The NFL has taken a lot of criticism lately for a number of obvious missteps, but that
extra attention has also lead to people criticizing them for less obvious things.
Like their tax-exempt status.
The NFL makes an estimated $9.5 billion dollars annually, yet their head office doesn’t
pay a single cent in taxes.
How is that fair - or even possible?
Well, prior to 1966, there were two major professional football organizations in the
US: the NFL and the AFL.
They wanted to merge, but due to anti-trust laws that wasn’t possible without getting
congress involved.
So in 1966, congress passed Public Law 89-800, allowing the NFL to merge despite those anti-trust
laws.
They also changed the tax code in order to give the NFL Tax Exempt status.
They’re included in Section 501(c)6 of the Internal Revenue Code, which gives tax exempt
status to trade associations like chambers of commerce, real estate boards, and since
1966, Professional Football Leagues.
We can’t speak as to why each individual congressperson voted for this exact change
in the tax code, but we can mention that the legislation was introduced and pushed through
congress by two Louisiana politicians.
And only 11 days after the merger was approved, Louisiana was awarded its first NFL franchise.
Those are the facts surrounding the merger.
So, should the NFL be tax exempt?
Well, most of the $9 billion dollars in NFL profits gets funneled back to the 32 NFL franchises
through a for-profit company called NFL Ventures.
That company and those 32 teams, do pay taxes.
So technically, most of the 9 Billion dollars is taxed.
It’s the money that goes to the NFL league office that’s not taxed.
And that includes the estimated $44.2 million dollars that the NFL paid NFL Commissioner
Roger Goodell in 2012.
So, some people still argue that their tax-exempt status is unfair, while others argue that
we may not be talking about a lot of added tax revenue and that changing the tax code
might not even be worth it.
The NFL’s 2012 IRS statement shows they actually finished the year millions of dollars
in the red, so that year we’d literally be talking about no money.
Still, some would argue it’s the principle that matters - not the revenue.
The NFL is being treated as a trade association, but not acting like one.
Anyone can join a normal trade association as long as they’re offering a similar product
or work in that industry.
Which is obviously not true of the NFL.
You can’t create your own football team and become an NFL affiliate.
You can’t even apply to be a part of their trade organization at all.
There’s also the moral argument to consider.
Most traditional non-profits generally contribute to the public good.
Many argue that is not the main goal of the NFL and with the recent controversies around
domestic violence, the effects of concussions on its players, and one particular franchise’s
insensitive branding, some could even argue that they may not be contributing to the general
good at all.