The American Red Cross, Salvation Army and the National Football League are examples of not-for-profit organizations. Yes, the NFL is seen as tax exempt in accordance to Section 501 (c)(6) of the Internal Revenue Code.The tax code, which was amended during the AFL-NFL merger in 1966, states that professional sports leagues are not organized for profit despite paying pensions for individuals.According the 2011 IRS filings, the NFL is seen as a trade association who promotes the interests of its clubs.
The league is not known for lobbying the government or creating industry standards like trade associations are supposed to do..Instead, the NFL is creates a mass amount of revenue for themselves by licensing logos, merchandising and negotiating television deals with the major companies to broadcast games, including the Super Bowl.Overall, the fact that the National Football League creates revenue goes against the purpose of what a non-profit organization is meant to do.
A non-profit organization is supposed to focus solely on a charitable mission for society and not to pocket the additional revenue that they receive.
Unfortunately, the NFL is not the only professional sports league that is not-for-profit. The National Hockey League and the PGA Tour and are also non-profits and Major League Baseball just lost its nonprofit status in 2007. The NBA is the only league that has never had a non-profit label.
Luckily, people started to take notice, including U.S senator Tom Coburn. Coburn, a Republican from Oklahoma, proposed a bill in 2012 which would abolish the NFL’s nonprofit status.
In Coburn’s annual report in 2012, Coburn stated, “These organizations are taking advantage of the provision of the tax code that allows industry and trade groups, such as the U.S Chamber of Commerce and the Natural Resources Defense Council to qualify as non-profit and tax exempt. None of these groups can report a specific brand within an industry, but each may promote an industry as a whole.”
In addition to taking advantage of the tax code, Coburn pointed out that the NFL can use the loophole in the tax code to avoid some city and state taxes. The Indianapolis Business Journal reported that hotels and restaurants did not tax NFL employees. In those same reports, the NFL used its tax-exempt status to avoid paying taxes, in addition to fuel, auto rental and admissions taxes.
Coburn’s reports stated that if his proposal is passed to get rid of professional sports leagues non-profit status then the NFL and NHL alone may generate $91 million annually for the federal government. Yet, the Congress’ Joint Committee on Taxation estimated $109 million of revenue that the NFL will produce over the next ten years.
Therefore, professional sports leagues should not be labeled as non-profit organizations due to the fact that leagues do not have a united social mission besides obtaining revenue for themselves. Also, the additional revenue that the NFL would gain would be taxed which would give more money to the federal government.
The government can put that money back into the economy which would be more of a benefit to the American people rather than having it be pocketed by corporate executives.
Also, if the NFL loses its nonprofit status, the average American will have to pay a little less in taxes per because the NFL would no longer be receiving a tax break for being recognized as a non-profit.
Morally and logistically, pro sports leagues are just like any corporation without an objective for social change, they are for-profit.
Coburn is still looking to push this bill through Congress. To nobody’s surprise, the NFL has already stepped up its lobbying efforts.
OpenSecrets.org reported that the league spent $1.9 million to lobbying against Coburn’s bill. This is just the beginning of a long battle that will not will not go away anytime soon.
Phil Novotny can be reached philip.novotny@theminaretonline.com