Renewed Spotlight on Why the NFL Is a Nonprofit Group
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Justin Sullivan/Getty Images(NEW YORK) — Attention over the National Football League’s domestic abuse policy and the league’s leadership has drawn renewed scrutiny of a fact that may surprise many people: the NFL is a nonprofit group.
The National Basketball Association has always been a for-profit business, and Major League Baseball gave up its nonprofit status back in 2007. So the NFL should no longer be nonprofit, some sports fans fume. This week, Sen. Cory Booker, D-N.J., called for increasing funding for domestic violence prevention by $100 million over 10 years by taxing the dues professional sports leagues pay to support leagues’ front offices.
The NFL league office has been a tax-exempt 501(c)6 trade association since the 1940s. The Professional Golfers Association and National Hockey League are also nonprofit trade organizations, though neither comes close to the wealth of the NFL.
That doesn’t mean the individual NFL teams aren’t making money or paying taxes for their $10 billion in annual revenue. The NFL’s 32 clubs pay taxes on all revenues on tickets, television rights and jersey sales.
Though the potential taxes owed if these sports leagues were classified as a for-profit entity are estimated at a modest $10 million, the fact that the NFL league office is tax exempt at all is rubbing some people the wrong way anew because of the recent scandals, including the controversial player concussion issue.
The NFL contends that the league office is an administrative office that writes the rules of the game, hires referees, negotiates collective bargaining agreements and more.
A spokesman for the NFL offered to ABC News as comment an op-ed by Jeremy Spector, the NFL’s outside tax counsel and partner with Covington and Burling LLP.
“The league office acts as a trade association for the NFL clubs,” Spector wrote in November. “It establishes rules and standard practices for its members, develops programs to help them run their operations more efficiently and profitably, and promotes the business in the broader community. Trade associations are nonprofit organizations. They don’t engage in any business activity. As a result, they are exempt from being taxed under section 501(c)(6) of the federal tax code.”
Spector wrote an op-ed for the Nov. 29, 2013, issue of U.S. News and World Report in response to questions about the league’s nonprofit status. That’s when Sen. Tom Coburn, R-Okla., introduced the “PRO Sports Act” to repeal tax-exempt status for certain professional sports leagues after 2013. While Coburn has said he still wants to move this bill forward, the bill has not moved out of committee.
The league’s Form 990 filed with the IRS for 2012, the most recent document available, shows the NFL lost more than $304 million in 2012. But that doesn’t mean the NFL is underwater and it’s not making a ton of money in royalties and licensing. The NFL commissioner since 2006, Roger Goodell, earned $44.1 million in 2012, according to the Form 990. The highest paid player in 2012, according to Forbes, Drew Brees, earned $44.4 million on the field that year and $5 million off the field in endorsements and other deals.
Goodell made a total of $85 million from 2010-2012, the last three years for which information is available. Though the other major sports leagues don’t publish executive pay, Goodell is widely thought to be the highest-paid sports commissioner, according to industry experts.
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