National Football League is Giving up Tax-Exempt Status

[alnorth]

<blockquote class="twitter-tweet" lang="en"><p>BREAKING: National Football League giving up tax-exempt status; Goodell says it was a &#39;distraction&#39;.</p>&mdash; The Associated Press (@AP) <a href="https://twitter.com/AP/status/593099030604972033">April 28, 2015</a></blockquote>
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WASHINGTON (AP) — The National Football League is giving up its tax-exempt status.

In a letter to team owners, Commissioner Roger Goodell says the league office and its management council will file tax returns as taxable entities for the 2015 fiscal year. Goodell says the NFL has been tax-exempt since 1942, though all 32 teams pay taxes on their income.

Goodell says the change will not alter the function or operation of the league, since all the teams already pay taxes.

Some members of Congress have criticized the NFL, which generates billions in revenue, for being tax-exempt. Goodell says the status has become a "distraction."

Goodell forwarded the letter to the owners to Congressman Paul Ryan, a Wisconsin Republican who chairs the House Ways and Means Committee.

[O.city]

Ok, what does that mean?

[teedubya]

It should have never been tax exempt. That's fucking stupid.

[Mr. Laz]

It's not really about being tax exempt


It's about not taxing the money twice

Teams are the ones that get the money, the league just oversees and organizes the money.


the NFL's position anyway.

[ptlyon]

Ok, what does that mean?

It means you'll have to sell your youngest girls to the China slave trade to afford to go watch a game

[Hootie]

so what does this mean?

There has to be a reason for it ...

I don't know a thing about it ... but there is no way the NFL is going to start willingly pay that much money in taxes (when they never have) unless it benefits them greatly or prevents something HUGE from spilling to the public.

[Skyy God]

so what does this mean?

There has to be a reason for it ...

I don't know a thing about it ... but there is no way the NFL is going to start willingly pay that much money in taxes (when they never have) unless it benefits them greatly or prevents something HUGE from spilling to the public.

Teams are already taxed, the league (until now) was not.

[O.city]

so what does this mean?

There has to be a reason for it ...

I don't know a thing about it ... but there is no way the NFL is going to start willingly pay that much money in taxes (when they never have) unless it benefits them greatly or prevents something HUGE from spilling to the public.

Dez video man, dez video

[alnorth]

Just put the AP article in the OP.

Apparently right now, the vast majority of revenue is made by the teams and is taxed. If the NFL itself makes anything, its not much, and I guess they decided it wasn't worth the hassle of grandstanding politicians yelling about how the NFL is tax-exempt.

[Amnorix]

so what does this mean?

There has to be a reason for it ...

I don't know a thing about it ... but there is no way the NFL is going to start willingly pay that much money in taxes (when they never have) unless it benefits them greatly or prevents something HUGE from spilling to the public.

Don't confuse the NFL with the NFL TEAMS. They are two different things. AFAIK, the teams are not claiming non-profit status. Most likely, and with some exceptions (Packers) they are closely held companies with pass-through tax treatment for the owners.

The NFL is the organization that runs the business of the NFL for the owners. That entity does not get billions of dollars a year (or at least, it doesn't keep it -- as the money goes out to the teams). It may technically qualify for non-profit status as IT (as compared to the teams) is not an entity designed to make a profit -- instead any amounts in excess of its operational funding needs would be sent to the teams.

[Brock]

Maybe there was some momentum gathering to take it away from them anyway.

[Rain Man]

Ok, what does that mean?

I suspect it means that Roger Goodell is about to get a huge annual bonus that exactly matches the entity's profits each year.

[alnorth]

I suspect it means that Roger Goodell is about to get a huge annual bonus that exactly matches the entity's profits each year.

Somehow, your posts seem more authoritative, and I find myself unwilling to question anything you say...

... then I realized its the new avatar. The ermine is a fearsome little beast.

[BossChief]

Watch them get audited in the next 5 years.

[Rain Man]

Somehow, your posts seem more authoritative, and I find myself unwilling to question anything you say...

... then I realized its the new avatar. The ermine is a fearsome little beast.

Your cat that's planning to pounce on my ermine is in for a bad surprise.

[Hootie]

Don't confuse the NFL with the NFL TEAMS. They are two different things. AFAIK, the teams are not claiming non-profit status. Most likely, and with some exceptions (Packers) they are closely held companies with pass-through tax treatment for the owners.

The NFL is the organization that runs the business of the NFL for the owners. That entity does not get billions of dollars a year (or at least, it doesn't keep it -- as the money goes out to the teams). It may technically qualify for non-profit status as IT (as compared to the teams) is not an entity designed to make a profit -- instead any amounts in excess of its operational funding needs would be sent to the teams.

Ah. Makes sense.

[DaFace]

Ok, what does that mean?

They've been taking some political heat for it, mainly because of the fact that people don't understand that the teams aren't tax-exempt, only the league office. Realistically, I'd imagine this means very little since the league retained very little profit for itself.

[Amnorix]

And as some reporters are now tweeting -- the change means NFL executive salaries, including Goodell's, will no longer be public information.

Starting next year, we will have no idea how much the NFL commish makes.

[Rain Man]

And as some reporters are now tweeting -- the change means NFL executive salaries, including Goodell's, will no longer be public information.

Starting next year, we will have no idea how much the NFL commish makes.


Ding ding ding ding ding ding!

We have a winner! Johnny, tell amnorix what he won!

[Skyy God]

Your cat that's planning to pounce on my ermine is in for a bad surprise.

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[KCFalcon59]

It'll probably mean they will pay even less taxes.

[alnorth]

I just looked it up, MLB gave up its tax-exempt status in 2007, and the NBA was never tax-exempt. NHL is the only major US sports organization left with tax-exempt status.

[cosmo20002]

I think this opens up Clark moving the entire 2016 season to London in exchange for the 2023 Pro Bowl.

[BossChief]

And as some reporters are now tweeting -- the change means NFL executive salaries, including Goodell's, will no longer be public information.

Starting next year, we will have no idea how much the NFL commish makes.

Wow.

He was already making 50m per...right?

I bet that's the distraction they are talking about.

[Rain Man]

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I think the weasel may actually be trying to kill the cat, but I'm not sure.

Regardless - wow. Weasels are really, really fast. I'm developing a huge appreciation for weasels throughout this naming process.

[ForeverChiefs58]

After over 70 years, the NFL has reportedly given up its nonprofit status and will begin paying taxes, starting with the 2015 fiscal year.

Commissioner 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."


It's a bit confusing why the NFL is tax-exempt in the first place. 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. Meanwhile, the NFL is a billion-dollar behemoth that has almost perfected the art of money-making and pays its commissioner almost $50 million.

Why was the NFL tax-exempt -- and why on earth would they relinquish that cushy status? We'll try to explain.

Wait, the NFL makes all that money and hasn't been getting taxed?

Not quite. Most of the money the NFL as a whole makes is taxed and always has been. 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. The NFL's teams are not tax-exempt. They have been paying their share of the huge amounts of money they make.

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. 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.

The NFL as a whole made a reported $10 billion in revenue in 2013. The NFL's league office reported a revenue of $326 million in 2012.

That's what's been exempt. The league said that after $317 million in expenses, its total income for the year was just $9 million.
Why isn't the NFL's league office taxed?

The NFL has been tax-exempt since 1942, when the league was classified as a trade association by the IRS.

A trade association is an organization that provides standard business practices and leadership for a certain field. 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.

However, a whole lot has changed since 1942. 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. 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:


Yes, there are four specific types of businesses exempted, and "professional football leagues" is one of them.

However, other sports leagues have been exempted under the "trade association" clause. The NHL remains tax-exempt. Major League Baseball voluntarily gave up its tax-exempt status, like the NFL is doing now, in 2007. Golf's PGA Tour and tennis' ATP World Tour are tax-exempt, while the NBA has never sought tax-exempt status.

Why would the NFL voluntarily agree to pay taxes?

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. 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. After his retirement in 2014, Republican Utah congressman Jason Chaffetz took charge. He most recently introduced the proposed legislation in January.

The attention the league's tax-exempt status has received, has led to exclusively negative PR. The PR could get even worse if the league had to testify in front of grandstanding congressmen as to why it shouldn't pay taxes. The league has apparently decided fighting this fight wasn't worth the trouble. From Goodell's memo:

As you know, the effects of the tax exempt status of the league office have been mischaracterized repeatedly in recent years. ... The change in filing status will make no material difference to our business. As a result, the (NFL's) Committees decided to eliminate this distraction.

How will this change things?

Quite frankly, not very much. A 2013 report by Congress' Joint Committee on Taxation estimated the league would pay $109 million in taxes over 10 years. This is essentially nothing to the NFL.

The one major difference is that we will probably never again know Roger Goodell's salary. We know Roger Goodell made $44 million in the fiscal year ending in March 2013 because nonprofits have to report their executive pay to the IRS in a publicly available filing. This led to ridicule, because, jeez, Roger Goodell makes $44 million to run a nonprofit?

MLB reportedly gave up its tax-exempt status so it wouldn't have to reveal its executive's salaries. Considering Goodell's exorbitant salary, this likely factored into the NFL's decision as well. We will eventually learn Goodell's 2014 salary, but its unlikely we'll ever hear anything after that.

[Bowser]

There's no way that the NFL does this unless the benefits outweigh the actions.

[ThaVirus]

I think the weasel may actually be trying to kill the cat, but I'm not sure.



Regardless - wow. Weasels are really, really fast. I'm developing a huge appreciation for weasels throughout this naming process.


Seriously. That thing is like lightning.

Rikki tikki tavi!

[DaFace]

There's no way that the NFL does this unless the benefits outweigh the actions.

Sounds like it's basically an investment of roughly $350k/year/team to 1) shut a bunch of congressmen up, 2) eliminate a negative PR story that keeps coming around, and 3) eliminate the level of scrutiny the league has to deal with with regard to exec salaries. It's a pretty easy decision when you look at it that way.

[Mr. Flopnuts]

Wow.

He was already making 50m per...right?

I bet that's the distraction they are talking about.

He just signed a 7 year deal for 300 million in 2012. They already renegotiating? There's something behind this.