The National Football League is eliminating its non-profit tax-exempt status.
If you’re wondering how the NFL can be tax-exempt if it rakes in massive profits each year, NFL Commissioner Roger Goodell brought that up in his letter announcing the decision on Tuesday.
“As you know, the effects of the tax exempt status of the league office have been mischaracterized repeatedly in recent years. The fact is that the business of the NFL has never been tax exempt. Every dollar of income generated through television rights fees, licensing agreements, sponsorships, ticket sales, and other means is earned by the 32 clubs and is taxable there.”
The league’s non-profit status, 501(c)6 to be exact, applied to the League office. The expected revenue the government will receive is slightly more than $100 million over 10 years.
“[That] isn’t a lot of money to the NFL, but it’s a lot of money to us,” says Kavitha Davidson, sports columnist for Bloomberg View.
The news sounds like it should be a PR win for the NFL, which has been criticized for many missteps during Goodell’s time as commissioner. But, instead of celebrating, the news was released on a day overshadowed by other concerns.
So why the news dump now? Davidson says the numbers don’t tell the whole story of what the NFL gained from being a non-profit. Team dues are paid to the League office, which can be deducted as a business expense.
“That basically means that the NFL can take that money, and if doesn’t spend it in a certain amount of time, can loan it back as part of its stadium financing program, for example,” Davidson says.
It’s not clear whether the League’s tax exemption benefits the teams themselves.
Moreover, non-profits like the NFL are required to report executive salaries. For instance, we know that NFL commissioner Goodell made $44 million in 2013. Giving up tax-exempt status means fewer reporting requirements.
Davidson pointed to the case of Major League Baseball, which immediately gave up its tax-exempt status when salary disclosures requirements started in 2007. Those details are of particular interest as executive salaries rise rapidly and outpace players’ salaries.
One other consequence that strikes Davidson: clear information about what female executives earn.
“As the rest of the country fights for equal pay,” she says, “the NFL has actually started to actually promote women to higher level executive positions. We won’t have disclosures now to show they’re being paid in a comparable way to their male counterparts.”
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