Knicks Owner MSG Sports Faces “Major Blow” From Tax Law Change That Could End Deduction of Player Salaries
The New York Knicks, one of the most iconic franchises in professional basketball, may soon face a financial curveball that has little to do with on-court performance. Madison Square Garden Sports (MSG Sports), the publicly traded parent company that owns the Knicks, is reportedly “assessing the impact” of a new tax law change that could eliminate their long-standing ability to deduct player salaries as business expenses.
According to multiple sources, the law—currently being phased in at the federal level—would strip professional sports franchises of a corporate deduction that has historically allowed them to reduce taxable income by treating athlete contracts like traditional labor costs. For a team like the Knicks, who carry max-level contracts for stars like Karl-Anthony Towns, Jalen Brunson, and other highly paid veterans, the change could mean tens of millions of dollars in additional tax liability each year.
One tax expert familiar with the legislation didn’t mince words, calling it a “major blow” to publicly owned franchises. The impact could even push MSG to consider taking the Knicks private as a way to mitigate shareholder pressures and restructure its finances.
The Law Change and Its Ripple Effect
For decades, U.S. corporations, including sports teams, have deducted salaries of employees—players included—as ordinary business expenses. This practice has been critical in balancing the books for high-revenue, high-cost organizations like NBA teams, which regularly pay out hundreds of millions in guaranteed contracts.
The new change, however, classifies certain high-level compensation packages differently, treating them as “non-deductible expenses” for companies that are publicly traded. The idea is to target corporations that use outsized compensation to reduce taxable income, but for NBA teams, it effectively punishes them for paying the going market rate for elite players.
Consider the Knicks’ current payroll picture:
- Karl-Anthony Towns is on a contract valued at nearly $60 million annually.
- Jalen Brunson, fresh off an All-NBA season, is lined up for a lucrative extension expected to exceed $200 million.
- Julius Randle and other veterans also command eight-figure salaries.
Combined, the Knicks’ top salaries easily exceed $150 million annually. Under the new rules, MSG Sports could lose the ability to deduct a significant portion of those costs, dramatically increasing their tax exposure.
Why the Knicks Are Uniquely Vulnerable
While every NBA team would feel some impact from the law, the Knicks’ ownership structure makes them especially exposed. Unlike privately owned teams such as the Dallas Mavericks or Golden State Warriors, the Knicks are owned by MSG Sports, a publicly traded company. That means the organization is required to report earnings, balance sheets, and tax liabilities to shareholders.
Losing a massive deduction tool would not only hurt MSG’s bottom line but also spook investors who already scrutinize the company’s performance. With the Knicks’ valuations soaring past $6 billion, the stakes couldn’t be higher.
“It’s not just about the taxes themselves,” explained one analyst. “It’s about how those taxes appear on quarterly reports, how investors interpret them, and whether MSG feels pressured to restructure.”
Could MSG Take the Knicks Private?
The most dramatic potential outcome of this law change is the possibility that MSG Sports could take the Knicks private again. Doing so would free the company from quarterly earnings disclosures and investor pressure, allowing ownership to absorb higher tax bills without the constant glare of public markets.
This wouldn’t be unprecedented. Other sports owners have opted for private structures to avoid transparency requirements. For James Dolan, the Knicks’ polarizing owner, the incentive to operate outside the spotlight could be particularly appealing.
Still, going private is no small undertaking. It would likely require Dolan and his family to buy back shares at a premium, a move that could cost billions given the Knicks’ sky-high valuation. Investors may demand top dollar, especially if they sense the team is attempting to shield itself from a financial storm.
The On-Court Impact: Will This Affect Player Spending?
Knicks fans may be asking the obvious question: Could this tax law change affect how aggressively the team pursues and retains star players?
In theory, yes. If MSG’s tax burden increases significantly, Dolan and his executives may grow more cautious about handing out supermax deals or absorbing luxury-tax penalties. While the Knicks have never shied away from spending in pursuit of talent, they are now entering a new era of financial calculus where the cost of a max contract could extend well beyond the player’s salary cap hit.
That said, the NBA remains a league where competitive balance hinges on star power. It’s hard to imagine the Knicks willingly scaling back on paying stars like Towns and Brunson just to save on taxes. More likely, MSG would look for structural solutions—like restructuring ownership—rather than handicapping the team on the floor.
Expert Takes: A “Major Blow”
Tax experts warn that the implications of this law could reshape not just the Knicks, but the entire business of sports ownership.
“This is a major blow,” said one expert. “It’s not just about one team—it’s about how professional sports franchises are treated under tax law. For public companies like MSG, the effects are magnified, but others could follow if more teams move toward partial public ownership.”
He added that the move could also accelerate the growing trend of billionaires and private equity firms buying up teams to keep them off public markets.
What Comes Next
For now, MSG Sports has said only that it is “assessing the impact” of the law and has not made any firm decisions. The NBA, along with other professional leagues, is expected to lobby for carve-outs or exemptions, arguing that athlete salaries should not be lumped in with executive compensation targeted by the law.
But if no relief is granted, MSG faces a difficult decision: absorb the financial hit, make drastic ownership changes, or pass on costs in other ways. For Knicks fans, the biggest concern will be whether this off-court drama spills into roster-building decisions at a time when the team finally looks like a contender in the Eastern Conference.
Conclusion
The Knicks have spent decades battling narratives of dysfunction, poor decision-making, and missed opportunities. Ironically, their latest challenge has little to do with basketball and everything to do with Washington tax policy.
With stars like Karl-Anthony Towns and Jalen Brunson anchoring their roster, New York has a golden window to compete. But behind the scenes, MSG Sports now faces a financial storm that could reshape not only the Knicks’ future but the broader model of sports ownership in America.
Whether the team remains publicly traded or goes private, one thing is clear: the Knicks are entering uncharted territory, and the consequences could be felt far beyond Madison Square Garden.
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