Illegal Deduction in the Backfield
The 1985 Chicago Bears were one of the greatest teams in NFL history — in fact, ESPN ranked them the greatest ever. Quarterback Vince McMahon, Hall-of-Fame running back Walter Payton, defensive tackle Richard “Refrigerator” Perry, and the rest of the team captured America’s heart as they sent nine players to the Pro Bowl and shuffled their way to victory in Super Bowl XX.
Hard to believe that was just 29 short years ago. Today’s “Monsters of the Midway” are 3-5 after going into hibernation against the New England Patriots this week. They’ve lost to the Bills, the Packers, the Panthers, and the Dolphins. They’re even losing to the Cook County Revenue Department! And that contest illustrates the sort of hair-splitting that seems to define so much of tax law.
In 2003, the Chicago Park District renovated the team’s home at Soldier Field. The new venue includes 8,000 “club seats” on the Lake Michigan side of the field that come with all sorts of extra goodies like access to the heated “Club Lounge,” parking, and gameday programs. There are also 133 luxury suites that rent for up to $300,000 per year and include private seating, private bathrooms, food and drinks, and even individual temperature controls. (If you’ve ever shivered through a December game at “the Eyesore on the Lake Shore,” you’ll realize that heat may be the most valuable perk of all!)
Cook County, where the stadium sits, levies an amusement tax equal to “three percent of the admission fee or other charges paid for the privilege to enter, to witness or to view such amusement.” (We’re not sure how “amusing” it is to watch Da Bears fall to the lowly Carolina Panthers, but that’s a topic for a different day.) However, that tax specifically excludes “any separately stated charges for nonamusement services or sales of tangible personal property.”
And that’s where it starts getting tricky. How much of the premium ticket price should be subject to that tax and how much should be exempt?
The team broke out a separate “club privilege fee” from the price of the club seats and argued that it shouldn’t be taxable because it’s separate from the right to enter the stadium and watch the game. As for the luxury suites however, they did not break out a separate fee for the extras, but assigned those seats a flat $104 value and paid the tax on that amount. In 2007, the county threw a penalty flag, holding that it’s impossible to separate the extra perks from the price of a seat, and sacked the team for $4.1 million in extra taxes.
Naturally, the Bears challenged the ruling on the field. They took it to an administrative law judge, who sided with the county.
If this had been an on-field call, the Bears would have been allowed just one challenge — and they would have been charged with a timeout too, for losing it! But that’s not how it works with taxes. So the team appealed to the replay judges at the Cook County Circuit Court, and won. But now the county had possession. They advanced the ball to the First District Appellate Court, which re-affirmed the tax. (Don’t rule out a Hail Mary to the Illinois Supreme Court. And you thought football games have gotten too long!)
Coach Mike Ditka would never have led his ’85 Bears to the field without a game plan to minimize his opponents’ strengths and take advantage of their weaknesses. It works the same way with your taxes. So call us when you’re ready for your own plan. But do it fast! December 31 is closer than you think, and the clock is about to run out on some of the most valuable strategies!
In The Headlines
This Year Halloween Sales Look to Be Scary Big
According to a recently released study from the International Council of Shopping Centers, nearly three-quarters of U.S. households are planning to spend money on Halloween-related items. Of these families, the total for Halloween spending is expected to be around $11.3 billion this year—an impressive number that is hard to ignore for retailers in the Halloween business.
“This is going to be a great year for the Halloween market. After all, we are selling for a Friday Halloween in 2014. Plus, costuming has become a year-round affair. People love dressing up, regardless of the season, and that is driving growth,” states Jonathan Erwin of the Halloween & Party Expo, an annual trade show that attracts an audience of retail buyers from across the world. This same study also reported that the average household that plans to spend money for Halloween this year will average $125 on candy, costumes, decorations and other Halloween-related items. This is up from last year’s spending, with eight out of ten households planning to spend the same or more the upcoming 2014 Halloween compared to 2013.
“I can’t say I’m a huge Halloween fan, but I’m always somewhat festive by decorating the house and buying candy. When I realized it landed on a Friday this year, however, I got more excited than normal and found myself buying extra decorations and making more plans. This has certainly impacted my wallet, as well,” shared Chicago based working mom Laura Rahilly. Her approach to spending more because Halloween lands on a Friday is not uncommon. Retailers can typically expect an increase in Halloween sales when the holiday lands on a Friday or Saturday, as it does in 2014 and 2015, respectively. Additionally, Halloween in general has seen an increase in consumer appeal in recent years.
“Halloween has continued to grow in importance over the past several years and consumer demand has driven retailers to place greater emphasis on the holiday,” said Jesse Tron, spokesperson for International Council of Shopping Centers. “The fact that consumers are willing to spend more on discretionary purchases is a positive sign for the upcoming holiday shopping season.”
The International Council of Shopping Centers found that in their Halloween survey, similar to their back-to-school shopping survey, sales and promotions will be the biggest factor in the decision to shop at a particular location for Halloween-related items. Participants of the survey revealed that when asked what influences them the most when choosing a store for Halloween, 64% of consumers said sales or the lowest price, 31% said the ability to physically see, touch or try on the merchandise, and 29% said convenience, including one-stop shopping and good parking.
With this in mind, the focus on price, along with an interest in one-stop shopping, could account for discount stores claiming the top spot this Halloween. It is reported that 34% of spending will take place at discount stores, and supermarkets are expected to gain 18% of purchases. Clothing and costume stores should account for 13% while drug store chains will see 11%, with wholesale clubs such as Costco gaining about 9% of sales. Online is only expected to see about 7% of purchases.
Popular movie characters from 2014 that include Elsa and Anna from Frozen or Raphael from Teenage Mutant Ninja Turtles have been best-selling items this season, as are television characters from shows like The Walking Dead and Game of Thrones. But the real star this Halloween season is not Elsa, Anna, or any character from TV. Instead, it is Friday night. Thanks to Halloween landing on a weekend this year, sales are up and so is the anticipated Halloween fun. It is a winning combination for Halloween goers and retailers alike.
New Model Anticipation – How a Ford F-150 Resembles an iPhone
The problem with high-tech hardware, whether it is a smartphone or a pickup truck, is that everyone wants the newest thing. When Apple has a new iPhone in the works, would-be buyers delay their purchases until the next iteration hits the market. That tricky timing dynamic happens with cars, too.
Ford Motor Company, in particular, is facing a bad bit of product whiplash at the moment. It has 16 vehicle launches next year, ranging from facelifts to entirely new models, in the most aggressive schedule to date of what car people in the car industry call product cadence. “We are committed to offering our customers the freshest lineup of world-class vehicles in the industry,” said Ford’s Chief Executive, Mark Fields. This may be exciting stuff, but toxic words forany dealership with a lot full of 2014 Tauruses.
It is a catch-22: A car company needs new models to drive future growth, and it needs to get an initial sales surge and a price premium from those new models before competitors catch up. But automakers also cannot be stuck with current inventory. As a company shifts from one product to another, prices generally get slashed to keep buyers coming in (e.g., consider the $99 iPhone 5). Revenue tends to become uneven.
The so-called product launch effects drove Ford’s auto-related sales down 3% in the recent quarter. Profit plummeted 34%, in part because Ford idled factories to retool assembly lines for making its new vehicles. Sales of the Ford Edge slid 18% in North America as buyers awaited an all-new version, expected to hit dealers in the spring. And some 11% fewer Ford Fiestas zipped off lots, a vehicle that has not been changed drastically since 2008.
Nowhere is the product path more fraught with product launch fallout than for the F-150 pickup, the long-time best-selling vehicle in North America and Ford’s big metal offering. Not only is Ford making a new F-150, but it is making a drastically new one. Huge plates of steel will be replaced with lighter aluminum in a bid for fuel efficiency. It is a massive overhaul, and truck buyers definitely have noticed.
That big plummet in F-150 sales in the first quarter of this year came when Ford unveiled its all-new aluminum model to much fanfare at the annual Detroit Car Show. Sales ticked up a bit over the summer and then flattened in the recent quarter as buyers grew expectant for the new iteration, set to reach dealerships in December.
The current F-150 is still a top-seller and Ford has been careful to keep pick-up production tight along with keeping incentives at, or below, last year’s levels thus far. But if you need a truck and are fond of old-fashioned steel, your local Ford dealer may be increasingly ready to negotiate as December approaches.
Sources:
1. http://onforb.es/1z4A8WG – Forbes
2. http://buswk.co/ZRL230 – Businessweek
The Good News Is . . .
• Sales of new U.S. single-family homes rose to a six-year high in September. The Commerce Department said on Friday that sales increased 0.2% to a seasonally adjusted annual rate of 467,000 units, the highest reading since July 2008. Compared to September last year, sales were up 17%. The figures indicate that housing is slowly regaining its footing after activity stalled in the second half of 2013 as mortgage rates rose.
• Southwest Airlines, Inc., the nation’s leading air carrier in terms of originating domestic passengers boarded, reported earnings of $0.55 per share, an increase of 67.8% over year-ago earnings of $0.34. The firm’s earnings topped the consensus estimate of analysts by $0.02. The company reported revenues of $4.8 billion, an increase of 5.6%. Management attributed the company’s results to strong traffic trends, lower jet fuel prices, and improvement in its operating margin.
• Cleco Corporation, a public utility holding company and owner of regulated electric utility Cleco Power LLC, today announced that it has entered into a definitive agreement to be acquired by a group of North American long-term infrastructure investors led by Macquarie Infrastructure and Real Assets and British Columbia Investment Management Corporation, together with John Hancock Financial and other infrastructure investors. The agreement values Cleco at approximately $4.7 billion. Following completion of the transaction, Cleco will continue to operate as an independent company led by local management and will maintain its headquarters in Pineville, LA.
Sources:
1. http://reut.rs/10rD4yp – Reuters
2. http://www.cnbc.com/id/102118682 – CNBC
3. http://www.cnbc.com/id/18080780/ – CNBC
4. http://bit.ly/1t3UE52 – Southwest Airlines, Inc.
5. http://bit.ly/1t24Nki – Cleco Corp.
Planning Tips
Tips for Cutting Your Cable Bill
Pay TV services have gone up steadily over the last 20 years. The average monthly bill for expanded basic cable service is now $64, nearly triple what it was in 1995. And according to the NPD Group, it will rise to over $200 by 2020. As a result, many Americans are looking for ways to cut their cable bill—or cut the cord entirely. In fact, according to Experian Marketing Services, 7.6 million homes completely eliminated their cable or satellite TV last year. Below are some tips to help you lower your cable bill.
Trim back on channels – Do you really need hundreds of channels? You are probably not even watching most of them, so you can save big by switching from a premium cable package to a basic package. Basic packages tend to include the major networks, ESPN, Disney, Nickelodeon, and many other popular channels. What you lose, primarily, are the movie channels. To replace them at a much lower cost, you can sign up for a movie streaming service such as Netflix for $7.99 a month or VUDU for as little as $2 a movie. Or you can rent DVDs for $1 a night from Redbox kiosks.
Keep up with promotions – Cable companies are constantly adding promotions to attract new customers, but current customers often can take advantage of these deals, too. Call your cable company or check its website every six months to find out whether it is offering any promotions, such as free movie channels. When you are asking about promotions, also find out whether your cable company offers discounts if you sign up for paperless statements or automated payments.
Buy an antenna – For $40, you can buy an HDTV antenna, such as the Mohu Leaf, to get access to local channels. They are great options for people who want to reduce their cable bill by limiting the number of cable boxes they have. You can hook the antenna up to that guest room TV so visitors have something to watch, or the kitchen TV that you just turn on to watch the news while making dinner. Look online to find the best prices for HDTV antennas.
Consider leaving – Check with other cable providers or satellite TV providers in your area to see if they have packages or promotions at prices that beat what you are currently paying. If so, then ask your cable company whether it is willing to match a competitor’s price. Be sure to speak with a supervisor, who has more power to make changes to your plan and bill. If you tell your current provider that you are seriously considering switching to another provider, you may well find that your cable company has some great offers to share with you. By sticking with your current company at a lower rate, you can avoid setup fees with a new provider.
Hook up a streaming media player – Devices such as Apple TV, Roku, and Google Chromecast bring iTunes and Google Play and other streaming video services such as Amazon, Hulu Plus, and Netflix, to your TV. Many smart TVs, internet-connected Blu-ray players, and video-game consoles can also access subscription-based services, which let you catch up with previously aired episodes of shows.
Sources:
1. http://bit.ly/1ztKxfX – AARP
2. http://bit.ly/1z9getP – Kiplinger
3. http://on.app.com/10thcD2 – aap.com
4. http://bit.ly/1snyFSV – Consumer Reports
5. http://on.mktw.net/1ztKKQ0 – MarketWatch.com
6. http://usat.ly/1qdgFdq – USA Today
