Deduct sponsoring a sports team
If you provide financial support for a sports team, your business may be able to deduct the expense.
An IRS ruling states that money spent to outfit and support a sports team is like other advertising methods. If you have hope that sponsoring the team will increase your business income, the expense is deductible.
Sponsoring a team can include expenditures such as equipment, uniforms, tournament fees, and umpires.
If you decide to have your business sponsor your child’s Little League team, that’s a tax-deductible business-advertising expense. Purchasing ads or banners at her sports events could also qualify. However, it’s crucial to understand the rules to avoid problems with the IRS.
The IRS will expect you to treat sponsoring a sports team like other advertising. If a business runs an ad several times over several years without getting any results, it will stop. You should stop deducting sponsoring that sports team if it isn’t increasing business revenue.
The cost of admitting your child to a sports program is generally not tax deductible, which includes registration fees, sports equipment, travel costs, and other expenses.
You can’t deduct sponsoring a particular person, like an athlete going to the Olympics.
You can’t deduct fees or the cost of attending sporting events as a business expense.
Revenue Procedure 70-393 is the IRS source for the deduction of sponsoring a sports team.
A revenue procedure is an official statement that affects the rights of the taxpayer under the Internal Revenue Code. While a revenue ruling generally states an IRS position, a revenue procedure provides return filing or other instructions concerning an IRS position.
Several court cases also support the deduction.
In the Strong Construction Case, the company primarily used word of mouth and athletic sponsorships. The business paid for uniforms, logo design, equipment, and tournament fees for the athletic teams it sponsored.
The court ruled that the sponsorship expenditures for the sports teams were ordinary and necessary business expenses that could be deducted as advertising or promotion.
In the Bower case, James Bower owned a commodities brokerage firm. He paid for an Amateur Athletic Union (AAU) basketball team. He paid for the team’s gym rental, travel, lodging, AAU fees, and uniforms.
The court noted that his sponsorship increased his commissions and ruled that the sponsorship expenses were deductible business expenses.
Sponsorship of a sports team can be great advertising and PR for your business while also supporting your local community. However, it’s essential to understand what is deductible.
David Zubler has an accounting degree and computer science degree with high distinction and has experience as an accounting manager and controller in manufacturing, and has owned his tax/consulting business since 1990. David Zubler is the founder and president of Your Tax Care. The company provides business and tax education to the public at its website, YourTaxCare.com. David can also be contacted by email at firstname.lastname@example.org.