January 30, 2015; BuzzFeed
After watching Katy Perry ride an animatronic tiger puppet and then fly on a cable through the Super Bowl halftime show, few viewers could legitimately think that they were watching an extravaganza mounted by a tax-exempt “nonprofit,” but the National Football League really is one.
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In the lead-up to the Super Bowl, two New York State legislators, State Senator Brad Hoylman and Assemblywoman Deborah Glick, introduced legislation to change New York State’s tax law that would remove the league’s tax-exempt privileges under state law. Hoylman’s thought is that an entity that nets $10 billion in annual revenue doesn’t quite fit the meaning of “nonprofit.” It is particularly meaningful to the New York legislators, since the NFL is headquartered in the state and, if taxed as a for-profit business entity, could contribute to state tax coffers.
In Congress, Representative Jason Chaffetz (R-UT) introduced a bill that would deny tax-exempt status to all professional sports leagues, including the National Hockey League and the Professional Golfers Association Tour in addition to the NFL. “To say establishments like the NFL are not-for-profit organizations is laughable,” Chaffetz explains. “They are a for-profit and should be taxed as such.”
NFL Commissioner Roger Goodell, earning a salary in 2012 of $3.5 million plus a $40 million bonus, sent Hoylman a letter explaining that though the league office is tax exempt, the 32 teams that generate the bulk of the revenue are taxable entities. The language in the Internal Revenue Code that defines 501(c)(6) business leagues specifically includes “professional football leagues (whether or not administering a pension fund for football players),” a provision negotiated as part of former commissioner Pete Rozelle’s antitrust deal with Congress, not mentioning any other kind of sports entity. The suspicions of state legislators, members of Congress, and the American public are easily understood.
Will it happen? Will the NFL end up reclassified? Consider that the NFL 501(c)(6) spends more than $1 million every year on lobbyists charged with protecting the league’s tax status, anti-trust exceptions, and more recently, efforts to deflect criticism of its domestic abuse policies. If the New York State legislature or the U.S. Congress were to make headway against the NFL’s tax-exempt status, then Katy Perry would have good reason to sing “Firework.”—Rick Cohen