Why the NFL Suddenly Wants to Pay Taxes
Apr 28, 2015
The NFL announced Tuesday that it's voluntarily relinquishing its tax-exempt status. Here's what you need to know about the move.
Why in the world would the NFL volunteer to pay taxes?
Basically,
the economic value of the exemption wasn’t worth the political and PR
headaches that it created. In a memo to the league’s teams and members
of Congress, NFL commissioner Roger Goodell called the tax-exemption a
“distraction,” and said it has “been mischaracterized repeatedly in
recent years.”
Is there truth to this?
Yes. Political threats to revoke the tax-exemption of pro sports
organizations hold populist appeal. After all, how can commercial
outfits that sell expensive tickets and generate millions of dollars for
owners and players be considered non-profit organizations – and thus
exempt from paying taxes? The NFL is no charity.
In
2013, Sen. Tom Coburn (R) of Oklahoma introduced legislation that would
prohibit the NFL and other pro sports organizations with over $10
million in revenue from filing as non-profits. In the wake of the Ray
Rice scandal last fall, New Jersey Senator Cory Booker, a Democrat,
proposed similar legislation – and argued that taxes on these leagues
could fund domestic violence programs. Last month, Republican
Congressman Jason Chaffetz, House Oversight Committee Chairman, told Reuters that “the National Football League should have to pay taxes like everybody else.”
Politicians,
however, largely fail to explain the scope of these tax-exemptions –
which are much more limited than they may appear. The NFL's teams, who
see a bulk of the league’s $11 billion in revenue, are taxable entities.
So the NFL does pay taxes. The league office is tax-exempt, but it
generated just $9 million in income during the 2012 tax year.
So
repealing the NFL's tax exemption wouldn’t create the windfall
politicians want you to expect. If it saved the NFL a ton of money,
today’s voluntary relinquishing never would have happened. Recent
political posturing exaggerated its value.
Why was the NFL office tax-exempt in the first place?
The
NFL has historically filed as a 501 (c)(6) non-profit, which provides
tax-exemptions for “business leagues, chambers of commerce, real estate
boards, boards of trade, and professional football leagues.” Er, how did
football get written into the tax code?
Who’s the big winner here?
NFL
Commissioner Roger Goodell. Remember him calling the exemption a
distraction? Well, the largest distraction has been the required public
disclosure of his enormous compensation -- $44 million in 2012, and $35
million in 2013. When Goodell mishandles an issue like Ray Rice, his
paycheck is inevitably thrown in his face. How can a guy making that
much money screw up so badly? The commissioner’s pay is also a sore
point during collective bargaining negotiations.
Without
the tax exemption, the NFL is under no legal obligation to release its
commissioner’s salary. Major League Baseball made a similar move in
2007, when it relinquished its tax exemption – and no longer had to
disclose the pay of commissioner Bud Selig, which had exceeded $18
million.
Fundamentally, does this news change anything about the NFL?
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