One for the sharp-pencil readers: Blackstone's sweet tax deal

July 13, 2007, 9:12 AM · When I went through Disney's Traditions orientation sessions for new hires, trainers told us stories of Walt's ongoing battles with what he called the "sharp pencil guys," the accountants who wanted to cut expenses when building Disneyland and nickel-and-dime the guests once they arrived.

Well, if the sharp pencil guys taketh, the sharp pencil guys can giveth, too. Check out today's "Must Read" from Josh Marshall's outstanding blog, Talking Points Memo:

Blackstone finds IRS tax loop

Blackstone, of course, is NBC Universal's partner in the Universal Orlando Resort and the primary investor in Merlin Entertainment Group, the owner of the Tussauds and Legoland theme parks.

The gist of the article? That Blackstone eventually will get tax deductions worth more than the multi-billion tax bill it paid by going public last month. Why? By writing off the eroding value of its companies' "good names" after the companies' sale.

Hey, maybe the "sharp pencil guys" on the site can explain it. ;-)

Replies (4)

July 13, 2007 at 4:41 PM · Way to stick it to the man.

Power to the theme parks!

July 13, 2007 at 5:12 PM · Interesting rebuttal to the NYT-initiated scandal from Blackstone:

Blackstone Says The New York Times Inaccurate And Misleading

Well, interesting to the extent in which "nuh-uh!" and ignoring many of the Times' criticisms forms a valid rebuttal. If they didn't happen to own every single theme park that I visit on a regular basis, I too would probably be joining the hate-parade. When you've got a monopoly on an industry - as Blackstone do in the UK theme park industry (and the cookie industry, incidentally) - I don't think this issue of good name really comes into it in a big way.

July 13, 2007 at 7:19 PM · I think I'll save them the trouble of reporting my ticket price as income and not visit any of their facilities.
July 14, 2007 at 1:22 AM · I'm an accountant, but it's always difficult to distill things like this down to a point where you can talk about it without writing a book while still being clear (especially to non-accountants) but here goes.

First of all, the writer has definitely tried to stack the argument and oversimplified how it works to make the company look bad. For starters, he's comparing a tax bill for Blackstone going public with a tax benefit of these write offs when the two have nothing to do with each other. Second, he ignores the fact that goodwill is typically written off over a very long time, decades in fact. Blackstone will almost certainly sell these parks within several years so they will end up with only a small portion of the tax write-offs discussed.

Without studying the deal in detail, I can't analyze it much more but this really doesn't look like anything that isn't done by every company when they buy another. The tax rules have been set up this way since before I got into accounting 25 years ago so if this is offensive then it's a little late for either Congress or the blogger to act like it's a surprise.

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