Jan 30 2014, 9:38pm CST | by Forbes
The National Football League takes in more than $9.5 billion per year and is exempt from Federal taxes. As a nonprofit, it earns more than the Y, the Red Cross, Goodwill, the Salvation Army or Catholic Charities – yet it stands as one of the greatest profit-generating commercial advertising, entertainment and media enterprises ever created.
For the love of Richard Sherman, how can this be?
An arcane tax code change that eased the 1966 merger of the NFL with the old American Football League landed the new combined entity in section 501(c)6 of the tax code, designated as an industry association. The designation actually covers “chambers of commerce, real estate boards, boards of trade, and professional football leagues.” This does not cover the league’s 32 individual franchises, which also rake in billions.
Now a national survey by Fairleigh Dickinson University is shining a light on this strange situation, and perhaps getting Americans to check off that nonprofit coverage faster than Peyton Manning can shout “Omaha!”
“The public’s love for the game clearly doesn’t trump their fiscal restraint when it comes to big time sporting events,” said Krista Jenkins, director of the polling unit and professor of political science at Fairleigh Dickinson University. “Even teams who don’t make it to the Super Bowl generate millions from licensing and ticket sales. The public says taxpayers shouldn’t be hit up for support when there’s enough in the NFL coffers to pay their own way.”
The survey found that people are both surprised by the NFL’s tax-exempt status – and generally opposed to it. Only 13 percent correctly identified the league as not-for-profit.
“Since the NFL is generally associated with wealthy owners and players, not to mention the tremendous revenue that each team generates year-round, the public would not be expected to know the League is a non-profit organization,” said Jenkins. “With billions likely to flow from the Super Bowl, it would seem a contradiction that the organization behind it all would be technically a not-for-profit, but that is indeed true about the NFL.”
With face values of as much as $2,600 for Sunday’s game in New Jersey, the NFL may be facing a serious challenge to its below-the-radar nonprofit status. A few months ago, Senators Tom Coburn (R-Maine) and Angus King (I-Maine) introduced a bill to strip the NFL of its status.
Coburn told CNN: “This is a directed tax cut that to the league office, which means every other American pays a little bit more every year because we give the NFL league office a tax break and call them a non-profit. In fact, they’re not.”
Its Park Avenue offices feature a reception desk shaped like a silver football. In 2011, commissioner Roger Goodell reaped nearly $30 million in compensation. In his latest contract, Goodell’s base salary will eventually double – most likely because he has vowed that, by 2027, the NFL will yield $25 billion.
The revenue will be achieved largely through lucrative broadcast rights that will be passed along to you, the non-luxury-suite consumer.
And the NFL is not alone. Also in the Senate’s crosshairs – should the Coburn-King bill pass – are the “nonprofit” Professional Golfers Association Tour, the National Hockey League and the Professional Rodeo Cowboys Association. Wrote Coburn in U.S. News and World Report: “Americans are paying artificially high rates in order to subsidize special breaks for sports leagues. That means you may be paying a slightly higher tax rate than is necessary to subsidize Jerry Jones or Tiger Woods.”
When you consider how many pro stadiums – like MetLife Stadium in the swamps of Jersey – are at least partially subsidized by public dollars, a Federal tax exemption for the professional league – really a joint venture of 32 other businesses and their investors – seems obscene. As Nina Ippolito wrote in PolicyMic:
As a 501(c)6, the NFL isn’t supposed to engage in business “ordinarily carried on for profit.” Apparently, licensing exorbitantly priced apparel, granting broadcast rights, and running an entire television network don’t count as profitable endeavors.
So if you don’t agree with a ref’s call on Sunday, if you think it was a gift to one team at the expense of another, just keep in mind there’s another kind of philanthropy at work for the NFL: the taxpayers’ donation to the richest sports league in U.S. history.
Source: Forbes Business
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