- The Washington Times - Thursday, July 20, 2000

NFL owners took careful note last year when bungled estate planning helped lead to the sale of the Washington Redskins outside the family of Jack Kent Cooke.

Now the owners once again are looking to Washington, hoping for a repeal of the federal estate tax that could prevent emergency sales of their teams outside their families and resulting tax bills in the hundreds of millions of dollars.

The NFL's considerable interest in the estate tax debate is the result of a collision of three factors: the NFL's long-standing ban on corporate ownership, average franchise values that have more than doubled since 1995, and a crushing 55 percent tax on estates worth more than $3 million.

The owners each hold assets worth well into nine figures but have comparatively little hard cash. They have become textbook examples of what opponents say is wrong with the tax, that it unfairly burdens those with valuable but illiquid assets built up over a lifetime, and are very closely watching the Republican-led push on Capitol Hill finally to abolish the tax.

"The estate tax has been an important part of the league's lobbying program for a number of years. It's a critical issue for them," said Marc Ganis, a Chicago-based sports industry consultant. "With the massive run-up in franchise values and overall wealth we've seen in the last couple of years, and the increasing average age of the owners, it's definitely becoming an even more pressing issue for them."

The House passed a bill last month repealing the federal estate tax by a 279-139 vote largely along party lines. The Senate followed suit Friday 59-39.

President Clinton has vowed to veto the bill once it is forwarded to him, largely because of the nearly $1 trillion it would cost the federal treasury over 20 years and because only 2 percent of Americans have an estate large enough to owe taxes on it. Each estate receives a $675,000 deduction before the tax kicks in.

Republicans, however, are continuing to pressure Clinton to sign the bill. An override is not unlikely, but Republicans may make the issue a centerpiece of their upcoming convention in Philadelphia.

The estate tax fails to affect most Americans, but each NFL owner falls squarely in the 2 percent that pays dearly.

Before Cooke's death in April 1997, he sought to avoid an estate tax bill of at least $350 million by willing his entire estate, the Redskins included, to a non-operating charitable foundation established in his name. The plan also was intended to ease greatly an eventual transition of team control to his son, John.

But the will did not foresee a market for NFL teams that skyrocketed following the signing of lucrative new TV contracts in 1998 and, as a result, left no firm instructions for John to compete against it. A contentious 10-month sale process ensued, with Dan Snyder eventually emerging as the winner in an $800 million purchase.

Some owners, such as Lamar Hunt in Kansas City and the late Rankin Smith in Atlanta, worked for years to plan their estates and considerably soften the blow of the tax bills for their children. The late Leon Hess also avoided the issue by mandating in his will shortly before his death last year that his Jets be sold outside his family.

Other owners, such as Art Modell of the Baltimore Ravens and Jerry Jones of the Dallas Cowboys, have employed other measures, such as pre-paying the tax, purchasing expensive life insurance policies or simply selling shares of the team while still alive as a means to get around the tax.

None, however, would be nearly as effective or popular as a simple repeal.

The Cincinnati Bengals were particularly hurt by the estate tax. Late owner Paul Brown, like the elder Cooke trying to avoid the tax, gave up all profits from 1984 to 1993 to his minority shareholders in exchange for options for his family to buy the controlling shares in the team. The plan, as well as a $37 million estate tax bill the Brown family needed a year to successfully challenge, sapped millions from the team's football operations. The franchise posted an NFL-worst 52-106 record in the 1990s.

Some other older owners, such as the Buffalo Bills' Ralph Wilson and the Oakland Raiders' Al Davis, also are vulnerable to a heavy tax burden if a Clinton veto stands. Without other assets to cover the bill, a sale of their teams would be necessary. The 78-year-old Wilson, for one, already has conceded that his estate will be forced to sell the Bills once he dies, quite possibly to interests outside Buffalo.

"Estate taxes makes every one of us nervous," Pittsburgh Steelers owner Art Rooney told Bloomberg News. "If there's an owner who isn't, he has his head in the sand."

Joe Browne, the NFL's vice president of communications and government affairs, downplayed the league's interest in the current estate tax debate, saying the league was just as eager to see a proposed ban on Internet gambling become law. That bill, however, was defeated in the House on Monday night.

"We're closely monitoring [the estate tax] issue, just like we closely monitor any issue that directly affects our league," Browne said. "Some clubs, for obvious reasons, are more interested in this one than others."

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