Can One Think Charitably About The Bryce Harper Deal?Posted: July 9, 2019
This column first appeared on TaxVox.
As a long-time baseball fan, I’m happy that my office moved closer to the Washington Nationals ballpark, where I expect to take in more games this year. But I’ll do so with some misgivings, in part because of how the Nationals and their former star Bryce Harper missed an opportunity. Not because Harper left DC for the rival Philadelphia Phillies, but because Harper and the teams he negotiated with whiffed on their chance to send an important message about acting charitably toward their communities.
For months, there appeared to be large dollar differences between the kind of contract Harper sought and the contracts teams were willing to offer. Eventually, Harper signed with the Phillies who paid him $330 million over 13 years. However, there was a missed opportunity to bridge the gap between the parties. For instance, the team could have proposed to donate much of the difference to charities, a foundation or a donor advised fund at a community foundation to support Harper’s charitable efforts. This would not only have benefited others, but likely returned substantial value to Harper and the team’s owners through enhanced goodwill in the community.
The same principle could apply to other sports negotiations. For instance, a team could use a similar charitable transfer to hang onto a popular older player who is less productive than he once was and whose high-dollar re-signing would create potential problems with salary caps and luxury taxes. The team could pay him less in salary and shift some of the difference to his favorite charity.
Even beyond sports, donations to charity can be a great way to mediate differences in all sorts of disputes. It can work for business contracts, lawsuits, or even divorces. Because of their visibility, however, athletes and team owners have a unique opportunity to demonstrate how to convert dollar disputes into charitable benefits.
Yet, a foundation official who previously worked for a major sports team told me that she had never seen charitable giving in the playbook of either teams or professional athletes. But just as Bill and Melinda Gates drove charitable giving among fellow billionaires through their “Giving Pledge” initiative, a group of team owners could do the same among their sports connections. They could even hire famous retired athletes who have a record of generosity to lead the effort.
Let’s face it, communities contribute substantially to these owners and players, not just by buying tickets but through considerable taxpayer support. The federal government exempts Major League Baseball from antitrust laws. State and local governments often grant teams concessions through tax breaks, zoning rules, development of roads or public transportation to ballparks, and much more. And much of the income of successful team owners comes in the form of accrued capital gains that may never be subject to income tax.
Of course, some players and team owners already are generous donors to their communities—often quietly. But the press rarely provides a thorough accounting of owners’ and players’ charitable efforts. Indeed, the pizza joint that donates $10 per home run gets vastly more attention than the charitable giving—or lack of giving—by athletes and team owners.
A charitable gift in lieu of a portion of salary can raise tax and other issues. For instance, the money may be more valuable if it is first given to the player, who would in turn donate it to charity (the IRS might deem the contribution to essentially be the player’s compensation in either event). And, this approach would also raise the issue of whether the donated money would be counted as compensation subject to league rules on salary caps and luxury taxes. Those challenges could be overcome, and the likely outcome favorable because owners would not want to be seen as creating rules that “taxed” charitable contributions.
The real issue, though, is whether some future Bryce Harper will step to the plate and hit a home run for the community. Let’s hope so.