Summary#
S. 5661 has no short title in the supplied text. It would amend the Internal Revenue Code of 1986 by changing how the five highest-paid employees are identified for the limit on deductions for certain employee compensation. Its stated goal is parity in the taxation of professional sports franchises. The bill is not law; its effect would begin for tax years starting after December 31, 2026.
- The bill would exclude people performing services in the field of athletics from the five-highest-paid-employee test in one part of the definition of a “covered employee.”
- That change could bring non-athlete employees into that group, affecting the employer’s deduction under the existing limit.
- The change applies to a “taxpayer” employing the person; the bill text does not limit it expressly to sports franchises.
- It does not change athletes’ pay, create a new benefit or tax, or set up a new program.
What it means for you#
- Employers whose deductions are subject to section 162(m): They would use the revised test to identify covered employees. The bill does not set out a new filing or review process.
- Sports franchises and other taxpayers: The change could affect which non-athlete employees count as covered employees for the deduction limit. The bill’s athletic-services exclusion applies only to the five-highest-paid-employee test; it does not override the separate categories in subparagraphs (A) and (B), or the prior-year rule in subparagraph (D).
- Athletes and other workers: The bill does not directly change pay or impose a duty on employees.
Money#
No publicly available information.
- The bill does not provide an estimate of its effect on federal tax revenue or on any employer’s deductions.
- It does not appropriate money or specify new staffing or administrative costs.
What is unclear#
- The current Internal Revenue Code text was not supplied, so the change cannot be checked against the full current law.
- The bill refers to a federal regulation to determine who performs services “in the field of athletics”; the supplied text does not explain the scope of that term.
- The text does not estimate how many employees or taxpayers would be affected, or the revenue effect.
- The bill does not explain how the change would interact with other existing tax rules or programs.
- The bill is still proposed, so passage is uncertain.
Case for#
- The bill appears intended to keep highly paid athletes from counting toward the five-employee test used for the deduction limit.
- A possible argument for the bill is that this could make the test more comparable for sports franchises and employers whose highest-paid staff are not athletes.
- Excluding athletic employees from this test could make the treatment of non-athlete employees more consistent across different types of taxpayers.
Case against#
- One concern is that the bill does not remove athletes from every route to being a covered employee; separate categories and the prior-year rule remain.
- The operative wording applies to a “taxpayer,” not only to professional sports franchises, so the reach may be broader than the stated goal suggests.
- The bill gives no estimate of the effect on federal revenue or on affected employers’ deductions.
- The bill does not define the scope of “services in the field of athletics” in its own text.