NFL Tax Exemption Status Raised Eyebrows of Two Senators


The NFL as a non-profit institution raised the eyebrows of at least two Senators, who cosponsored the bill to strip of the NFL’s $9 billion tax exemption status. The proposed bill has made buzz around the media and blogosphere in the Super Bowl week.

The bill named Properly Reducing Overxemptions For Sports Act or PRO Sports Act was introduced a few months ago to the Senate by Republic Senator Tom Coburn and Independent Senator Angus King. It is not difficult to see why these two and many others want the NFL’s legal status as a non-profit institution to end, and their effort is drawing out renewed attention.

In the findings sections of the bill, it is noted that the NFL, along with the NHL and the PGA Tour, are considered exempt legal entities under Internal Revenue Code Section 501(c)(3), which also lists other eligible entities such as church or private foundations. The proposed bill is to introduce to the IRS Code a special exception that excludes a professional sport organization from being tax-exempt if it makes more than $10 million. The NFL should easily exceeds $10 million threshold, according to the most recent numbers, but it is not so easy to see as it should be to most people.

GuideStar, another non-profit organization, gathers the financial records of non-profit entities except church and releases them to the public. The NFL as not being church needs to file Form 990 that reveals its financial records. According the 990 Forms filed the NFL, the entity running the most favorite sports for American has accumulated $316 million more liabilities than assets, which is impossible for a normal entity.

Peter J. Reilly, a Certified Public Accountant, has provided an excellent analysis on the NFL’s tax status in Forbes. In short, he found that such enormous liabilities have been made possible through the creative finance in debt programs on building stadiums. The questions, however, still remains how then the NFL losing money every year, according to the IRS documents, paid $29 million to its commissioner Roger Goodell. The answer is partially linked to the NFL’s affiliation with other entities, which at the end raised the eyebrows of two Senators who want to terminate the NFL’s tax exemption status.

The NFL earns its money through NFL Ventures, an entity that manages sales of television broadcasting rights and league merchandise. The IRS receives tax from that entity. Joseph Nicola, a tax expert, told Pittsburgh Post-Gazette that teams and players are already paying heavy taxes to the IRS. The legal entities under Section 501(c)(3) would get taxed only on their expenses on lobbying. If the NFL is levied tax as the proposed bill intends, other entities such as the U.S. Chamber of Commerce and other professional associations should be taxed.

The critics of the NFL, however, point out that the NFL is not like many other professional associations, because it is purely created to make money. Patrick Hruby writes in Politico that building 78 stadiums for the NFL cost the public $16 billion. He cited Paul Brown Stadium in Ohio, the home stadium for the Cincinnati Bengals. Taxpayers in the area reportedly had to pay $454 million, which could increase to $550 million if other surrounding facilities are included. Meanwhile, the local government had to cut funding for schools, police and a program for troubled teenagers. Hruby states that in return for allowing the NFL and teams to use taxpayers’ money, fans received broadcast blackouts.

The controversy surrounding the NFL is not new. NFL currently faces a serious issue with concussion and lawsuits by former players and families. In fact, the proposed bill has not received much attention after it was introduced in early 2013. Media has picked up the story of the proposed bill after a concern is raised on the accessibility of the Super Bowl to most fans. Raising the eyebrows of two Senators was not a serious concern for the NFL through 2013, but now the bill they proposed on the NFL’s tax exemption status is gaining some traction during the week when the NFL wants the least of negative publicity.

By Jonathan JY Jung


Pittsburgh Post-Gazette

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