It’s Super Bowl weekend, and the National Football League is about to reap its biggest payday of the year. Funny thing about that, though: The NFL won’t be paying any taxes on the profits it will be raking in from advertising revenue, ticket sales, or merchandise.
In fact, the last time the NFL paid taxes was in 1966. That was the year when lobbyists convinced Congress to change the definition of organizations categorized by the Internal Revenue Service as 501 (c)6 not-for-profit organizations. Previously, a sentence in Section 501(c)6 had granted not-for-profit status to “business leagues, chambers of commerce, real-estate boards, or boards of trade.” Since 1966, the code has read: “business leagues, chambers of commerce, real-estate boards, boards of trade, or professional football leagues.”
In return for this incredibly lucrative, sweetheart deal, Congress asked for just one concession from the NFL: its promise not to schedule games on Friday nights or Saturdays in autumn, when many high schools and colleges play football.
The new provision gave the NFL a way to skirt taxes, while also granting it an uncommon anti-trust exemption, allowing it to create a monopoly to negotiate TV rights at the same time. Under the rule, leagues qualify for the tax-exempt status by stating that their purpose is to help promote their respective sports and membership instead of themselves. More specifically, 501(c)6 organizations — essentially industry trade groups, are defined as “associations of persons having some common business interest, the purpose of which is to promote such common interest and not to engage in a regular business of a kind ordinarily carried on for profit.” Hmm.
So, at the Internal Revenue Service, NFL stands for Non-profit Football League.
It’s a special status that the NFL continues to work hard to maintain. According to the Center for Responsive Politics, the NFL has spent $2 million in campaign contributions since 1992, and $12.7 million on lobbying efforts since 1998. That’s a lot of money, but clearly, the NFL is getting a to-die-for return on its lobbying investments, because its fair share of taxes would be many millions more. According to Forbes Magazine, 2013 revenues for the National Football League [were] just north of $9 billion, which means the league remains the most lucrative in the world. NFL commissioner, Roger Goodell—whose annual salary is $30 million–is aiming even higher, hoping to reach $24 billion in annual revenues for the league by 2027.
And it’s all tax-free, subsidized by NFL fans and taxpayers. If the NFL were taxed as a normal corporation, it would be subject to the standard 35% corporate tax rate.
Just to clarify, the tax-exempt status applies only to the league—more specifically, its headquarters, which administers the league and its all-important television contracts. Individual teams are considered for-profit organizations, and presumably pay taxes—except for the tax credits, subsidies and giveaways they routinely get, most notably for billion-dollar stadiums, at the expense of the taxpaying public.
It should also be noted that, while the league claims that it shares much of its untaxed revenue with teams, it still manages to pay Goodell $30 million a year. According to CBS News, 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.
How much do individual teams pay in taxes? That’s hard to know, because the teams—except for Green Bay—are privately held and don’t open their books to the public..
Bottom line, It’s scandalous to know that the NFL has the same tax status as a soup kitchen and other charitable groups that actually do some good for society. I recently received an email from Credo that put this issue in a wider political context:
As Republicans in Congress vote to cut food stamps and obstruct the extension of unemployment benefits, it’s time to highlight the hypocrisy of letting a multi-billion operation like the NFL get away with paying no taxes while they stick us with the bill. Though the NFL has successfully held back efforts to make it pay its fair share for nearly 50 years, Congress has the opportunity to change that by updating the Internal Revenue Code.
Credo is asking citizens to sign its petition urging Congress to change the IRS code regarding tax-exempt status for the NFL.
To that same end, in September 2013, Senator Tom Coburn [R-OK] introduced a bill that would ban pro sports leagues with more than $10 million in revenue from receiving tax-exempt status. He dubbed the bill the PRO Sports Act, with PRO as an acronym for Properly Reducing Over-Exemptions. Coburn also released a government “waste book” decrying the nonprofit status of the NFL, NHL and other professional sports organizations, estimated to cost taxpayers between $10 million and $91 million annually. Coburn said:
Tax earmarks are essentially tax increases for everyone who doesn’t receive the benefit. In this case, working Americans are paying artificially high rates in order to subsidize special breaks for sports leagues. This is hardly fair. This bill would require major professional sports leagues to be prohibited from qualifying as non-profit organizations under the tax code. This would help give all Americans, not just athletes and owners, a break and pave the way for the kind of tax reform and job creation our economy desperately needs.
Coburn should get some credit for the effort, although he couches it in typically Republican language, decrying earmarks and touting “job creation.” Not surprisingly, Coburn’s bill gained only one co-sponsor—Angus King, (I-ME)—and Govtrack rates its chance of passage by the Senate Finance Committee as 0%.
Andy Kroll, a reporter at Mother Jones, puts the issue this way:
So as you settle onto the couch next Sunday for a full day of gridiron action, don’t be fooled by the NFL’s manly, to-the-victor-go-the-spoils ethos. The league is one of the biggest welfare queens around.