Senator Tom Coburn of Oklahoma introduced the PRO Sports Act in 2013, which would prevent sports leagues with a revenue of more than $10 million from being listed as nonprofits. In the past few years as public criticism of the league has heightened, a few congressmen from states without NFL teams have tried to get the NFL to justify their tax-exempt status. Why would the NFL voluntarily agree to pay taxes? Golf's PGA Tour and tennis' ATP World Tour are tax-exempt, while the NBA has never sought tax-exempt status. Major League Baseball voluntarily gave up its tax-exempt status, like the NFL is doing now, in 2007. However, other sports leagues have been exempted under the "trade association" clause. Yes, there are four specific types of businesses exempted, and "professional football leagues" is one of them. In 1966, as the NFL and AFL merged and added a pension fund for its players, the IRS added a specific provision to section 501(c)(6) of the tax code to make "professional football leagues" tax-exempt: As the league began to look less and less like a trade association, it wanted to make sure it wouldn't lose its tax-exempt status. However, a whole lot has changed since 1942. Have you ever seen an ad on TV for a generic product, like the "Got Milk" commercials, or those ads for avocados? Those are the work of trade associations. The NFL has been tax-exempt since 1942, when the league was classified as a trade association by the IRS.Ī trade association is an organization that provides standard business practices and leadership for a certain field. The league said that after $317 million in expenses, its total income for the year was just $9 million. The NFL's league office reported a revenue of $326 million in 2012. The NFL as a whole made a reported $10 billion in revenue in 2013. In comparison to the vast sums of money the NFL's teams reel in, the NFL's league office makes a pretty small slice of the pie, mainly through the membership teams each NFL team pays. However, the league's main office - the administrative arm of the league, the people in charge of setting the NFL's rules, organizing its events and such - is considered tax-exempt. They have been paying their share of the huge amounts of money they make. Any revenue an individual team makes - ticket sales, jersey sales, their split of the league's massive TV deals - is the revenue of that team. Most of the money the NFL as a whole makes is taxed and always has been. Wait, the NFL makes all that money and hasn't been getting taxed? Why was the NFL tax-exempt - and why on earth would they relinquish that cushy status? We'll try to explain. Meanwhile, the NFL is a billion-dollar behemoth that has almost perfected the art of money-making and pays its commissioner almost $50 million. Normally, we associate the concept of a "nonprofit" with charities, religions, and schools - organizations that are supposed to value making the world a better place rather than earning cash. It's a bit confusing why the NFL is tax-exempt in the first place. After over 70 years, the NFL has reportedly given up its nonprofit status and will begin paying taxes, starting with the 2015 fiscal year.Ĭommissioner Roger Goodell explained the decision to the NFL's owners in a memo tweeted by Bloomberg's Scott Soshnick, calling the league's tax-exempt status a "distraction."
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