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
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
(Hat Tip: Greg McNeal.