Should the NFL get tax-exempt status?

October 23, 2014 by Eric Linden
Football Field

Sunday during the fall is a huge day of the week for many Americans. Namely, the sporting fiends with professional football fever. The National Football League is hugely popular and also extremely lucrative for its owners. This league has surpassed MLB, the NBA, and the NHL in becoming the most popular spectator sport in the USA. According to an August 2013 Forbes magazine article, “This year revenues for the National Football League will be somewhere just north of $9 billion, which means the league remains the most lucrative in the world.”

The NFL nonprofit is made up of thirty two separate for-profit organizations (the football teams), the owners of which all pay taxes on their individual revenues. Each team pays dues to the league office, which was granted nonprofit status in 1942.

The league office is, under current law, a 501(c)(6) organization, which according to the IRS website is as follows:

Section 501(c)(6) of the Internal Revenue Code provides for the exemption of business leagues, chambers of commerce, real estate boards, boards of trade and professional football leagues, which are not organized for profit and no part of the net earnings of which inures to the benefit of any private shareholder or individual.

Right now, Congress is not so happy about the fact that an organization made up of such hugely profitable owners (and whose aim is to make money) should have tax exempt status. Currently, there is a bill introduced by Senator Corey Booker of New Jersey which strips the NFL of its 501(c)(6) status. He would like this tax money to go to fund domestic violence programs, mainly in reaction to recent high profile events involving players and domestic violence cases. "Taxpayers are losing $10 million a year subsidizing these tax loopholes for professional sports leagues that generate billions of dollars annually in profits," Sen. Coburn told CNBC.

Should the NFL league office continue to receive this tax treatment? This is a complex tax question that, unfortunately, many in the media and Congress do not seem to understand fully. While the $10 million in lost tax revenue from the league office is quite a lot, it is nowhere near what it would be if the NFL teams paid no taxes at all. And when the $9B revenue number is tossed around it can be easily misconstrued to mean that these owners are not paying any tax, which is far from the truth. Yes, the IRS IS losing revenue, but it is not as much as people think. As with any issue, there is always much more information than is initially reported. Especially when it comes to our complex tax structure!

Tags: IRS

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