Tuesday, October 5, 2004

Bengals near $2M tax deal

Team, county argue over which owes IRS

By Dan Horn
Enquirer staff writer

The Bengals and the Internal Revenue Service are close to settling a tax dispute that could cost Hamilton County taxpayers about $2 million.

The proposed settlement would resolve a two-year disagreement on whether the IRS can collect taxes from the sale of personal seat licenses at Paul Brown Stadium.

The settlement would reduce the amount of taxes owed from about $14 million to $2 million, but county and Bengals officials still don't agree on who must pay.

Bengals officials say the team's stadium lease leaves the county on the hook for the bill, while county officials say the bill is the team's problem.

"If they think it's a good deal for the Bengals' shareholders, then they should go ahead and do it," County Commissioner Todd Portune said. "But we're not going to pay it."

Bengals' lawyer Stuart Dornette notified county officials in a letter last week that the team was close to a settlement. The letter asks the county to respond with objections by Friday.

The team's lawyers have been negotiating without input from county officials for most of the year, and Dornette said the letter was intended to let the commissioners know that a deal is in the works.

The county and the team stopped working together on the IRS case after the county sued the team - and the team counter-sued the county - over the lease agreement at the stadium.

Both the county and the team dispute the tax bill, arguing that the sale of personal seat licenses should not be considered income to the team because the money was collected by the county and went directly to stadium construction. Licenses are one-time fees paid by people who buy season tickets to Bengals football games.

The team and county have said the $26 million raised from the sale of seat licenses was the Bengals' contribution to construction of the $450 million stadium. The IRS, however, said the money was a benefit to the team and therefore was taxable.

According to Dornette's letter to the county, the deal would reduce the taxable income from $26 million to about $4.3 million, which would, in turn, shave about $12 million from the original $14 million tax bill.

An IRS spokesman declined comment Monday, but Dornette said the settlement proposal arose from ongoing negotiations with the agency.

"I think this is a settlement we can pursue," he said.

Although the county and the team continue to feud over terms of the lease, Dornette said the team wants to give county officials a chance to object before the deal is signed.

"We don't want the county to then say, 'You shouldn't have entered into a deal,' " Dornette said.

He said the county ultimately is responsible for any tax bill because of an amendment to the lease that states: "The county alone shall be responsible to pay ... any claims or assessments for taxes relating to (the sale of seat licenses)."

But county officials are challenging the legality of the lease in a suit that accuses the team and the National Football League of using its monopoly power to force the county to build a new stadium.

The county's lawyer, Stan Chesley, said he expects to respond to Dornette's letter this week. He said the county cannot indemnify the Bengals from a tax liability, no matter what the lease agreement says.

"We weren't liable before, and we're not liable now," Chesley said.

"Let the Bengals pay it."


E-mail dhorn@enquirer.com

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