The New York Knicks and New York Rangers could face a combined annual tax burden of up to $75 million if Madison Square Garden Sports proceeds with its planned franchise spinoff, according to new analysis tied to a federal tax rule set to take effect in 2027.
The rule change, introduced under the 2021 American Rescue Plan Act, expands limits on executive compensation deductions for public companies — increasing the number of affected top earners from five to ten. For MSG Sports, which uniquely houses two major league franchises under a public corporate structure, the impact is outsized.
A research note by Seaport analyst David Joyce estimates that a standalone Knicks entity would generate roughly $55.4 million in additional annual tax costs, while the Rangers would face about $19.8 million, based on current payroll structures and compensation caps.
The financial pressure comes as MSG Sports evaluates a potential spinoff of its NBA and NHL teams, a move aimed at unlocking shareholder value amid rising franchise valuations across North American sports.
The Knicks have already hit a sporting milestone, winning at least 50 games in three straight seasons for the first time in 30 years, further boosting revenue projections through extended playoff runs.
MSG Sports has argued that separating the franchises could improve financial flexibility and valuation clarity, particularly as private equity interest and minority stake sales continue to reshape the sports ownership landscape.
However, analysts warn the tax change could become a structural drag on post-spinoff operations, particularly given the high concentration of player salaries within compensation brackets affected by the new rule.
Despite the projected tax hit, MSG Sports shares have climbed sharply, rising 75% over the past year, fueled by broader optimism around franchise valuations following blockbuster NBA team sales in Boston and Los Angeles.