Sixers Seize Tax Windfall from New Jersey
The Philadelphia 76ers will construct an $82 million dollar state-of-the-art practice facility and team headquarters in Camden, NJ, aimed to be completed by 2016. Pursuant to New Jersey’s “New Jobs Investment Tax Credit,” the State has awarded tax credits to the 76ers over a 10-year period (not to exceed $82 million,) which should allow the team to recoup the FULL cost of building the complex.
The deal guarantees an $8.2 million tax credit annually that the Sixers can use or sell, so long as the team (1) employs 250 people in Camden, and (2) stays in the city for 15 years. If the team employee total at the facility drops below 250 in any year, the tax credits would be reduced to $5 million per year.
This specific New Jersey tax credit entitles corporate entities to a credit against the portion of their corporation business tax liability that is attributable to certain qualified investments in buildings, building components, equipment and capitalized start-up costs, in any new or expanded business facility in New Jersey, which results in the creation of a specified number of new jobs in the state.
The credit is determined by multiplying the amount of a corporation’s “qualified investment” by its “new jobs factor.” “Qualified investment” is determined based on the expected depreciation life of the property for federal income tax purposes, as depicted below:
- property with a 3-year life—35% of cost;
- property with a 5-year life—70% of cost; and
- property with a life of seven or more years—100% of cost.
The “new jobs factor” is based on the number of jobs created in New Jersey which are directly attributable to the entity’s investment in the new or expanded business facility.
While the Sixers are required to provide 250 jobs to maintain the tax breaks, 200 of these positions are already filled by team administrators, players, and staff. Thus, only 50 new jobs will actually be created.
The 76ers are the only NBA franchise without its own practice facility, and the team has been using the Philadelphia College of Osteopathic Medicine for such purposes since 1999. The team will continue to play its home games at the Wells Fargo Center in Philadelphia.
The team’s individual players currently pay Philadelphia wage taxes on days they have home games, and pay other city wage taxes when the team is on the road. The players will eventually have to pay a New Jersey wage tax for the time they spend practicing in New Jersey.
Authored by CJ Stroh
