TaxProf Blog

Editor: Paul L. Caron
Pepperdine University School of Law

A Member of the Law Professor Blogs Network

Thursday, October 25, 2012

Does the NFL Deserve its Tax-Exempt Status?

NFL Following up on my previous post, The NFL's Undeserved Tax-Exempt Status: Atlanta Journal-Constitution,  Did You Know That the NFL Is a Tax-Exempt Nonprofit?:

Once in a while, I run across something that I did not know and it leaves me flabbergasted.

For example, I did not know that the National Football League, the colossus of professional sports, is classified as a non-profit — a tax-free non-profit, to be more specific. That’s right: The NFL has its own exemption, written into federal law, that makes it exempt from federal corporate taxes.

The Professional Golf Association and the National Hockey League, among others, enjoy a similar exemption although in their cases, it is not an exemption specifically written into the law.

As described in Waste Book 2012 — compiled by the staff of U.S. Sen. Tom Coburn, a conservative Republican from Oklahoma:

In 2010, the registered NFL nonprofit alone received $184 million from its 32 member teams. It holds over $1 billion in assets. Together with its subsidiaries and teams – many of which are for-profit, taxed entities – the NFL generates an estimated $9 billion annually. Each of its teams are among the top 50 most expensive sports teams in the world, ranking alongside the world’s famous soccer teams. Almost half of professional football teams are valued at over $1 billion….

League commissioners and officials benefit from the nonprofit status of their organizations. Roger Goodell, commissioner of the NFL, reported $11.6 million in salary and perks in 2010 alone. Goodell’s salary will reportedly reach $20 million in 2019. Steve Bornstein, the executive vice president of media, made $12.2 million in 2010. Former NFL commissioner Paul Tagliabue earned $8.5 million from the league in 2010. The league paid five other officials a total of $19.2 million in just one year. In comparison, the next highest salary of a traditional nonprofit CEO is $3.4 million.

The NFL’s exemption stems from a 1966 law, passed at the time of the merger with the old American Football League, specifically allowing “professional football leagues” to enjoy 501(c)(6) status as tax-exempt trade organizations. Other leagues have piggy-backed on that legislation to claim that status themselves.

Major League Baseball also used to enjoy the same tax-exempt protection, but in 2007 it chose to surrender that status in part because as the salary information above illustrates, tax-exempt, non-profit status requires you to report the salaries of your top executives. MLB decided that protecting that information from the public was more important than escaping taxes.

(Hat Tip: Adrian Swindells.)

http://taxprof.typepad.com/taxprof_blog/2012/10/does-the-.html

Tax | Permalink

TrackBack URL for this entry:

http://www.typepad.com/services/trackback/6a00d8341c4eab53ef017c32c8b40a970b

Listed below are links to weblogs that reference Does the NFL Deserve its Tax-Exempt Status?:

Comments

So, what's the difference in principle between the NFL and PBS?

Posted by: Skip | Oct 26, 2012 10:14:55 AM

Are we sure this is abusive? Is income trapped untaxed at the NFL, or do NFL teams/owners pay tax on all NFL profits?

Posted by: Mike Petrik | Oct 26, 2012 10:35:22 AM

As someone that watches a lot of college football and some NFL, I have to say the pro-game has gotten worse (e.g. last year's error prone playoffs with fumbles, bad calls, miss chip-shot field goals) and the college game has gotten much better (unless you watch the pathetic so-called 'Big'-10.)

At least the college players stick with one team. The NFL is a revolving door.

Posted by: lester | Oct 26, 2012 10:44:28 AM

Other than a very narrow group of charities why is there a non-profit status at all to begin with, especially for any organization that can be done as or has a for profit analoge?

Posted by: Cubanbob | Oct 26, 2012 11:26:52 AM

I have read that team owners are ego-driven and willing to lose millions of dollars in order to win championships. The intangible benefits of team ownership offset the financial loss. The players make all the profit and then some.

Is this scenario correct? Do professional sports teams really show zero profit using generally accepted accounting principles?

Now to the NFL, which is the umbrella organization for the teams. They presumably get their revenue from a "tax" they impose on member teams. The NFL member teams have no reason to tax themselves more than the amount of money needed to run the umbrella organization. Therefore the NFL would naturally be an approximately break-even operation. Right?

Posted by: AMTbuff | Oct 26, 2012 1:59:41 PM

I suppose if the NFL serves as a pass-through to the individual teams for the revenues the league earns from its various licensing agreements, media broadcasts, sales of NFL merchandise, royalties from films or books and other printed materials, etc., a tax exemption for NFL Inc. could conceivably be justified. It might prove interesting, however, to see the details of any contractual arrangements or revenue sharing agreements that currently exist between the clubs, the league, the broadcast networks, etc., to see whether the revenue the NFL reaps is eventually taxed at the club level.

Posted by: Baba Ganoush | Oct 26, 2012 2:14:29 PM

Agree with Mike Petrik's comment. How much income is actually going untaxed here? Isn't that the key question?

Aren't the teams themselves paying taxes? Aren't the owners paying taxes (if the income from the team is flowing to the owner?

"Roger Goodell, commissioner of the NFL, reported $11.6 million in salary and perks in 2010 alone. Goodell’s salary will reportedly reach $20 million in 2019. Steve Bornstein, the executive vice president of media, made $12.2 million in 2010. Former NFL commissioner Paul Tagliabue earned $8.5 million from the league in 2010. The league paid five other officials a total of $19.2 million in just one year."

Aren't the folks above paying taxes? Aren't the players paying taxes?

Posted by: JWJ | Oct 26, 2012 4:13:29 PM

Cubanbob: I agree. Hospitals and Universities have become profit seeking corporations. They should pay taxes. As for the NFL, it is quintessentially a business and should be taxed.

Mike: A wise man once said in my presence: "If it doesn't make money, It won't have to pay taxes. If it makes money, it is not a non-profit".

Posted by: Walter Sobchak | Oct 26, 2012 4:50:36 PM

Religious exemption. Sports is a religion for many and we know how that works with the IRS/Congress.

Posted by: Bert | Oct 31, 2012 5:47:34 PM