National Football League, $9 billion non-profit

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Patrick Hruby, writing in Politico Magazine, calls the NFL the "National Freeloader League," in an open letter to the infatuated congressmen who let the NFL make billions and still claim non-profit status:

So: Your relationship with the National Football League. It's toxic. Not for you, of course. You seem happy, like a bunch of starstruck fans. And we understand--we're fans, too. Professional football is fun, and no doubt a far better way to spend a Sunday afternoon than rushing around to grovel for cash at half a dozen fundraisers. The league throws a terrific Super Bowl party, too, and given the choice, who wouldn't prefer Denver-Seattle and a tub of guacamole over voting to repeal Obamacare for the 5,000th time?

But we digress. Back to the toxic part. While you're enjoying the epic Richard Sherman vs. Peyton Manning matchup this weekend, the NFL is pulling a fast one on us. Dodging taxes. Pocketing government handouts. Passing the buck on workplace injuries. Mooching harder than one of Ronald Reagan's welfare queens. Adding insult to injury--come to think it of it, it's probably the other way around--the league also is peddling a potentially dangerous product to our children with almost no oversight.

The mention of "starstruck fans" reminds me of the normally fiscally sober Oklahoma Republican legislators who fell all over themselves to include professional basketball teams in Oklahoma's "Quality Jobs Act," so that the new NBA owners could claim a tax credit.

How does an organization with $9 billion in revenue manage to claim non-profit status?

Your predecessors modified the law to specifically exempt "business leagues, chambers of commerce, real-estate boards, boards of trade and professional football leagues." (Somewhere in heaven, an NFL lobbyist just got his wings.) As Senator Coburn has repeatedly noted, the letter of the reworded 501(c)6 law violates its spirit. Lumping pro football in with boards of trade makes no sense. "It's a ruse," he says of the filing status that also applies to the PGA Tour and the National Hockey League. "Compare the NFL to other trade associations. They don't qualify at all. They're not promoting a trade. They're promoting themselves."

There's more, and you'll want to read the whole thing.

Last September, Oklahoma Sen. Tom Coburn introduced legislation to strip the tax-exempt status from professional sports organizations with annual revenues greater than $10 million:

Today, U.S. Senator Tom Coburn, M.D. (R-OK) introduced the PRO Sports Act, S.1524, which would amend the tax code to prohibit professional sports organizations with annual revenues over $10 million from enjoying the same tax-exempt, 501(c)(6) status as industry trade associations and public interest groups.

"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," Dr. Coburn said. "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."

Currently, a number of professional sports leagues have central offices registered as 501(c)(6) tax-exempt organizations allowing for the opportunity for their revenue to be tax-free. Leagues qualify for the tax-exempt status by stating their purpose is to help promote their respective sports and membership instead of themselves. The PRO Sports Act will not impact leagues' 501(C)(3) charitable organizations.

A backgrounder on the bill points out that other "public interest groups" have been stripped of 501(c)(6) status because they exist mainly to secure benefits for their members rather than serve the general public interest. AAA is one such example listed in the piece.

At this point, Coburn's bill has been referred to the Senate Finance Committee, and no further action has been taken. No wonder he's discouraged and ready to pack it in.

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1 Comments

Graychin said:

This may not be as big a deal as it seems. The Form 990 that the NFL filed with the IRS for 2012 shows that the league lost $78 million in 2012 and $52 million in 2011. It has negative net worth of $317 million. So it doesn't appear to be avoiding any income taxes as a result of its tax exempt status.

Of course all the profits are realized by the teams and their owners.

More interesting facts from the NFL's tax filings: Commissioner Roger Goodell was paid $25,000,000 in 2012. Former commissioner Paul Tagliabue was paid $8.5 million.

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This page contains a single entry by Michael Bates published on February 2, 2014 1:19 AM.

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