'Fiscal cliff' deal steers big breaks to NASCAR circuit
CONCORD, N.C. — In the budget debate over taxes and spending, few people realized unlikely beneficiaries would emerge: Congress quietly provided NASCAR track owners tax breaks that will cost Americans an estimated $150 million over the next five years.
Buried in the “fiscal cliff” deal that avoided steep tax increases and spending cuts at the start of the year, Congress extended tax breaks that allow NASCAR racetrack owners to accelerate depreciation of their properties. As a result, the cost for upkeep and improvements at tracks shifts from corporate backers of the billion-dollar sport to taxpayers.
That means taxpayers will continue to subsidize a financially rejuvenated sport that this year increased its corporate sponsorships and landed a lucrative deal with FOX Sports. As a bonus, the Motorsports Fairness and Permanency Act, as the tax break extension is called, allows track owners to accelerate the depreciation of facilities over seven years instead of the estimated 40 years it takes racetracks to depreciate — a special-interest giveaway that cost the government more than $40 million in 2011.
“It's a statement about political influence,” said Phineas Baxandall, a senior analyst for tax and budget policy at the Public Interest Research Group. “It certainly isn't a statement of NASCAR's usefulness for the nation — or at least, no one has made that case. The question is, does everyone have to pay for this business? And for the federal government to do this is senseless.”
‘A sign of the times'
Most racetracks were built without taxpayer subsidies, a source of pride for executives with International Speedway Corporation and Speedway Motorsports Inc. , the primary proprietors of the 23 tracks in NASCAR's Sprint Cup circuit. But as smaller tracks in Rockingham and North Wilkesboro, N.C. closed, others replaced them from America's heartland to the desert of the Southwest.
In examining the “carve-out” for NASCAR racetracks, the Tribune-Review found construction of tracks in Chicago, Kansas City and Phoenix are costly for racetrack owners and taxpayers.
“All of the taxes have to be factored into everybody's business model,” NASCAR President Mike Helton told the Trib this month in Detroit while kicking off a tour of the Generation-6 race car that will debut in Sunday's Daytona 500. “In the case of the racetracks, we need them to be healthy. We need them to sustain and maintain their facilities.
“We need facilities that can host events not only on the competition side, but we have to consider the amenities and the fans in the grandstand. And that's expensive,” Helton said. “Frankly, it's a sign of the times.”
In examining the lobbying efforts of NASCAR and speedway owners, the Trib found track owners spent more than $500,000 during the past two years to ensure passage of the provision. Of that amount, NASCAR contributed $240,000 and the International Speedway Corporation — in which NASCAR Chairman and CEO Brian France's family is majority owner — spent $300,000. Chicagoland Speedway, Automobile Competition Committee and SMI also lobbied for the legislation, according to the Center for Responsive Politics, a nonprofit, nonpartisan research group that tracks the effects of money and lobbying on elections and public policy. The ISC alone has spent $940,000 lobbying Congress since 2008.
A bipartisan effort
Though NASCAR executives and employees made campaign contributions — mostly to Republican candidates in 2012, including presidential nominee Mitt Romney — the tax relief in the cliff deal received bipartisan support. Democratic Sens. Debbie Stabenow of Michigan and Bill Nelson of Florida, along with Democratic National Committee Chairwoman Debbie Wasserman-Schultz of Florida, accepted campaign contributions from NASCAR.
Rep. Vern Buchanan, R-Fla., a co-sponsor of the permanent tax breaks, has sponsored or co-sponsored NASCAR-friendly bills at least three times. According to the Sunlight Foundation, Buchanan has received more than $530,000 in campaign contributions over his political career from NASCAR and the automobile industry. Automakers such as Ford, Chevrolet and Toyota promote their models through NASCAR racing. Buchanan, by the way, owns several car dealerships.
“If there was a bill that said the Treasury will give millions of dollars to NASCAR, it would have gotten more scrutiny and probably wouldn't have happened. But because it happened in the name of tax breaks in a huge bill in which no one understands every part of, it didn't get the same scrutiny,” Baxandall said. “Unfortunately, these kinds of hidden tax giveaways are definitely a bipartisan problem. … It's something where the tax code becomes somewhat of a shroud.”
The Joint Committee On Taxation estimates the loophole will cost taxpayers $46 million this year and $95 million more through 2017. The tax relief for track owners cost taxpayers about $43 million the past two years; a one-year extension could cost $70 million in lost tax revenue.
“I would recommend everyone understand the nuance of all that,” said Helton. “It's not a new (tax) break. What the racetrack owners are asking is to be treated the same as other entertainment facilities. But it's been that way for a while.”
Rep. Mike Thompson, D-Calif., who sponsored the tax extension, argued it's a necessary correction to the tax code that essentially compares racetracks with theme parks or amusement parks.
Yet, some track owners insist they have yet to reap the benefits.
“I don't know of anybody who lobbied for it,” said Eddie Gossage, president of Texas Motor Speedway. “I've been getting calls from people asking me, ‘What are they talking about?' I didn't know anything about it. I'm looking for President Obama's check.”
Bruton Smith, owner of SMI, argues that the loophole is invaluable, mostly because racetrack owners haven't lobbied local governments for tax revenue to help fund the construction of facilities. In Charlotte, where Smith has invested $1.5 million since purchasing the speedway, city officials are asking for $250 million in public money for the Carolina Panthers to renovate Bank of America Stadium.
Baxandall argues that NASCAR officials are talking apples and oranges in comparing racetracks to taxpayer-backed stadiums. Baxandall accused NASCAR of leaning on the backs of taxpayers in North Carolina, Virginia and Alabama — states with an increasingly heavy tax burden.
“You wouldn't expect them not to take taxpayers' money,” Baxandall said. “But that doesn't mean that members of Congress should be heaping more profits into their pockets just because they can. This is a harder call for cities and states because businesses say if you don't invest, then we'll move to the next state.
“People don't realize that it's the ordinary taxpayers who have to pick up the tab. If NASCAR gets a special break and doesn't have to pay its taxes, then small businesses without a small army of lobbyists have to make up the difference. Usually, the difference is made up in federal program cuts, increases of other taxes or more debt,” Baxandall said.
Handout or fair play?
Some local government officials in states with NASCAR tracks worked with members of Congress to attach the racetrack loophole. The bill included other curious tax changes, including a rum tax for Puerto Rico, a $9 billion tax break for banks and corporations and subsidies for Hollywood films.
“I can't speak on the rum deal and some of the others bundled with it,” said Jerry Gappens, executive vice president of New Hampshire Motor Speedway. “From our standpoint, it gives an accounting procedure which allows us to write some of these assets off quicker.”
Gappens said the New Hampshire track has contributed $400 million to the local economy and established 38 full-time jobs.
“There is a misconception by the public that we're getting a handout or a bailout of $70 million and we're not,” he said. “It's encouraging guys like Bruton Smith to reinvest in their facilities.”
Smith said NASCAR's track would have remained on solid financial footing without the tax breaks. But, he said, accelerated depreciation is fair to maintain the health of the sport, considering the escalating tax rate for most racetracks.
“It's too small for me to worry about but it's something richly deserved,” Smith said. “It's not like they wrote a check to us. It's a savings and that's all it is. Instead of it being stretched out longer, it's a seven-year deal.”
“At some point, it's going to cost $700,000 to $1 billion to build a racetrack. We don't ask for tax money to build our racetracks, because it's too far-fetched.”
Gappens said his revenue margin shrank, in part because property taxes for New Hampshire Speedway increased from $600,000 annually to more than $900,000. The track cost $340 million to build and has needed $20 million in improvements since it first hosted NASCAR weekend in 1993.
“We're paying more in property taxes because the facilities are worth more now,” Gappens said. “If you think of the economy the past five years, I can't think of any other New Hampshire company that has invested more.”
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