Donald Sterling could write off huge fine; new bill would stop him

Reporting From Washington —  The Donald Sterling scandal has reached Congress.

San Fernando Valley Congressman Tony Cardenas introduced legislation Thursday that would prevent sports team owners from writing off fines as a business expense on their federal income tax returns.

“The American people are happy to help small businesses grow, but paying fines for multimillionaires to subsidize bad behavior should not be the responsibility of American taxpayers,” Cardenas, a freshman Democrat, said in a letter to House colleagues seeking their support.

The Stop Penalizing Taxpayers for Sports Owners’ Fouls Act comes after Sterling, the owner of the Los Angeles Clippers, was fined $2.5 million, the maximum allowed under NBA rules, and banned for life from association with the team after the league determined he made incendiary remarks about race.

“When it’s a $2.5-million fine, that’s a significant write-off,” Cardenas said in an interview in the Capitol. “I don’t think this is a business investment.”

The measure would amend the Internal Revenue Code to “disallow a deduction for any fine paid by an owner of a professional sports franchise.” It would apply to fines imposed after Dec. 31, 2013.

It has no Republican co-sponsors, but Cardenas said he has just began talking to his colleagues about the bill.

Steven M. Rosenthal, senior fellow at the Tax Policy Center in Washington, called prospects for the legislation bleak.

“I think we are in the silly season. If we disallow deductions for payments that we do not like, where will we stop?” he said. The center is a joint venture between the Urban Institute and the Brookings Institution.

Last fall, bipartisan legislation was introduced in the Senate to prevent companies from taking tax deductions for some types of payments made to settle allegations of “illegal corporate behavior.” That legislation has languished.

Cardenas’ measure is likely to be referred to the House’s tax-writing Ways and Means Committee.

Although the fine to Sterling drew Cardenas’ attention to the issue, he said, “This isn’t just about Don Sterling.” Other sports team owners have been fined too, he said.

“Sterling’s $2.5-million fine compares to another NBA owner, Mark Cuban, who was recently fined $100,000, for a total career fine total of nearly $2 million,” Cardenas told colleagues in his letter. He also mentioned NFL owners, including former San Francisco 49ers owner Eddie DeBartolo.

“Being fined for violating the rules of your league is not the same as a shop owner on Main Street paying to have a new sign hung in front of their business,” Cardenas said in the letter. “One is a business expense, the other is a punishment.”

richard.simon@latimes.com

Twitter: @richardsimon11