Section 501(c) of the Internal Revenue Code provided much political fodder this past summer due to the alleged heightened scrutiny applied to Tea Party-backed groups seeking tax-exempt status. However, that same section of the U.S. Code is now in the news for a different reason: the National Football League. The section grants tax-exempt status to charitable organizations, civic leagues, agricultural organizations, and . . . the NFL. Specifically, Section 501(c)(6) includes amongst the various tax-exempt organizations: “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 any private shareholder or individual.”

In a recent spate of interviews promoting his new book, The King of Sports: Football’s Impact on America, Gregg Easterbrook calls for a revision to 501(c)(6) to remove the NFL from the class of tax-exempt organizations. The NFL’s member teams are incredibly profitable, bringing in a total of $9 billion last year, and it may be difficult to understand why the league qualifies as a nonprofit organization. This is especially true given that similar sporting organizations such as the National Basketball Association are not included (note, Major League Baseball gave up its tax-exempt status in 2007). This is largely due to the heroic lobbying efforts of Pete Rozelle, former NFL Commissioner, who convinced Congress to create a tax exemption for the NFL at the same time it received an antitrust exemption.

The issue with the NFL’s tax-exempt status is also complicated by the relationship between its members and the cities they represent. Over and over, cities have helped fund stadium projects that play a vital role in netting the NFL teams millions of dollars over the course of the stadiums’ lives, but cities never see a cent of the direct profits. Thus, an organization that benefits from tax-exempt status is comprised of highly profitable members, that take advantage of public subsidies, to further their own operations, without any obligation to repay their host cities. Still, some commentators seem to believe the whole controversy has been blown out of proportion.

Kimberly Smtih

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One Response to NFL: The No Fed-Tax League

  1. Kate says:

    It’s hard to believe this issue is just gaining momentum. However, I think it’s notable that Congress did not act to remove the MLB’s tax-exempt status, but rather gave it up on its own accord. With the NFL showing no signs of doing the same, I am skeptical that Congress is going to act to justify this blatant tax loophole for some of the nation’s richest citizens. Here’s to hoping. Great article!