Ryan Mayer

MLB attendance for the first half of this season has slipped as compared to previous seasons. Discussions about why that is the case tend to revolve around poor weather conditions, noncompetitive teams, and higher strikeout rates. However, there’s another factor that could play into whether or not some of the most high-profile luxury seats are filled in the coming years: the recently implemented Tax Cuts and Jobs Act of 2017.

The law, which was passed by Congress and approved by the President last year, contains a clause within it that states that tickets to “entertainment” events can no longer be written off by businesses as tax deductions. Local businesses tend to be the ones that are purchasing season ticket packages in the various luxury suites/seats that have been added to stadiums in recent years as a revenue source for teams. As C.P.A Lance Christensen of Margolin, Winer and Evens explains, the new law makes the decision on whether or not those company seats are worth it a little trickier.

“Well, like any transaction that a business makes, it becomes a cost-benefit analysis,” said Christensen via phone interview. “Basically the company looks at it based on what how much the tickets cost against the benefits, i.e. the goodwill they’re generating with clients by taking them to games, and decides whether those tickets are still worth it. I explain to my clients now that the cost for these tickets just went up due to the elimination of the deduction. If you were sort of on the margins before about whether or not the tickets were worth it, you may see companies just say, ‘hey let’s not do this anymore.”

According to a Tampa Bay Online article from 2016, corporate ticket sales account for approximately two-thirds of ticket sales for most MLB teams. Now, there’s no evidence to suggest currently that corporate sales have been affected by the new tax law yet, something that Christensen says has been his experience in speaking with his clients as well.

“I have not heard any of my clients say they’re not buying any tickets,” said Christensen. “A lot of the season-tickets for this year were purchased before the law came into effect on January 1, so it would be tough to tell how much, if at all, the law has impacted this year’s ticket sales.”

Christensen did say, however, that he’s heard anecdotally that the new law is having an impact in how company’s look at the value of corporate tickets and a drop in sales could be an unintended effect of the legislation. As businesses and leagues continue to get used to the new law, it will be interesting to see what adjustments both sides make when it comes to corporate ticket sales. It could theoretically lead to a drop in sales or, leagues and teams could try to find a way make the tickets more enticing and therefore worth the cost despite the loss of deductibility.