They won the Super Bowl, but can the New Orleans Saints take on the IRS?
In 2003, according to the IRS, the Saints failed to report an $8.5 million payment from the state of Louisiana -- a payment on which the team -- in the opinion of the IRS, at least -- now owes back taxes and penalties. But in court documents, the Saints say the payment is working capital as part of 10 years of inducement payments from the state, and therefore not taxable.
Those inducement payments began in 2001 and were intended to keep the NFL team afloat financially -- and in New Orleans. Much of the money was used to attract and retain star players. In 2009, the Saints reached a long term deal to remain in the Superdome, which is also listed as an expense. T
The key question in the dispute is whether the payments from the state meet the definition of income or working capital. The Saints will need to show that once they received their payment, the money was then spent. Any remaining cash should be recognized as net income, and profits are then taxed. An expense account to specifically host the activity of working capital would help prevent similar run-ins with the IRS. In this case, receipts saved in the office will be more valuable than yards gained on the field.