TaxProf Blog

Editor: Paul L. Caron
Pepperdine University School of Law

A Member of the Law Professor Blogs Network

Monday, April 29, 2013

Sen. Coburn's Bill Would Strip NFL, NHL & PGA of Tax-Exempt Status

NFLThink Progress:  The NFL Is a Tax-Exempt Organization — But One Senator Wants to Change That:

Oklahoma Sen. Tom Coburn (R) today introduced an amendment to the Marketplace Fairness Act that would end the practice of allowing professional sports leagues to qualify as tax-exempt organizations, a move that would hit leagues like the National Football League, the Professional Golfers Association (PGA) Tour, and the National Hockey League, among others.

Since 1966, the tax code has allowed leagues to classify as 501(c)(6) charitable organizations — a classification used by trade and industry organizations — under the assumption that the leagues were promoting the general value of their sports. But Coburn’s amendment asserts that the leagues are not non-profits engaged in the promotion of their sports but instead are businesses interested solely in the promotion of their business; that is, the NFL isn’t so much concerned about promoting the general sport of football as it is concerned with promoting NFL football, because it is the NFL brand and the NFL teams and logos and products that make it a profitable business. The NFL, for instance, didn’t seem interested in promoting the general spread of football when a competitor league, the United States Football League, was formed in 1983. Likewise, the PGA Tour, NHL, and other sports leagues serve to promote their brand of their sports, not the sport as a whole.

Further, the leagues hardly pay their executives as if they are non-profits. The NFL paid $51.5 million to just eight executives in 2010, according to Coburn, and other leagues are similar — PGA commissioner Tim Finchem made $5.2 million that year, while NHL commissioner Gary Bettman took home $4.3 million....

NFL teams pay membership dues totaling roughly $6 million per team, but they are allowed to write those off for tax purposes as donations to a charitable organization. As Andrew Delaney explained in the Vermont Law Review in 2010, the NFL, which collected $192 million in revenue largely through membership dues in 2009, then pours much of that money back into a stadium fund that allows owners to access interest-free loans as long as they secure taxpayer financing for either new stadiums or improvements to existing facilities. ...

Removing the tax-exempt status would force the leagues to acknowledge the reality that they are businesses, and they would be taxed as such. For the NFL, that would mean that membership dues and assessments would no longer be tax exempt, according to Delaney, and the profits run through the NFL’s or PGA’s tax-exempt organizations no longer would be either (the NFL runs multiple for-profit organizations, such as NFL Films.

(Hat Tip: Greg McNeal.

http://taxprof.typepad.com/taxprof_blog/2013/04/sen-coburns.html

Celebrity Tax Lore, Tax | Permalink

TrackBack URL for this entry:

http://www.typepad.com/services/trackback/6a00d8341c4eab53ef017d43305b23970c

Listed below are links to weblogs that reference Sen. Coburn's Bill Would Strip NFL, NHL & PGA of Tax-Exempt Status:

Comments

This is a good one, finally a proposal from a Republican that is rational and consistent with true conservative principles. There is no reason the sports leagues should be tax exempt, none.

Posted by: johnqpublic | Apr 30, 2013 7:24:35 AM

Why stop there? What is the rationale for any "tax exemption" except social engineering.

Posted by: George | Apr 30, 2013 10:33:00 AM

It's about time! I said that over 40 years ago when I was taking my tax courses in law school.

Posted by: LJB | Apr 30, 2013 11:21:56 AM

Umm, since when do 501(c)(6)'s qualify for charitable deduct on donations? If I was an NFL team, I'd say those payments are ordinary and necessary business expenses. Don't law firms deduct bar dues as such? Am I right?

Anyway, yeah, the fact that 501(c)(6) specifically lists "professional football leagues (whether or not administering a pension fund for football players)" is an absurdity.

Posted by: HTA | Apr 30, 2013 1:01:08 PM