Golden State Warriors Avoid Taxes on $300MM Season Ticket Membership Loans
In 2012 the Golden State Warriors announced their desire to relocate from Oakland’s Oracle Arena, and by 2017 commenced construction on the team’s brand-new facility, the Chase Center in Mission Bay. With the massive multi-purpose arena set to open before the 2019-2020 season, the Warriors revealed that they would be selling memberships in the $15,000-$35,000 range to help finance the billion-dollar project. The sales of these memberships are estimated to total about $300 million in interest-free loans and bring into question if the Warriors would be required to pay income taxes on the membership fees.
After analyzing the terms, the IRS determined that the Warriors will not have to pay taxes on the money received from the memberships. This ruling was in the Warriors favor as the tax code would not classify the loan proceeds as a part of the team’s gross income, a benefit related to their federal income taxes.
On the other hand, the IRS ruled that those who purchased memberships will not be able to deduct the loan from their taxable income. Looking at the loan details, the thirty-year season ticket memberships are paid either in full without interest, or in installments with interest. By the end of the membership period, the Warriors state they will repay the fees to buyers, under the stipulation that the team will not have to pay interest.
In response to the ruling, the team wanted to inform their potential ticket holders, and have clearly stated in the membership agreements that the loan amount is not deductible on members’ income taxes. Not surprising for a team that’s won three out of the last four NBA championships, the news hasn’t deterred their diehard fans with the membership waiting list having over 40,000 individuals.
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