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NFL tax-exempt status under attack

By Kay Bell · Bankrate.com
Tuesday, September 10, 2013
Posted: 4 pm ET

The start of the 2013 football season has been a good one for me. I saw my Dallas Cowboys hang on to beat conference rival New York Giants. The other Lone Star State team, the Houston Texans, came from behind on Monday Night Football to defeat the San Diego Chargers.

The NFL itself, however, is off to a bit of a rocky start, at least on the tax playing field.

Sen. Tom Coburn, R-Okla., has renewed his efforts to strip the league of its tax-exempt status. The Sooner State senator says any version of tax reform, now a hot topic on Capitol Hill, should eliminate the preferential tax status given to sports organizations like the NFL, National Hockey League and Professional Golfers' Association of America.

You didn't know the NFL, the overseer of the most popular sport in the United States and maker of $10 billion a year, operates as a nonprofit? Does that mean the outrageous prices of the tickets we buy to the games are deductible as charitable donations?

The answer to the first question is yes, the NFL, et. al., are nonprofits.

The answer to the second question is no, the leagues are not traditional charities to which we're accustomed to contributing.

Different tax-exempt rules

The charities that provide us a way to deduct donations on Schedule A are granted tax-exempt status by the Internal Revenue Service under section 501(c)(3) of the Internal Revenue Code.

The professional sports leagues' earnings are tax exempt under section 501(c)(6). That part of the code applies to 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. Yes, professional football leagues are specifically cited in the tax statutes.

Under that description, says the NFL, it is an organization whose primary purpose is to further the industry or profession it represents. It cites as an example the revenue-sharing agreement the NFL administers to all the 32 member teams.

A continual tax target

The professional sports leagues' tax-exempt status is a fixture in Coburn's annual "Wastebook," the senator's collection of what he calls the most egregious ways U.S. tax dollars are wasted each year. In the 2012 edition, he cited the league loophole as costing $91 million in taxes.

In response to tax reform requests from his colleagues Senate Finance Committee chair Sen. Max Baucus, D-Mont., and the committee's ranking minority member Sen. Orrin Hatch, R-Utah, Coburn is again recommending that professional sports leagues lose their tax-exempt status.

The leagues have fended off similar attacks over the years. I suspect they'll do so again this congressional session.

But as talk continues on how to raise more federal revenue and revamp the tax code, the clock might just be running out, albeit in slow motion, on the NFL and other nonprofit professional sports groups.

Want the latest news on taxes, tax reform prospects, filing deadlines, political fights, Internal Revenue Service alerts and tax-saving tips? Subscribe to Bankrate's free Weekly Tax Tip newsletter.

You also can follow me on Twitter @taxtweet.

Veteran contributing editor Kay Bell is the author of the book "The Truth About Paying Fewer Taxes" and a co-author of the e-book "Future Millionaires' Guidebook."

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15 Comments
jerry burns
February 27, 2014 at 1:27 pm

Here's a great big "shout-out" and THANK YOU to DARRELL ISSA for calling
attention to the IRS so that we can dig deeper into this 501 SCAM.
Here in this "great experiment" in the competition of ideas and free market
economy people have to decide once and for all whether society exists for the
benefit of corporations or vice-versa.
Hog raising is an honorable profession,. long as we don't let the hogs run the
farm.

David
February 27, 2014 at 7:44 am

Not only should they be taxed like everything else but every owner should stand up in public and apologize to everyone that has every attended a game for RAPING them in public. Shame on the government for letting them do this when people have to try and live on $7.25 an hour. Lets see them do it for a week. BET THEY CAN'T.

Eric Coate
October 08, 2013 at 6:08 pm

Only in America. Read the book "Family of Secrets", about the Bushes Their buddies own the Dallas Cowboys, etc.

Moe
October 08, 2013 at 3:27 pm

What I find amazing is that States continue to have taxpayers pay half or more to finance the construction of football stadiums, as is currently going on in Minneapolis, when the NFL
made $10 billion last year and could easily pay for their own stadiums and not put the burden on people who can't even afford to attend a game due to high ticket prices. Let them have the players buy stock in the stadiums with their multi million dollar salaries and then they can have their cake and eat it too with the profits from their own concession stands.

boomhauer
September 29, 2013 at 6:15 pm

did you know you pay income tax on social security payments?

ozric
September 22, 2013 at 12:02 pm

I believe the answer to this problem is that all the people should organize as sport teams and not pay any taxes to the government(corporations)that seem to accept corporate welfare while whining about the poor that receive food stamps.
If you want true conservative values here, just do away with federal and state governments and let the local "villages" govern themselves.

lefty
September 22, 2013 at 9:09 am

I am conservative as they come but contrary to what the left thinks about conservatives we want equitable, consistent and fair taxes for "everyone." We realize taxes are needed for infrastructure, military and a federal government that is not out of control as it is currently. I did not know this, learn something everyday. We all know why though...America currently is about the big guy and making him richer. It is not a Republican nor Democrat issue as Congress patronizes these big guys from all directions and many are the big guys with the power they control. It is all about the owners and them making money. If and when the NFL has it's non-profit status taken away, I guarantee everyone will know about it because of the yelling and hollering coming from the owners of the teams. It makes no difference to the players.

Todd
September 22, 2013 at 8:11 am

Wow I didn't realize that they didn't have to pay taxes. I have a question that you may want consider writing an article about. Should a soldier have to pay taxes on his income if the NFL doesn't?

rick parm
September 22, 2013 at 5:30 am

this is unbeleiveable,they should be paying tsxes and making payments on past years.Also not to make up for taxes charge by raising ticket prices on tax payers.We should findout how they receive this tax exempt status and expland this to the all the tax payers out their how a $10 billon dollar busness got non-profit tax status.If they Aired that many would watch.

Greg
September 11, 2013 at 9:49 am

Considering the salaries and the profits organized sport leagues rake in season after season, it's probably only right that they poney up and bear their fair share of our nation's tax burden. I attend several games in several different leagues each year to the tune of a few thousand dollars without considering the concessions I support. I was surprised to learn of their tax exempt status. Sure would like to claim my expenses as deductable!

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