Sky boxes not a taxing issue for customers IRS changes not slowing sales

June 24, 1993|By Jon Morgan | Jon Morgan,Staff Writer

Proposed changes in tax law now heading through Congress would lessen the advantages of renting luxury suites at sporting events at the same time that Baltimore and four other NFL-hopeful cities are trying to market more than $250 million worth of the pricey seats.

But customers don't seem to mind: All of the cities that have begun collecting commitments on the seats report brisk sales.

President Clinton's economic plan, already passed by the House and now before the Senate, calls for a reduction in the amount of entertainment spending that can be deducted from income taxes as a business expense. The amount, which was reduced from 100 to 80 percent in 1986, would be pared again to 50 percent.

The law currently forbids deduction of sky-box and club-seat rental fees, but 50 percent of the food and beverages and ticket costs -- including that portion of the rental fee that can be attributed to seats -- can be deducted.

"Tax changes have never been a factor. We thought they would be a factor with the Orioles, and they were not," said Herbert J. Belgrad, chairman of the Maryland Stadium Authority.

Baltimore is competing with St. Louis, Charlotte, N.C.; Memphis, Tenn.; and Jacksonville, Fla., for one of the two expansion teams the league plans to add for the 1995 season. The franchises will be awarded this fall, and the league is allowing the competing cities to market sky boxes and club seats from July 1 to Sept. 3 as a way to prove market strength.

If all the suites and club seats in Baltimore are rented for the minimum three years, the total bill would top $50 million. Taken as an average -- some cities have more and some fewer suites -- the five cities are seeking a combined $250 million in commitments.

Deposits cannot be accepted until July 1, but Baltimore officials kicked off their campaign last week by announcing 31 commitments had been obtained for the 100 sky boxes at the proposed downtown NFL stadium. Belgrad declined to say how many suites had been sold as of Monday, but said, "The response has been overwhelming."

The issue of taxes has not come up, he said.

Officials in Jacksonville reported that all but four of their 68 boxes have been accounted for. Charlotte leaders said 95 of their 104 boxes had been accounted for. St. Louis and Memphis have not announced their sales campaigns.

Craig Skiem, director of the public assembly industry services unit of the accounting and consulting firm of Coopers & Lybrand, said the 1986 tax changes had little effect on the booming market for luxury suites.

"It continues to impact the industry, but at what point the tax becomes over-burdensome, I don't know," Skiem said. "The growth has shown there is interest and that corporations see value in these."

One Baltimore box renter, the Bank of Baltimore, is unconcerned with the taxes, said chairman Edwin Hale Sr.

"It's an investment in the city right now," Hale said.

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