The National Football League, purveyor of such spectacles as the Super Bowl, the Pro Bowl and Jerry Jones, is exempt from paying taxes. It’s a fact that surprises most people, including most NFL fans, especially in light of some other facts:
. The NFL grossed more than $9 billion in revenue in 2014.
. Roger Goodell, the Commissioner of the NFL, was paid about $44 million in salary and bonuses in 2014.
. Steve Bornstein, the NFL’s Executive Vice President for Media, was paid approximately $26 million in wages and bonuses in 2014.
. General Counsel Jeff Pash received nearly $8 million in take-home pay in 2014.
. The league also paid more than $16 million in legal fees to outside firms Covington & Burling in Washington, D.C., and Paul, Weiss, Rifkind, Wharton & Garrison in New York City.
. The NFL paid more than $1.2 million lobbying legislators in 2014.
And yet, despite all the money swirling around it, the NFL is tax-exempt. It was granted its tax-exemption all the way back in 1942 when current face (and hair) of the league Tom Brady was negative 35 years old. The United States was mobilizing for the war effort, and the NFL was struggling. It applied to the IRS for tax-exempt status, and its application was granted.
To be clear, though, the exemption applies only to the NFL League Office, not the league as a whole. Each team is organized as a separate entity, and each must pay taxes on its profits each year. Each NFL team, that is, is a for-profit company as far as the IRS is concerned.
The NFL League Office, on the other hand, is a trade association, which means it helps other businesses, e.g., the Dallas Cowboys and the Jacksonville Jaguars, run their operations more efficiently. The idea is rooted in sound enough philosophy: trade associations make things run more smoothly for all the participants in a particular industry. But the NFL League Office does not exist for the benefit of any whole industry, be it the professional football industry or the sports-equipment-manufacturing industry or the spicy chicken wing industry. The NFL League Office exists to benefit the NFL, a tiny group of professional football franchises. It is interested in the efficiency and profitability of the industry as a whole only to the ensure that its existing franchises continue to enjoy all of the benefits.
And maybe even that’s alright. But non-profits are supposed to go untaxed because they are engaged in some sort of altruism. The principle behind the policy is something like: the public shouldn’t tax the non-profits because they exist for the public good. And the Wounded Warrior Project, it isn’t!
It makes one wonder what the NFL listed as its public mission when it applied for non-profit status in 1942. According to a report published in 2009, though, neither the IRS nor the NFL can find a copy of the application for exemption. No matter, 24 years later, in 1966, the IRS inserted a specific exemption for “professional football leagues” in the tax code. Section 501(c)(6).
The legislation came about because the NFL was merging with the AFL and there were concerns that the new league may violate the Federal Trade Commissions Act or the Clayton Antitrust Act when it made pension payments to former players. The league may not even have received special treatment then, but it’s initial and current tax-exempt status have left some policymakers and tax experts scratching their heads.
If you would like to become a contributor to RPRNmag newsmagazine, read our submission guidelines, and apply. We welcome your ideas and recommendations.
For a product review, read our guidelines here. We welcome your ideas and recommendations.
Thank you for reading.