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CoTA and the Fiscal Deal

posted by Bob Lawless

US Grand PrixOver the holiday break, Credit Slips went on an unplanned hiatus. "Unplanned" could just be implied because most everything that happens here is unplanned. Between everyone's travels, nothing got posted in between Christmas and New Year's. I hope the new year is starting off well for all of our our readers. Although off topic, I thought I would start off 2013 by achieving an important goal of my own, which is to finally work Formula 1 into one of my posts.

Last night's fiscal deal predictably included a number of special-interest tax breaks. The one that caught my attention has been dubbed the "Nascar tax break" by the media. Instead of a long depreciation period of 15 to 39 years, a "motorsports entertainment complex" has been eligible for accelerated depreciation over seven years (26 U.S.C. 168(k)(1)). By accelerating depreciation, the owners of a race track getting bigger tax deductions more quickly instead of smaller deductions spread out over a longer period of time. This particular tax break had been available for any race track placed into service before December 31, 2011, but the fiscal cliff deal extended that date through December 31, 2013.

Thus, the extension of the tax break will benefit any race track that went into service during 2012 or will go into service during 2013. Being a person who watches way too much auto racing, I believe that describes one and exactly only one facility -- the new Circuit of the Americas in Austin, Texas, known as "CoTA" in racing circles. In November, CoTA hosted not Nascar, but the return of Formula 1 to the United States as evidenced by this picture we took from our seats in Turn 5. For the uninitiated, that is Kimi Raikkonen driving a Lotus. Also, if you are like most every other friend of mine in the U.S., the next question will be "Isn't Formula 1 the same thing as Nascar?" The answer is "no." To understand the differences, either rent Talladega Nights: The Ballad of Ricky Bobby and or check out this chart put together by Red Bull (the sponsor of the current F1 champions).

On top of whatever lobbying that went into creating this tax break, there was some fantastic marketing. A "Nascar tax break" almost sounds patriotic, conjuring up images of Bud Light swilling Americans watching cars turn left instead of the Stella Artois chugging Europeans who had the seats behind me for the race. That is not a exaggerated characterization or intended as a criticism from the Guiness-chugging American seated in front of them.

I am getting too old to feign surprise or outrage at special-interest tax breaks in a last-minute fiscal deal. In any event, this one has the promise of keeping the lid on on ticket prices for something I enjoy, so  it is OK. My kids can pay for it. May you all enjoy similar blessings. Tax not you, tax not me, tax that man behind the tree.

UPDATE (1/4):  The New York Times has just posted a detailed story on this tax break. Senator Debbie Stabenow apparently played a key role in getting the tax break through Congress. There will be some benefits to Nascar tracks that put into place new capital improvements, and the International Speedway Corporation is quoted as saying it will carry out a "robust capital spending plan." Although CoTA still stands to be a major beneficiary of this tax break, there will be some benefit to Nascar.


A modern Formula One car is capable of developing 3.5 g lateral cornering force (three and a half times its own weight) thanks to aerodynamic downforce. That means that, theoretically, at high speeds they could drive upside down.


That's really taxing the laws of gravity.

Bob, I have to congratulate you on achieving your goal of working Formula 1 into a Credit Slips blog post. I have been trying to do that myself, but unless the CFPB holds a public hearing on F1 ticket prices or rolls out a new tire compound disclosure that is simpler and easier to understand, I am not sure I'll get the chance.
In terms of the policy issue raised in your post, I suggest some comparative international research should be undertaken. Perhaps the tax situations at Spa and Suzuka should be examined (in person) and compared?

I also scanned the bill. There are quite a few business depreciation, etc. breaks which were extended. My question (before blaming lobbying) is how this set of tax extensions compares to the full set expiring the end of 2011. Did Congress pick and choose which to extend or were all business breaks expiring the end of 2011 extended wholesale?

Bob Lawless, thank you very much for blowing the whistle on the accelerated depreciation extender for the Circuit of the Americas.

Here is what the United States of America as a culture and an economy has become: it is a public sector and political economy which provides personal access to Texas public officials for the politically connected to write a custom boot Texas law to provide $290,000,000 in mezzanine financing to a race track under guise of economic development as pure gift as public investment for private profit to an track investor group composed of the billionaires Red McCombs and John Paul Dejora now granted accelerated tax depreciation to said wealthy investors fairly now described, as of January 1, 2013's Fiscal Cliff bounty, as a tax shelter on steroids that would make Lance Armstrong blush.

My oh my, they mind their spigots don't they.

One good thing about the H.R. 8, the American Taxpayer Relief Act of 2012. is that mortgage cancellation relief for home owners or sellers who have a portion of their mortgage debt forgiven by their lender, typically in a short sale, foreclosure sale or loan modification is extend through 2013.

Additionally, deductions for mortgage interest, mortgage insurance premiums and state and local property taxes, are extended. The exclusion from capital gains with the cap at $500,000 ($250,000 for individuals) remains in effect (subject to limitations).

This is good news for the real estate industry. Now we just have to make sure that we try not to repeat the financial crisis again. To see what we can do to keep ourselves from foreclosure during 2013 you can check out my recent blog article "Avoid Another Foreclosure Crisis – Take Matters Into Your Own Hands" at http://www.bankforeclosuressale.com/wp/article-01044142.html.

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