Super Bowl

Sports Cronyism: The NFL and Other Pro Leagues are Tax Exempt


Yesterday, Senator Tom Coburn (R-OK) introduced legislation to kill off a particularly ridiculous bit of corporate welfare that allows professional sports leagues to dodge millions in taxes. The National Football League, National Hockey League, Pro Golfers Association, and the Ladies Professional Golf Association all claim tax exemptions by operating as non-profits.

From ThinkProgress:

Since 1966, the tax code has allowed leagues to classify as 501(c)(6) charitable organizations—a classification used by trade and industry organizations—under the assumption that the leagues were promoting the general value of their sports. But Coburn's amendment asserts that the leagues … are businesses interested solely in the promotion of their business; that is, the NFL isn't so much concerned about promoting the general sport of football as it is concerned with promoting NFL football, because it is the NFL brand and the NFL teams and logos and products that make it a profitable business. The NFL, for instance, didn't seem interested in promoting the general spread of football when a competitor league, the United States Football League, was formed in 1983.

In his 2012 "Wastebook," Coburn estimates that the NFL and NHL saved $91 million by avoiding taxes on dues paid by teams to the leagues in 2010.

From Nonprofit Quarterly:

As a tax-exempt entity, [the NFL] doesn't pay taxes on the income that it earns. The NFL has managed to keep its income earnings a little on a low side by paying its top executives corporate-level salaries—eight NFL execs took home compensation of $51.5 million in 2010. The teams get to write off their NFL membership dues, roughly $6 million per team, for the privilege of belonging to this unusual trade association, and that money is put into a stadium fund that provides interest-free loans to teams so long as they get taxpayer financing on stadium construction and improvement costs.

The Properly Reducing Overexemptions for Sports Act (or Pro Sports Act), would put an end to the shenanigans.

Earlier this week, Reason contributor S.M. Oliva called for putting an end to the NFL draft. Steve Chapman, on the other hand, sees the end of the NFL entirely.