A 10 percent excise tax will be imposed on Olympic broadcast rights fees, to establish a U.S. Olympic Committee trust fund, if legislation in Congress passes this week.
The proposal, introduced by Rep. Guy Vander Jagt (R-Mich.), is part of the huge tax reform bill that may reach a vote in the House on Friday. If passed, the legislation would take effect for the 1992 Summer and Winter Olympics. Network officials indicate they expect it would increase their rights fees moderately.
The tax would be imposed on the seller of the broadcast rights; that is, the national organizing committee hosting the Olympics. If the legislation had been in effect for the 1988 Winter Games in Calgary, Alberta, for instance, $30.9 million of the $309 million ABC is paying the Canadians automatically would go to the U.S. Treasury.
The trust fund would be administered by the USOC, to use the money as it saw fit.
"For 1988, we have $609 million going out of the United States to support organizing committees in Calgary and Seoul (including at least $300 million NBC is paying the South Koreans for the Summer Games) and not a cent of those monies will be made available to our Olympic effort," said Baaron Pittenger, the USOC's assistant secretary general. "Some people don't see the logic of that."
"The United States is just about the only country in the free world with a competitive broadcasting system. The price (for broadcast rights) gets bid up because people are competing," said Ken Kies, minority tax counsel for the House Ways and Means Committee. "The rationale is this: there's a windfall here because of our competitive broadcasting system. (Other Olympic committees) are benefiting from our system. It's like, don't we tax their Mazdas? They do business here, and this would also apply here if we host the Olympics."
According to network officials, future rights fees almost certainly would increase because of the tax. "In all likelihood, organizers are going to build that tax into their thinking and it will inflate the rights price," said Jim Spence, senior vice president for ABC Sports.
"If it passes," Spence said, "quite frankly, I think it's counterproductive to the USOC's objectives. If the American broadcaster ends up paying more for rights in the future, it's going to lead to a lesser commitment on our part for other USOC properties, such as the Olympic trials. If we had to pay $340 million or so for Calgary (instead of $309 million), it would have some impact on what else we could afford to televise."