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Your Prompt for the Day: Should the NFL Lose Its Non-Profit Status?
Philip Klein, writing in the Washington Examiner:
Sen. Cory Booker, D-N.J., has proposed a bill to strip the NFL of its current nonprofit status over the league’s handling of domestic violence. Meanwhile, Sen. Maria Cantwell, D-Wash., has also threatened to do so, only in her case, it’s because the league hasn’t forced the Redskins to change their name.
Further:
In reality, however, lawmakers shouldn’t need an excuse to end the NFL’s tax-exempt nonprofit status. It should end because it’s bad policy that exemplifies the problems with the nation’s disastrous tax code.
…
Though the league distributes lucrative television and licensing revenue among the 32 teams, which do pay taxes on their earnings, the teams also send dues to the NFL league office. The office does not pay taxes on those dues, and the fees could be deducted from the teams’ taxes.
The NFL reported total revenue of $326 million for the 2012 tax year, according to its most recent publicly available filing with the Internal Revenue Service. During that year alone, the NFL paid $44.2 million in compensation to commissioner Roger Goodell.
…
The idea of allowing professional sports leagues with huge revenue streams to file as nonprofit entities makes a mockery of the tax code.
But beyond that, maintaining the status quo gives opportunistic politicians a hammer that they can use to interfere with issues that should be beyond their purview.
Don’t let Booker and Cantwell’s names prejudice you. As Klein notes, conservative par excellence Tom Coburn has fought to keep professional sports leagues from claiming non-profit status if they have annual revenue over $10 million.
So what do you think? Is it time to get rid of the NFL’s non-profit status?
Published in General
Well, no. Any such move at this time would clearly be a punishment aimed at Goodell for having failed, until recently, to turn his office into a quasi-judicial body intended primarily to regulate off-the-field conduct traditionally viewed as the exclusive province of the criminal justice system. Repealing tax laws that would otherwise remain in place because a particular beneficiary of a broadly applicable law has not obeyed PC-culture is EVEN WORSE tax policy than keeping an otherwise goofy or outdated tax status. Imagine how private sector actors could be manipulated by the mere threat of revoking their tax status if they do something perfectly legal that will outrage feminists.
It’s a good question, Troy, and really they probably shouldn’t be tax exempt. But I would like, for once this season, to turn on football and just enjoy a football game without all the breathless commentary about violence, tax status, team names, concussions, etc. Football is an escape, if only for a few hours. I guess I just wish politics didn’t have to intrude on everything, souring the mood.
Unsportsmanlike conduct on politics for trespassing into our beloved sports.
Politics has been ejected from the game.
Let’s ask this another way. What private sector business does need to be tax exempt? Isn’t this what is called corporate welfare?
gts109 has a good point. It would seem to be a punishment if the NFL lost its tax exemption right now. But if all businesses were required to pay taxes, it would no longer be a targeting of the NFL.
My first reaction on hearing about this legislation was: “Wait, the NFL is tax exempt?”
So I agree that they shouldn’t be exempt. But that coincides with my beliefs that our tax code is ridiculously complex built on rewards, coercion, and favoritism.
Only if this is applied to all other sports leagues including the NCAA.
Here’s an idea: maybe legislation should be based on carefully-thought-out general principles, rather than on Bills of Attainder directed against whatever organization may currently be (however justifiably) highly unpopular.
The important general question is: What types of organizations should quality for “nonprofit” status? It is an important question because this sector is growing in size and influence…and because in all too many cases, “nonprofit” means only that there are no pesky shareholders with whom the loot must be shared. The main objective of many of these organizations, whatever their ostensible goals, is the pecuniary enrichment and improved career positioning of their key personnel.
Yes. I think a lot of these non-profits are just rackets. This one especially is…
Ideally we’d fix it by making all corporations non-profits. Tax at the individual level.
David Foster, bill of attainder is a great way to put it. If I could separate this issue from the Rice thing, which I can’t, I’d be fine with yanking that status.
P.S. Is it just the NFL that is considered a non-profit? Or are all the teams non-profits too?
So, wait, having employees who commit crimes means your organization must be for-profit?
I do not see the connection.
Having employees who commit crimes might make your organization awful, but it could still be non-profit.
Agree with the points above about this being a good idea generally and a bad idea at this particular moment.
But one other factor: no matter what the timing, non-profit status should not be revoked only for the NFL, or even for all professional sports at once. We should instead push for a sweeping reform of non-profit definitions, ideally as part of comprehensive tax code reform.
The entire problem with our current system of taxation is that it evolved on a piecemeal basis and at an atomic level. Fixing it by adjusting non-profit status one company (or industry) at a time commits that same error in process.
They also had about $318 million in expense, so it is not like this will be a big revenue grab for the IRS. Corporate tax avoidance could give NFL exec’s an incentive to dole out more bonuses to themselves (that’ll show ’em).
Taking away non-profit status is fine, but don’t tie it to a bill with whiny PC language.
What is the source of the NFL’s revenue? I don’t think the member dues should be taxed. To my mind, that would be taxing that money twice, once when earned by members and again when paid to the member organization. However, I think that TV revenues not shared with and taxed at the member level should be subject to taxation.
It really does not matter whether the organization is defined as a “nonprofit.” What matters is what if any revenue is taxed. Nonprofits, including 501(c)(3)’s are all taxed on “unrelated business income.”
I’m with gts 109.
Businesses provide jobs and already pay millions in payroll and corporate taxes. Let us not continue to handicap the geese laying the golden eggs.
Need more revenue? How about taxing the 47% ?
If the problem is double taxation, would it not make more sense to allow teams to deduct “membership dues” as business expenses, and then tax that money when it arrives at the NFL?
I don’t see anyone here calling for raising taxes on business (in general) as much as leveling the playing field among all payers. All of us would also love to see corporate taxes on ALL businesses be sharply cut, but at the moment that is a different issue
For years we have had a one-way ratchet in which cherry-picked companies and industries see individual tax relief against a backdrop of horribly high base rates. That situation probably won’t be remedied without some business’ taxes going up somewhere.
I’ll take “cherry-picked” as an example of how to proceed with all businesses.
The fact that the NFL is non-profit just shows how corrupt our system has become. No doubt some senators and reps on the take pushed this through the IRS back in the day. Then again, maybe the NFL just bribed IRS officials directly.
Our system can usually be manipulated by the powerful to their benefit. Crony capitalism strikes again!
Congress passed a bill in 1966 labeling the sports leagues as “trade organizations.” Major League Baseball has given up their’s as a way to avoid publishing the salaries of the league staff.
As several other commenters have said, I would push to remove the tax-exempt status of all major sports leagues.
Which begs the question of why trade organizations should be tax exempt in the first place.
For the same reason that the Mother’s Club at my kids’ school should be tax exempt: “revenues” are merely incidental to the pooling of interests mostly via dues, or fundraisers in the case of charitable organizations. As David Caroll said above, if there is non-incidental revenue from a regular and unrelated business activity then it will be taxed.
This.
In other news “Illegal contact on San Francisco, 5 yard penalty, automatic FIRST DOWN!!!”
I’m starting to think we are witnessing the beginning of the end for the NFL. I can get my kid to stand around in a striped shirt and throw yellow flags all over the lawn.
Only if baseball give up its antitrust exemption.
Yes and for this reason:
“The idea of allowing professional sports leagues with huge revenue streams to file as nonprofit entities makes a mockery of the tax code.”
Not with any rancor, just as an obviously needed reclassification. Baseball too.
Well the article said:
So it sounds to me like the bulk of the revenue goes to the teams and does gets taxed. We’re just talking about the league office itself.
I assume that the teams already deduct these “membership dues” as a business expense. Even so, the dues show up as revenue to the NFL. But the NFL has its own business expenses. Those dues are used to pay the salaries of league muckety-mucks, and no one is suggesting that Goodell is not paying income tax on his compensation.
If I may piggyback on your concluding line, I’ll add that revoking the 501(c)(6) seems fine, but also don’t champion it as some huge tax revenue bonanza. The Examiner claims that the income-tax take over 10 years will be $100 million. How so? For the year you mention, that would be taxable income of $8 million. Applying the highest rate of 35%, you get income tax for that year of $2.8 million. I’ve read that in some years the NFL runs a deficit. Where in the heck does the Examiner’s $100 million figure come from?
“The idea of allowing professional sports leagues with huge revenue streams to file as nonprofit entities makes a mockery of the tax code.”
This statement in Klein’s piece makes no sense given what he’s written earlier in the column. Clearly, the member teams are reporting their shares of the NFL’s huge revenue streams on their returns. Of course, on a tax return, that huge revenue figure will be reduced by various legitimate expenses, including salaries of players, coaches, and others–all of whom, I’m sure, are paying income tax on those salaries.
I think Klein engages in exaggeration of the NFL’s nefarious tax avoidance when he conflates the amount that the NFL might end up paying–an amount he never provides–with the amount several leagues might end up paying, and over a 10-year period.
I agree that the exemption should go. But Congress has far bigger Internal Revenue Code fish to fry.
Sorry, Stanko. I missed that. I no read too good sometimes.