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April 8, 2012
Brooklyn arena financing (as well as the two NYC stadiums): an exception to the "exception to the exception" in the tax code
Atlantic Yards Report
Would you believe that sports facility financing in New York City is so byzantine that it qualifies as an exception to the third power?
Let's go to What’s the Easiest Way to Cheat on Your Taxes?, a column in today's New York Times Magazine about various questions "you always wanted to ask your accountant:
Why is the tax code so complicated?
The answer, according to most accountants, is simple: “exceptions to the exceptions,” which, typically, are extremely complicated. John Yeutter, a C.P.A. who teaches accounting at Northeastern State University in Tahlequah, Okla., offered the following example:
RULE: When you buy a bond, you have to pay taxes on the interest payments you receive.
EXCEPTION: You don’t have to pay taxes on interest from municipal bonds (because the federal government wants to make it easy for local governments to borrow money).
EXCEPTION TO THE EXCEPTION: If a municipal bond is used to finance a professional sports arena, you have to pay taxes on the interest (the government doesn’t want to support a sports team).
Now imagine this times a thousand. “Each step along the way is great,” Yeutter says. “But after 100 years, we have a system that is very, very complex.”
Indeed it is, because there's yet another exception.
The new Yankee Stadium in the Bronx, the Mets' new Citifield in Queens, and the emerging Barclays Center arena (for the Brooklyn Nets) are all financed via a clever scheme, fully tax-exempt.
Posted by steve at April 8, 2012 8:59 PM