On June 29, 2007, the IRS Chief Counsel's office released a legal memorandum (ILM 200726023) asserting that a broadcasting company cannot take a federal income tax deduction for all licensing fees payable under a multi-year sports broadcasting agreement when the contract is executed.

Typically, a broadcasting company enters into a multi-year contract with a sports league to broadcast sporting events via over-the-air, cable and television platforms in exchange for licensing fees paid to the sports league. The licensing fees are usually paid in installments over several years, but broadcasting companies argue that all licensing fees are deductible in the year the contract is signed. The IRS disagrees.

Most broadcasting companies are "accrual method" taxpayers, and as such can deduct their business expenses when "all events" have occurred to fix the liability for the expense (even if the expense has not actually been paid). In this case, the IRS disputes that "all events" have occurred. Instead, the IRS takes the position that a broadcasting company has not incurred a liability to pay all licensing fees, because the IRS believes that the broadcasting company's licensing fee payment liability is not fixed by merely executing a multi-year contract. The result is that even though broadcasting companies are obligated to pay such licensing fees to the sports leagues, the IRS is resisting efforts to allow broadcasting companies to take up-front deductions for their licensing fee liabilities.