Why Isn’t the NFL Taxed?

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March 5, 2012; Source: Business Insider

Now that Peyton Manning is leaving the Indianapolis Colts, and now that former New Orleans Saints defensive coach Gregg Williams has been exposed for offering his players bounties for having opposing players carried off the field, we can return to the real business of professional football and join Business Insider to ask, “Why Does the National Football League Deserve Tax-Exempt Status?”

NPQ raised this question in 2008. Back then, the NFL tried to get the American Society of Association Executives (ASAE) to get a bill passed that would give a special meaning to the NFL’s tax-exempt status—making them exempt from having to reveal the names of NFL staff members earning six-figure salaries, not to mention the seven-figure and, in the case of commissioner Roger Goodell and NFL Network president Steve Bornstein, the eight-figure compensation packages. According to the NFL, complying with the requirement of disclosing high-salaried employees—like every other nonprofit has to do—would violate the employees’ privacy.

Like this Business Insider piece, we questioned the nonprofit provenance of the NFL, suggesting that there was much to make the IRS reconsider the NFL’s status. We contrasted Roger Goodell’s NFL with Bud Selig’s Major League Baseball which is incorporated as a for-profit. Business Insider examined the definition of a 501(c)(6) and concluded, “It seems inconceivable that the NFL is not ‘engag[ing] in a regular business of a kind ordinarily carried on for profit.’”

The Business Insider blogger cites a paper by Vermont Law School student Andrew Delaney, who concluded that the NFL was functionally a “glorified tax shelter.” Delaney concluded, “If the NFL isn’t violating the letter of nonprofit status, it’s certainly violating the spirit.”

Our analysis noted that the NFL “has the unusual distinction of not only being a tax-exempt multi-billion dollar corporation…[but] a tax exempt monopoly.” It is a 501(c)(6) monopoly that earned a scant $9 billion in revenue last season. Maybe as the IRS begins to find its oats in questioning the tax-exempt credentials of 501(c)(4) organizations that seem to do a lot of politicking and not a lot of social welfare, it might also take time to look at the 501(c)(6) NFL, which seems to pull in lots of earned revenue with little hint that it deserves to be a nonprofit.—Rick Cohen

 CORRECTION: An earlier version of this article referred to Vermont Law School as the University of Vermont Law School. NPQ regrets the error.

  • Dave

    Great question. This seems almost criminially evasive.

    Also, there is no University of Vermont law school. You’re probably referring to Vermont Law School, which is not affiliated with the university in Burlington.

  • Kristine Staley

    Isn’t this another example of how the rich are exempt from paying taxes? Our federal government should strive to eliminate these types of tax disparities. Should the working class be paying a greater percentage of their wages in taxes than an NFL football player?

  • dclaudew

    “According to the NFL, complying with the requirement of disclosing high-salaried employees—like every other nonprofit has to do—would violate the employees’ privacy.” Hmmm, why not just follow the tax advice of Komen and do as Komen does to hide CEO Nancy Brinker’s salary?

  • sip

    What does Nancy Brinker do to hide her compensation?

  • Gavin Burgess

    There is no reason for the NFL to have tax-exempt status except, of course, to avoid paying taxes. The US is in such horrible shape that (for example, and because the math is simple) 33% of $9 Billion, or $3 Billion, is considered a drop in a very empty bucket. But it’s not nothing. There are entirely too many loopholes and exemptions in the US tax code. The country is already broke and the next stop is Greece-like meltdown, but that’s no reason to allow this nonsense to continue. A flat tax would be a start: Gross income minus $50,000 multiplied by 30% minus bona fide charitable donations equals your annual tax rate whether you are a part time hamburger-flipper at a fast food joint or the NFL. Or Willard Mitt Romney. Everybody keeps the first $50K, and everybody antes up 30% on the balance. No loopholes. That takes the US tax code which, when printed on plain paper, double sided, single spaced in 12 point font, weighs 13,382 pounds unbound (OK, I made that up but it’s likely close) to a single sheet of paper. I can hear Romney screaming from here….

  • darley

    This is disgusting! Everybody knows that football is a business and is strictly for profits. To claim that its equal to churches and charities is a SIN ! I wonder how many Americans know that and would find that acceptable. The double standard is shameful, the players are unionized but the owners are tax exempt. What’s wrong with this picture?

  • Ted

    “It is a 501(c)(6) monopoly that earned a scant $9 billion in revenue last season.”

    Maybe you should do some better analysis.

    The NFL league office is tax-exempt, the teams themselves are not. The teams are the ones who are collecting the huge majority of that revenue and paying taxes on it.

    Very, very misleading.

    The NFL league office is tax-exempt (and has been since the 1940’s) because it falls under the category of a business league.