Bob Lord Economy Sarah Anderson

The Everlasting Tax Shelter for Billionaires

A perverse loophole allows owners of profitable teams — and their heirs — to lower their tax bills by claiming huge paper losses.
Roberto Piccinini claimed millions in losses from his ownership of the Golden State Warriors. [Florent Lamoureux / CC BY-NC-ND 2.0]

By Bob Lord and Sarah Anderson | OtherWords

Remember the Everlasting Gobstopper from Willie Wonka’s chocolate factory? Designed for children “with very little pocket money,” it lasted forever, never got smaller, and was perpetually flavorful.

There’s a non-fiction equivalent, except it’s only for billionaires. We call it the Everlasting Tax Shelter, but it’s more commonly known as a sports team.

ProPublica recently reported how it works: A billionaire buys a sports team (or an interest in one) and is allowed to claim income tax deductions for about 90 percent of the cost over the subsequent 15 years.

Using what’s called an “amortization deduction,” these owners get tax breaks for intangible assets like “goodwill” — such as a loyal fan base, good employee relations, and strong brand recognition.

Our tax code assumes these intangible assets decline in value in the same way that factory equipment depreciates, so owners can claim deductions for them for years.

But this isn’t how sports teams work at all. In almost all cases, assets like the goodwill of fans get more valuable over time, not less, which drives the values of sports teams ever higher.

So, as teams are generating profits and growing more valuable, billionaire owners are claiming losses on their tax returns. This tax-dodging game works as long as they hold on to the investment, which most billionaire sports team owners do until death.

So it was with the late Save Mart Supermarkets mogul Robert Piccinini.

He was a member of a group that purchased the Golden State Warriors in 2010 for a reported $450 million. Over the following four years, ProPublica reports, he claimed losses of $16 million — despite the fact that the team’s total value ballooned to $1.3 billion during that period.

In 2015, Piccinini died, leaving his ownership interest to his children. Because he never sold his share in the team, Piccinini never had to pay income taxes on those paper losses.

His heirs didn’t have to either. Under a tax rule known as “stepped-up basis,” the heirs are treated as if they bought Piccinini’s interest in the limited liability company that owns the Warriors for its 2015 value, which had nearly tripled since Piccini bought his stake in 2010.

It’s highly likely these heirs have also been enjoying huge tax breaks by claiming paper losses on their Warriors investment, even though the team is now reported to be worth $4.7 billion —  over 10 times the 2010 purchase price.

No wonder Robert Piccinini’s son Dominic was in a jubilant mood when ESPN cameras caught him sipping from a golden chalice at a Warriors game in 2019.

Contacted by ProPublica, Dominic Piccinini acknowledged that he and his siblings had inherited equal shares of his father’s stake in the team, but he said he’s left the tax details to the family’s lawyers .

“It’s just the darndest thing,” the younger Piccinini said in a phone call from a vacation in Mexico. “I’m a lucky son of a b—-, there’s no way around it.”

Hard to disagree there.

President Biden’s tax plan would close the “stepped-up basis” loophole that allows the wealthy and their children to escape taxes on their investment gains. Congress should pass the Biden plan — and also the amortization deduction loophole.

Demolish the Everlasting Tax Shelter.

Bob Lord
Sarah Anderson

Bob LordSarah Anderson

Bob Lord, an Institute for Policy Studies associate fellow, is tax counsel to Americans for Tax Fairness. Sarah Anderson directs the Global Economy Project at the Institute for Policy Studies and co-edits Inequality.org. This op-ed was adapted from Inequality.org and distributed by OtherWords.org. 

4 comments

  1. There is absolutely NO REASON why sports team owners should get tax deductions at all. There is NO democracy when the Congress ignores the voters and obeys only lobbies for the rich. Passing the benefits to offspring compounds the problem as smaller and smaller proportions of the population build up piles of money and the rest of us lose.

  2. Thank you for opening this can of unclassy big rich unadulterated pigs-at-the trough – “oh little ole me? I don’t know anything about this get mega rich scheme those wonderfully naughty accountants of mine seemed to have dreamed up to keep me and mine and them swimming in the ever deepening green gravy free of ethical and social consciousness much less commitment.
    The more transparency you can bring to this chronic theft and thereby wounding of the public collective body (think: homelessness, unlivable wage, thin to no health care, evisceration of the civics-humanities-arts-sciences in education, infrastructure, intentional corporate obstruction to meaningful climate catastrophe actions, etc) by revealing the sinister big rich callousness in their (usually) parasitic clandestine engorgement of the public purse, the greater the collective energies are freed, the greater the clarity, emotional fuel, determination, will and civic actions emerge to unhinge these mortals from sucking us dead. Resurrection is possible!

  3. While you’ve surely exposed a problem with “stepped up basis” being abused, let’s look at how that might have affected the sale of my wife’s mother’s home after she died last year.

    “Mom” lived in that house for 70 years, so it’s basis was maybe $20,000. It was sold for $320K.

    Now, does she have to pay taxes on $300K, roughly 10x her normal income?

    Yeah, there’s the “inherence tax” involved here. Perhaps a sale of the home would be covered by that.

    The problem is how does one determine the basis of a property purchased 70 years ago?

    I’m just pointing out that getting rid of “stepped up basis” isn’t a simple proposition even though the facts presented here would make it seem so.

    But there’s another way of getting Piccinini’s money. Raise the marginal tax rate back to 95%. Surely income is being distributed from the franchise. If the marginal rate is high enough, the worth of the team will drop back to a realistic value. then we won’t have to worry about stepped-up basis.

    1. All the proposals contain exemptions for modest amounts of gain. Your wife would not pay tax on that gain from her mother’s house.

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