It can be argued that professional sports organizations provide economic benefits to their local community by helping fuel the hospitality industry (hotels, restaurants, etc) and paying state income taxes. Although there may be some truth to these claims, there is a dark side to professional sports that many fans are unaware of. Some of the largest professional sports organizations enjoy not-for-profit status for IRS purposes and therefore do not pay federal income taxes. This includes the National Football League (NFL), the Professional Golfers Association (PGA), National Hot Rod Association (NHRA), and Professional Rodeo Cowboys Association.
Let’s focus on the NFL.
In 1942, the National Football League (NFL) became a not-for-profit organization. In 1966, the NFL managed to wheedle a few very important keywords into a piece of legislation that solidified its tax-exempt status as a not-for-profit. During these early years, the NFL claimed it needed these tax breaks since it was struggling financially and many of its franchises were folding. Pro football was not yet the crazy profit-generating entity that it quickly morphed into by the mid to late 1970’s.
Fast forward to the 21st century.
According to Gregg Easterbrook in an article for The Atlantic, “Taxpayers fund the stadiums, antitrust law doesn’t apply to broadcast deals, the [NFL] league enjoys nonprofit status, and Commissioner Roger Goodell makes $30 million a year.”
According to the IRS, 501(c)6 organizations are supposed to be business leagues that promote a common business interest but do not to engage in “a regular business of a kind ordinarily carried on for profit.” I argue that the NFL is an organization whose *sole* purpose is to provide entertainment and generate profit for its 32 franchise owners. A former IRS attorney stated, The NFL’s main goal is not to “operate for the public purpose of aiding commerce for all within a broad segment of some type of business or business in general. … [Instead] these sports organizations, in my opinion, are anything but public-minded in their profit interest. They are focused on the profits of their franchises.”
Nonprofit Quarterly had an excellent article explaining why Senator Tom Coburn, R-Okal., proposed the PRO Sports Act S. 1524 and the Daily KoS blog offers a scathing (and wonderfully bias) commentary regarding why the NFL should be stripped of its not-for-profit status.
As a spokesman for Senator Coburn’s office stated, “It’s one of the striking examples in the tax code where middle- and lower-income Americans are essentially subsidizing salaries for multimillionaires.” Furthermore, the Joint Committee on Taxation in Congress estimates that “removing such exemptions… could mean $109 million in new tax revenue over the next 10 years.”
For an in-depth look at this issue, read the full Atlantic article by Gregg Easterbrook here.
To sign a petition to request the IRS revoke the not-for-profit, tax exempt status of the NFL, click here.