The NFL makes $9 billion in revenues annually, but pays no federal taxes on any of the revenue.
So, why doesn’t the National Football League pay federal taxes?
Oh, you didn’t know the NFL, which generates $9 billion in annual revenue, does not pay federal taxes?
It’s true. The NFL, one of the most successful businesses in the United States, and by far the most successful sports business in the U.S., is a not-for-profit organization.
In 1942, the National Football League was first given not-for-profit status, then, in 1966, when the National Football League was trying to merge with the American Football League, Congress specifically gave professional football leagues not-for-profit 501 (c) 6 status, which is the same not-for-profit status as chambers of commerce and boards of trade. Such status goes to organizations that have as its sole purpose the promotion of one industry, or businesses with a common business interest. 501(c) organizations cannot engage in a “regular business of a kind ordinarily carried on for profit.”
The NFL receives $250 million total in membership fees from its 32 member teams, but it distributed $4.3 billion to its clubs (so stated in its most recent tax forms). The league points out that the teams are taxed on the revenue they receive from the league. On its tax form, the NFL calls itself a “trade association promoting interests of its 32 member clubs.” The NFL currently holds $621 million in loan obligations given to its member teams for the building of new stadiums, but those loans are made at below-market rates.
But Roger Goodell, the commissioner of the NFL and de facto CEO, was paid $29.4 million in 2012. In 2010, the league’s executive vice-president of media, Steve Bornstein, made $12.2 million. The NFL has over $1 billion in assets, and spent $1.5 million in 2012 on lobbying Congress for unspecified purposes.
The NFL also recently paid $35.9 million to a New York City construction firm to build new office space for the more than 1,500 employees that work in NYC. In 2012, the NFL also donated $2.3 million in grants given to community groups, most famously the March of Dimes and the United Way.
The NFL does not request a federal deduction on its moving expenses, which is allowed for for-profit organizations.
Oklahoma Sen. Tom Coburn has spearheaded a movement to change the NFL’s tax status (which would also change the similar statuses of the Professional Golfers Association and the National Hockey League) and said such a change would produce over $100 million in new tax revenue over the next 10 years.
The NFL says that all of its revenues outside of team membership fees are subject to federal taxes when that money is turned over to the teams. “Every dollar of income generated in the NFL – such as tickets, TV rights fees, merchandise sales, etc., - is subject to federal income tax,’’ said NFL spokesman Brian McCarthy told USA Today.
But when the NFL held the Super Bowl in Indianapolis in 2012, NFL employees were not taxed for hotel and restaurant expenditures because of their tax-exempt status. The NFL also did not pay taxes on fuel or auto rentals, according to the Indiana Business Journal.
Because the league does not pay federal taxes on its own revenues, it has more money to allocate to its member teams as well as to employees, including Goodell, who does not income taxes on his salary.
Kent McDill is a staff writer for Millionaire Corner. McDill spent 30 years as a sports writer, working for United Press International and the Daily Herald of Arlington Heights, Ill. From 1988-1999, he covered the Chicago Bulls for the Daily Herald, traveling with them every day through the nine-month season. He also covered the Bulls for UPI from 1985-88, and currently covers the team for www.nba.com. He has written two books on the Bulls, including the new title “100 Things Bulls Fans Should Know And Do Before They Die’, published by Triumph Books. In August 2013, his new book “100 Things Bears Fans Should Know And Do Before They Die” gets published.
In 2008, he resigned from the Herald and became a freelance writer. The Herald hired him to write business features and speeches for the Daily Herald Business Conferences and Awards presentations.
McDill also writes a monthly parenting column for the Herald’s Suburban Parent magazine.
McDill is the father of four children, and an active fan of soccer, Jimmy Buffett and all things Disney.