Did You Know That the NFL is a Tax-Exempt Non-Profit: Round 2

by Steven Sodini 15. May 2013 13:02
      Back in December, we posted a blog regarding the surprising non-profit tax-exempt status of the NFL, NHL, and many other professional sports organizations, under Section 501(c)(6) of the Internal Revenue Code.  That blog was primarily based on the 2012 Wastebook that is published annually by Republican Senator Tom Coburn of Oklahoma and ranks the 100 largest wastes of taxpayer monies each year.  The non-profit tax-exempt status of these sports leagues ranked as the #2 biggest waste of taxpayer money for 2012.  Since that time, according to an article in the New Jersey Star-Ledger this week, Senator Coburn has tried to educate his Senate Colleagues on the tax-exempt status of many of these organizations, and recently crafted legislation an amendment to the recent “Marketplace Fairness Act” (aka “Internet Sales Tax Act”), known as the “Property Reducing Overexceptions for Sports Act” (aka “PRO Sports Act”), in order to strip these professional sport organizations of their non-profit tax-exempt status.   This issue, as outlined in the 2012 Wastebook, was in fact originally brought to Senator Coburn’s attention from an article written back in 2010 in the Arizona State Law Journal by a law student.  That original article noted that based on the NFL & NHL alone, revoking the tax-exempt status of these professional sports organizations could generate at least $91 million of new federal tax revenue each year.  As noted in our original blog, while individual sports teams operate as for profit entities, the underlying sports leagues (set up as trade associations to promote the common business interest of their particular sport) do not, and often even avoid state and local taxes as well, based on this tax-exempt status.   Obviously, it is difficult to ascertain the precise revenue impact of this tax-exempt status since the leagues do not disclose financial reports, but as an example, it is known that the NFL alone paid 8 top executives nearly $55 million in 2012, and generated approximately $10 billion of revenue in the same year.  In 2010, they reported a net profit of about $1.3 billion.  The NFL also collects about $192 million ($6 million in annual membership dues from each of the 32 NFL teams), then each team writes off the dues as charitable donations.  The $192 million is then put into a stadium fund for owners to get interest free loans as long as they can secure public funding for constructing a new or renovating an existing sports stadium.   As outrageous as this may all sound, from a practical standpoint it may not amount to anything in the long run. Among other reasons, the NFL alone has powerful lobbyists, and many members of Congress are longtime sport fans (that may have been directly involved in securing public funding of sport stadiums for their local sports teams and constituents).  Even though the average worker likes to complain about sports figures, Hollywood celebrities, etc. making too much money, he or she won’t hesitate to spend their own money to support their favorite sports team, or attend that opening day screening of the latest Hollywood blockbuster.    
Categories: Tax