The agreed purchase of the Seattle Seahawks by the Khosla family set a record price for an NFL sale at $9.61 billion. By virtue of the deal’s size, tech billionaire Vinod Khosla and his wife Neeru could also secure a record tax break for an NFL team transaction.
While final details of the new ownership group’s cap table have not been disclosed and are likely still in flux, federal tax law provides a powerful tool for new owners of teams or any business to cut personal or business income.
Through amortization, the new business owner can write off intangible assets over 15 years. With a sports team, nearly the entire value—90% or more in most cases—is made up of intangible assets, from player contracts, media rights and goodwill, among other examples.
“If you look at a sports team, their balance sheet is going to be pretty simple,” Chris Migliaccio, partner at accounting and advisory firm PKF O’Connor Davies, said in a phone interview. “Amortization can be a very powerful thing, especially if you are someone who’s generating income on a regular basis from non-sports sources. The fact that you have a large tax write-off can make the financial pain of buying a team significantly less.”
Migliaccio walked through the example of a team sold for $10 billion with 90% of the price able to be amortized over 15 years. He said it could potentially provide the buyer $600 million annually to offset other income, with cumulative tax savings of $3.3 billion based on a top federal rate of 37%. State taxes add more gains.
Migliaccio emphasized that this is not a special bonus for sports owners, but part of the tax code that applies to all businesses. It is all more of a tax deferral-strategy, as the annual write-down lowers the cost basis that is used for capital gains taxes when the club is sold. NFL owners are typically thinking long-term in a league with an average ownership tenure of more than 40 years.
The Khoslas will only capture the tax benefit based on the percentage of their equity stake in the team—the deal’s press release cited an ownership group “led by the Khosla family.”
In a social media post, Vinod Khosla said he was “excited to be part of this great franchise” and than he’d have no other comments until the sale is final.
Tax breaks for LPs in the deal is a more complicated question. “It’s much more difficult as a passive investor to use those write-offs,” Migliaccio said. “There are significant limitations for individual taxpayers on the deductibility of passive write-offs.”
Robert Willens, a tax expert and Columbia Business School adjunct professor, said new owners need to spend more than 500 hours during the year in active participation in the business.
“By definition, limited partners do not materially participate in the business,” Willens said in an email. “For them, the losses will be passive and will not be currently deductible but will, instead, be deductible only when they dispose of their entire interest in the partnership.”
Last year, lawmakers considered denting the tax advantages. The original House version of the One Big Beautiful Bill Act (OBBA) would have cut the deduction on intangible assets to 50% from 100%. The provision was dropped when the OBBA moved to the Senate.
Reducing the tax break would have slightly dampened franchise values, according to multiple sports bankers Sportico spoke with last year when the tax change was on the table. But no one thought it would have a major impact, with the main thesis for sports team investments still in place.
The write-off can slash the team’s income tax burden and/or offset an owner’s personal tax liability from non-team income. A 2021 ProPublica feature detailed the benefits for high-profile owners David Tepper and Steve Ballmer. ProPublica said Ballmer reported a total of $700 million in losses from his Clippers ownership between 2014 and 2018, offsetting a portion of his massive income from Microsoft dividends and other business income.
The first case of an owner depreciating a portion of a team purchase dates to 1946, when Bill Veeck—one of the most innovative owners in baseball history—was buying the Cleveland MLB franchise. The IRS accepted Veeck’s logic to write off the value of player contracts over five years at a time when the top individual tax rate was 91%, albeit with much more liberal deductions. The ruling changed the economics on sports team ownership forever.
The IRS eventually capped the write-off for team owners at 50% of the purchase price in what was known as the Roster Depreciation Allowance, but the American Jobs Creation Act of 2004 expanded the provision to all intangible assets, which pushed the write-off to 90% or greater in some cases.
The Seahawks sale price topped the previous record for an NFL team of $6.05 billion in 2023 for the Washington Commanders. Josh Harris led that ownership group with a stake near the NFL minimum of 30%. The previous biggest tax break tied to an NFL team was likely connected to the $4.65 billion buy of the Denver Broncos in 2022. The Walton and Penner families had just a few very small LPs in their deal to acquire the team.
Microsoft co-founder Paul Allen bought the Seahawks in 1997 for roughly $200 million. The Seahawks were sold to the Khoslas by Allen’s estate, which assumed ownership after his 2018 death.