April 29, 2015
NFL: tax exempt no more!
Posted by Usha Rodrigues

The NFL is a nonprofit corporation. That should be no surprise when you stop to think about it.  Many--indeed, most--trade associations are nonprofit, because their point is to create benefit for their members, not to create profits at the trade association entity level.  IRC 501(c)(6) exempts from taxation for chambers of commerce (and professional football leagues) for just this reason.

Yet because the general public equates "nonprofit" with "charity" or "do-gooder,"the NFL has taken a lot of flak for its status.  From Vox via Paul Caron:

For years, the NFL's tax-exempt status has been the subject of scrutiny and ridicule. To many people, the fact that a league headed by a commissioner making $44 million a year was categorized as a nonprofit was absurd.

This is not absurd, it's fuzzy thinking.  Each NFL teams individually still pays tax on all its profits, since each is a for-profit entity.  They teams pay taxes on any money the NFL distributes to them.  But as an entity, it's not supposed to make a profit.  Just because you're a nonprofit doesn't mean you can't make a profit.  Harvard's endowment was $36.4 billion on June 30 of last year.  It's doing quite well.

It's unclear exactly how much the NFL will save per year by forgoing its 501(c)(6) status--this WSJ article has estimates costing from $10.9 million to $91 million annually--this for a $10 billion-a-year organization.  Commissioner Goodell's letter to the owners characterized the NFL's tax-exempt status as a "distraction,"--but even at the low-end estimate of costing $11 million per year, wouldn't you put up with the distraction?  Reading between the lines, the reason is clearly that Goodell doesn't like the public disclosure attendant with 501(c)(6) status.  Particularly the disclosure of his salary, which totaled $35 million in 2014. 

Costing your organization $10 million a year because you don't like having your salary being public?  Now that strikes me as absurd.

 

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