Take a Hike! Why the NFL Shouldn’t Enjoy Tax-Exempt Status
By Aarthi Manohar on January 12, 2013
When most people think of non-profits, names like The Salvation Army and The American Red Cross are likely come to mind. Therefore, it might come as a surprise to hear that major league sports associations like the NFL, the NHL, and the PGA are also non-profit organizations. The NFL, for example, is classified as a 501(c)(6) organization with the IRS, which means that it is a federal, non-profit, tax-exempt entity.[1] In other words, the NFL is not required to pay taxes on any revenue it takes in, putting it on a similar plane as organizations like the Salvation Army and the Red Cross.
Recently, the tax-exempt designation of the NFL has come under fire, as critics and public figures alike have panned the non-profit status of the multi-billion dollar organization. For example, in 2012, U.S. Sen. Tom Coburn from Oklahoma released a report claiming that the Treasury would save an estimated $91 billion if it “closed the loophole” and revoked the tax-exempt status of the NFL and other sports leagues.[2] Similarly, a columnist in The Huffington Post denounced the tax-exempt status of the organization, claiming that “[t]he NFL may technically be a non-profit, but it sure as hell isn’t acting in the public interest.”[3] Additionally, theblaze.com reports that the NFL is a “tax-dodger masquerading as a non-profit.”[4]
Critics of the NFL’s tax-exempt designation base their arguments on the fact that the NFL’s not-for-profit designation is singularly at odds with its clear for-profit goals. Namely, the NFL generates approximately nine billion dollars annually, and it appears to be operated in a manner akin to for-profit corporations: it is designed and run to make money.[5]
Senator Coburn’s report cites the following statistics to prove that the NFL is a for-profit corporation hiding beneath a non-profit categorization:
“League commissioners and officials benefit from the nonprofit status of their organizations. Roger Goodell, commissioner of the NFL, reported $11.6 million in salary and perks in 2010 alone. Goodell’s salary will reportedly reach $20 million in 2019. Steve Bornstein, the executive vice president of media, made $12.2 million in 2010. Former NFL commissioner Paul Tagliabue earned $8.5 million from the league in 2010. The league paid five other officials a total of $19.2 million in just one year. In comparison, the next highest salary of a traditional nonprofit CEO is $3.4 million.”[6]
Coburn’s report engenders several questions: why are a supposed non-profit’s highest-ranking officials enjoying multi-million dollar salaries? Why haven’t these figures been questioned by the IRS? Critics respond to these queries with more questions, as it remains unclear why the NFL’s multi-billion dollar enterprise reaps the benefits of taxpayer subsidies. For example, former Vermont Law School student Andrew B. Delaney authored a paper in 2010, claiming that the NFL’s tax-exempt status is a “sham,” and that there is “no logical explanation for [its] tax-exempt status.”[7]
So, while the NFL’s non-profit designation remains a mystery, one thing remains clear: it is wrong. Not only is the NFL benefitting from taxpayer dollars, it is operating at a profit, raking in billions of tax-exempt dollars in ticket sales, television air time, and advertising. It is not operating in the interests of the public, but rather in the interests of private parties, like its commissioners and players, who make millions of dollars annually.
Critics like Delaney and Senator Goodell recommend that the NFL either “start acting like a non-profit” or change its IRS status to that of a for-profit company.[8] For the sake of the taxpayers, let’s hope the NFL takes a hint and takes a hike.
[1] Rick Cohen, Sen. Coburn’s “Wastebrook” Eyes NFL’s Nonprofit Status, Nonprofit Quarterly (Oct. 17, 2012), available at http://www.nonprofitquarterly.org/policysocial-context/21192-sen-coburns-wastebook-eyes-nfls-nonprofit-status.html.
[2] Mike Florio, Republican Senator Targets NFL’s Non-Profit Status, ProFootball Talk, NBC Sports (Oct. 18, 2012), http://profootballtalk.nbcsports.com/2012/10/18/republican-senator-targets-nfls-non-profit-status/.
[3] Brian Frederick, Why Does the National Football League Deserve Tax-Exempt Status?, The Huffington Post (March 8, 2012), available at http://www.huffingtonpost.com/brian-frederick/nfl-tax-exempt_b_1321635.html.
[4] Meredith Jessup, Should the NFL be Tax-Exempt?, The Blaze (Oct. 16, 2012), available at, http://www.theblaze.com/blog/2012/10/16/should-the-nfl-be-tax-exempt/.
[5] Dan Daly, Another Way to Look at the NFL’s $9 Billion in Revenue, Daily OT, Wash. Times (Feb. 24, 2011), available at http://www.washingtontimes.com/blog/daly-ot/2011/feb/24/another-way-look-nfls-9-billion-revenue/.
[6] Dave Pear, So Maybe Charity Does Begin at Home?, The Sport Digest (Oct. 23, 2012), http://thesportdigest.com/2012/10/so-maybe-charity-does-begin-at-home/.
[7] Andrew B. Delaney, Taking a Sack: The NFL and Its Undeserved Tax-exempt Status, Soc. Science Research Network (May 11, 2010), available at http://papers.ssrn.com/sol3/papers.cfm?abstract_id=1605281.
[8] Id. at 19.
