2 Percent To 3 Percent
Given the size of the projects that will come from this adjustment in the law, the recommendation here is to increase the Bond Issuance Cost Limit from 2 percent to 3 percent. Those costs are related to Legal fees, underwriting fees, rating agency fees, printing and distribution costs, trustee fees, and registration and filing fees. Too often, these costs are over the national 2 percent limit, and in a World were inflation has impacted even this area of business, having a 2 percent limit seems archaic. It should be increased to 3 percent.
In Closing: Toward Adjusting Tax Law To Embrace The New World Of Sports, Entertainment, And Tourism As Economic Development
Historically, national tax law has favored the construction of manufacturing and transportation facilities. But the emergence of the Internet and digital media have altered the world economy such that human-centered entertainment has become a giant economic development generator. Altering national tax law to reflect this new world will create more diverse job opportunities at a time when technology threatens to close other ones. Please call for this reform of American national tax law to include sports and entertainment and tourism facilities.
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