MLR

NFL threatened with losing tax-exempt status

Categories:

In response to the domestic violence case of Ray Rice and other NFL football players, a senator has introduced legislation to end the tax-exempt status of the National Football League as well as a number of other sports leagues.

Sen. Cory Booker, D-N.J., introduced the legislation which, if enacted, would end the tax-exempt status of 10 professional sports leagues, including the NFL, National Hockey League, Professional Golf Association and the U.S. Tennis Association.

Individual teams are taxed, but sports leagues typically file for tax-exempt status under Section 501(c)(6) of the IRS code. Some have held tax-exempt status for decades – the NFL’s tax-exempt status dates back to 1966.

Major League Baseball dropped its nonprofit status in 2007, reportedly in part because it didn’t want to make public large executive salaries. The National Basketball League never had tax-exempt status.

NFL Commissioner Roger Goodell earned a reported $44 million in 2012, according to published reports. The NFL brings in $9 billion a year.

Booker said the act could raise up to $100 million over the next 10 years, which could be used to support domestic violence prevention programs.

Booker is not the only government official trying to end the tax breaks for professional sports leagues. Sen. Tom Coburn, R-Okla., has been pushing to end the tax breaks since 2013.

Coburn wants teams with more than $10 million in annual revenue to lose their exempt status. In addition, he wants a number of leagues organized under 501(c)(6) to have their exempt status revoked.

Sen. Maria Cantwell, D-Wash., has joined the battle, saying she wants the exemption gone because of the NFL’s failure to force Washington to change its name from “Redskins.”

Code Sec. 501(c)(6) status means that these sports leagues do not pay any federal income tax. The code section refers to “business leagues, chambers of commerce, real-estate boards, boards of trade, or professional football leagues (whether or not administering a pension fund for football players), not organized for profit and no part of the net earnings of which inures to the benefit of a private shareholder or individual.”

It is tough to get lawmakers in cities that have professional sports teams to back this legislation. Because of the interplay between ticket prices, fan loyalty and voting preference, sports fans might not look too kindly on their lawmakers if they help to increase the cost of event ticket prices.