6:30 p.m. -
BY GEOFF HOBSON
The Bengals may become the first in a trend of pro sports teams undergoing Internal Revenue Service scrutiny of stadium deals.
In a strongly-worded statement released Thursday by the team's lawyer, Thomas Borders of Chicago, the club said it plans to go to court to fight a recent IRS notice of deficiency for revenue Hamilton County received when the County sold charter ownership agreements (COAs) nearly six years ago.
The Bengals argue they never had the estimated $26 million that Hamilton County sold and received because the Paul Brown Stadium deal gave "total control" of the COA program to the county from 1996-2000. The money was put in County bank accounts for building PBS, which opened in 2000.
News reports and county audits down through the years have reflected the county's possession of the $26 million.
Borders said the Bengals feel so strongly about their case that team officials have told the county the club is prepared to pay half the litigation costs even though the PBS lease says Hamilton County has the obligation to pay and defend all claims or assessments.
Hamilton County Administrator David Krings said Thursday night he doesn't believe anyone owes anything because the building of the stadium was "a tax-exempt project."
"We believe that this issue is no different than Hamilton County selling dog licenses or parking spaces," Borders said. "In both cases , Hamilton County transacts
business with private individuals or business, accepts the revenue into County owned and controlled bank accounts, and spends the money on county government programs as it sees fit."
The county isn't eligible to pay federal taxes because the federal government can't tax a local government.
Five years ago, an IRS case against Bengals founder Paul Brown threatened the Brown's family ownership of the Bengals. But U.S. Tax Court Judge John O. Colvin ruled there was not an estate tax deficiency of more than $40 million.
It's not known how much the IRS seeks on this deficiency, but it's clearly less than the $26 million the county generated in a marketing effort with Tri-State Sports and Events, Inc. Don Schumacher and Associates, and the Leffler Agency.
Several NFL and baseball stadiums have been funded in similar fashion and could undergo the same scrutiny.
"The Cincinnati Bengals understand this effort to be part of a larger undertaking by the IRS to look into the sale of seat licenses for new professional sports facilities all across the country," Borders said. "Other cities are expected to raise significantly more revenue through the sale of seat licenses than was raised by Hamilton County."