'Fiscal Cliff' Tax Break Aids N.H. Motor Speedway
The owner of New Hampshire Motor Speedway will get a tax break on future capital investments at the Loudon track as part of what has been dubbed a $70 million extension of the "NASCAR tax break," which is included in the deal Congress forged around New Year's to avoid going off the so-called "fiscal cliff."
The tax break has been blasted by critics, who include it with other fiscal cliff tax breaks that help Puerto Rican rum makers, Hollywood movie producers and Wall Street bankers.
But this tax incentive makes sense, said Jerry Gappens, executive vice president of NHMS. It results in more jobs, an increase in local business and more property taxes for Loudon and the state, he said.
"This is an economic stimulus to put more money back in our facilities," Gappens said. "This is not some obscene tax break. It's working the way it is designed to, providing an incentive to invest in the local economy."
The speedway break - first passed by Congress during the George W. Bush administration - includes a seven-year depreciation provision for new motorsports construction, as opposed to taking it over the life of the facility, which can range from 15 to 39 years.
Since then, Congress has repeatedly extended the tax break. The last extension - from Dec. 31, 2011, to Dec. 31, 2013 -- was included in the American Taxpayer Relief Act of 2012, passed during the first days of 2013 in a desperate attempt to avert massive automatic budget cuts and tax increases - the self imposed "fiscal cliff" if Congress didn't come up with a deal to curb the deficit.
Speedway Motorsports Inc. the Charlotte, N.C.-based company that bought the Loudon track for $340 million in 2008, has used the tax break for some $15 million in capital improvements, from upgraded bathrooms to a new scoreboard, said Jerry Gappens.
The $2.1 million spent last year, for instance, enabled Speedway Motorsports to double its write-off from $150,000 a year to $300,000 a year, Gappens said. (A write-off is a reduction in the amount being taxed - not a reduction in the tax itself.)
It's difficult to estimate how much that would mean in tax savings, but in general such a break could roughly translate into a $50,000 tax reduction for each $1 million spent in capital improvements by companies in the top tax bracket, estimated Steve Feinberg, a CPA and owner of Appletree Business Services in Londonderry.
According to that rule of thumb, that $15 million in investments would have translated into about $750,000 in annual savings during those seven years.
But Speedway Motorsports - a publicly traded firm that made a half-billion dollars in total revenue in 2011 - owns nine facilities in all.
Calls to the firm were not returned by deadline, but according to financial forms filed with the U.S. Securities and Exchange Commission, the company nearly spent $140 million in capital improvements related to the speedways from 2009 through 2011 and $6.7 million in the first three quarters of 2012.
While the company might benefit from such breaks now, the breaks have contributed to the company's deferred tax liability, which was $381 million at the end of September, according to its financial filing.
While the fiscal cliff deal won't affect the SMI's past liabilities, it would apply to capital expenditures made during 2012 and 2013.
In New Hampshire, that could include repaving the raceway with new asphalt, estimated to cost from $3 million to $4 million, a lighting system that would enable night racing, a multimillion-dollar project, and construction of a New England Racing Museum, which could cost another $7 million, said Gappens.
"This is the type of incentive that would help justify building that," he said.
Gappens said he didn't know whether the federal tax break would affect the facility's New Hampshire business profits tax bill. While parts of the state tax code reflect federal tax law, the Department of Revenue Administration said it would not be able to answer that question by NHBR's deadline, because the answer would be both complicated and perhaps confidential.