Advertisement
  1. Business

Fallout from tax reform: No more deductions for pricey suites and sports tickets

Spectators sit in the club level during the first period of Game 7 of the Eastern Conference final against the Washington Capitals on May 23 at Amalie Arena, in Tampa. (DOUGLAS R. CLIFFORD   |   Times)
Spectators sit in the club level during the first period of Game 7 of the Eastern Conference final against the Washington Capitals on May 23 at Amalie Arena, in Tampa. (DOUGLAS R. CLIFFORD | Times)
Published May 31, 2018

Like many local businesses, Baldwin Risk Partners takes clients to Amalie Arena for Lightning games and also has a suite at Raymond James Stadium.

Last year, those entertainment expenses came with a sizable tax deduction. But thanks to the recent federal tax overhaul, that deduction is going away.

Now businesses are taking a hard look at whether tickets and suites and other client entertainment is providing enough of a return on their investments. Are the venues helping them land enough deals or retain their existing clients?

Baldwin Risk Partners is banking on the benefit, deciding to hang on to their tickets and suite.

"The changes have definitely brought a heightened level of scrutiny to how entertainment dollars get spent," said Trevor Baldwin, president of the insurance brokerage firm, which is also the parent company of BKS-Partners. "For us, we are in a relationship business, so the opportunity to develop relationships with our clients and interact with them outside of a strictly business environment is valuable."

MORE: Go here for more Business News

Tightening deductions will help offset some of the massive cuts in the Tax Cuts and Jobs Act of 2017, which included slashing the corporate tax rate to 21 percent. According to estimates from the Joint Committee on Taxation, scrapping the entertainment deduction should generate almost $19 billion in tax revenue by 2022 and more than $41 billion by 2027.

For small businesses that only buy a few tickets each year, the difference won't add up to much. But for businesses that spend $1 million on client entertainment, their tax bills could rise by tens of thousands of dollars, depending on what tax rate they paid last year.

The Lightning, which also controls Amalie Arena, has received inquiries from season-ticket holders but was not aware of any cancellations due to the changes in the tax law, said Bill Wickett, executive vice president of communications.

"We are aware of the new changes in the tax code and comprehensively communicated to season-ticket members," Wickett said, "but in the end, advised them to work through their own tax advisers to make final determinations on what might be best for them."

Allie Tschirhart, a certified public accountant and manager with the firm Warren Averett in Tampa, said the changes have prompted her clients to assess how they spend their entertainment budgets.

Before, businesses might have renewed season tickets or a suite in an arena without much thought. Now, they are running the numbers.

"For the most part, our clients don't have these sports tickets or the concert tickets or suites to get a tax deduction," Tschirhart said. "They use them to connect with their clients, for the camaraderie, for those moments that bring them together with their clients. The need to connect with clients is never going to go away."

Tschirhart added that the majority of her clients have liked the changes to the tax law, despite losing the entertainment deduction.

"Overall, the reaction has been so positive based on the other savings they are receiving," Tschirhart said. "They aren't focusing as much on what has been taken away, as the savings they are getting in other areas."

When certified public accountant Jennifer Ray put on a presentation in March about the new tax law, she sensed the crowd wasn't totally engrossed.

"As much as they say they want to know about the tax law changes, it's still tax law, so it's only so interesting," she said with a laugh. "But I noticed when I came to the part on meals and entertainment, the room perked up. They can see that this is something that could apply to their everyday business."

Ray, a senior tax manager at Frazier & Deeter in Tampa, said many businesses are still assessing whether to change how they spend their entertainment budget. Some are deciding between various forms of entertainment, she said.

"They want to know where they get the most bang for their buck. Whether that's taking clients to sporting events versus taking people golfing versus some other activity," she said. "Clients that may have used a suite or tickets mostly as a marketing tool, now may consider changing their approach and instead do a sponsorship. It's still getting their name out there, but in a different way that is a deductible approach."

The new corporate tax rate will soften the blow of losing the entertainment deduction for corporations that hang onto their tickets and suites, or buy new ones. Instead of paying up to 35 percent, they will only pay 21 percent.

"That can be a big difference if you're paying $100,000 for a suite," Tschirhart said.

The changes have also raised some uncertainty about how the new law applies when meals and entertainment collide. Meals with clients or associates remain 50 percent deductible if business is conducted and they aren't too lavish. But what if a celebrity chef makes the meal, is that a meal or entertainment? And what if the meal takes place at a baseball game or during another form of entertainment?

"There's a lot of caveats around that and that's the squishy part," Ray said.

Both Ray and Tschirhart expect the Internal Revenue Service to offer some written guidance later this year.

"It's not necessarily the fastest moving machine when it comes to getting guidance," Ray said. "But because the tax law was passed so quickly, hopefully the IRS is waiting to get a lot of input before publishing the regulations."

Contact Graham Brink at gbrink@tampabay.com. Follow @GrahamBrink.

ALSO IN THIS SECTION

  1. The Tampa Bay Times' headquarters in downtown St. Petersburg. [CHRIS URSO  |  Times]
    No customer information was compromised. The Times is removing the malicious code.
  2. Concentrix has told the state of Florida that it plans to lay off as many as 174 employees from one of the programs it has at the Interstate Corporate Center east of Tampa. This is the same call center hit with 245 layoffs announced in November. (Google street view photo) [Google Street View]
    In November, Concentrix, the California multinational company that runs the center, announced the layoffs of 245 employees.
  3. Loreen Spencer (left) and Sue Watts, the two newest members of HCI Group's board of directors. [HCI Group]
    “I just wish I had thought of this earlier,” the chairman and CEO said.
  4. Tampa-based WellCare Health Plans will become the headquarters for Medicare and pharmacy operations now that it has been acquired in a $17 billion cash and stock deal by Centene Corp., base in St. Louis. (Times files)
    New owner Centene said it “expects to maintain strong operations in Tampa,” which is anticipated to be the headquarters for its Medicare and pharmacy operations.
  5. Jon McCurdy 50, a deli retail improvement specialist, assists Yesenia Ynfante 30, and Janet Morales 54, at the new Publix located in downtown Tampa. The deli will now be able to take online orders easier via Instacart, a grocery delivery app. [OCTAVIO JONES   |   TIMES  |  Times]
    New Instacart Meal program to make Pub Sub orders a breeze, according to the grocery delivery app.
  6. Johanna Santiago, 50, of Riverview, hopes to start selling her Joba Sofrito early this year. Santiago developed the product, a savory Puerto Rican cooking sauce, with help from the nonprofit Enterprising Latinas in Wimauma. [MARTHA ASENCIO RHINE  |  Times]
    Selling food and crafts, three women are among the dozens who turned to the organization for training in 2019.
  7. Ramon Christopher Blanchett. [Courtesy of Ramon Christopher Blanchett] [Ramon Christopher Blanchett]
    An attorney for Ramon Christopher Blanchett sought a lesser sentence after his client admitted to filing a false return.
  8. Kahwa Coffee master roaster Cedric Anderson, 35, drops roasted coffee beens to cool Thursday, Jan. 16, 2020 in St. Petersburg. [CHRIS URSO   |  Times]
    One of Florida’s leading independent roasters offers an inside look into how they make your favorite blends.
  9. [Getty Images] [Getty Images]
    It won’t be easy at first, and you’ll make mistakes, but that’s okay.
  10. More than 44 percent of people who searched on ApartmentList.com for the Tampa Bay area from June to December were outside the region, according to a report from Apartment List. Percentages in the “Top Three Sources” box represent the share of searches coming from outside the metro area. (Apartment List map) [Apartment List]
    The region trails only Denver, Baltimore and San Diego for the percentage of people from outside the area searching for apartments on Apartment List.
Advertisement
Advertisement
Advertisement