I am not a football fan, but the news that crossed my desk this morning makes it imperative that regardless of our interest in the sport we pay attention to the National Football League.
At NFL headquarters on Park Avenue in Manhattan, the daily business may span game scheduling, referee hiring or media-rights bargaining – an operation financially fueled by all 32 pro teams which collectively pay more than $250 million in annual “membership dues.”
All of that revenue received by the league office — a half billion dollars since 2010— is untouchable to the Internal Revenue Service.
Score? No, says the NFL’s tax attorney, Jeremy Spector. He says the league office, according to U.S. tax code, is a nonprofit trade association, promoting football and serving as an agent and organizer for the 32 clubs. And it’s been that way since the 1940s.
Out of bounds? Yes, says U.S. Sen. Tom Coburn- R-Okla., who filed a bill in September to revoke the tax exemption, asserting that working folks are subsidizing a special break for a sports league. He’s got 275,000 supporters in spirit: Americans who have signed a Change.org petition that asks Congress to strip the nonprofit status.
“This doesn’t pass the basic fairness test,” said the petition’s author, Lynda Woolard. Somewhat ironically, she adores her hometown New Orleans Saints and shouts the praises of what that team has done to help rebuild and revive the region after Hurricane Katrina. But she’s had it with the league office.
“I was getting frustrated with what I saw from the NFL. We had the (2011) lockout, the (2012) replacement refs, the concussion issue. We’ve got cities subsidizing stadiums then having TV blackouts so fans can’t even see the games,” Woolard said. “What I saw happening was the fans being left out of the loop.
“I know this (tax exemption) is just one tiny piece of that puzzle,” she added. “But to me, I felt like we had to say: ‘Hang on a minute, this doesn’t seem right!’ This is a way for the fans to tell the NFL: ‘You don’t get to just do whatever you want.’ ”
If the response from the NFL’s league office could be boiled down to six words, those would be: “We’re glad you brought this up.”
The NFL does not claim to be a charity, and the $9 billion in annual revenue earned through network-TV contracts, jersey sales, ticket proceeds and other sources gets funneled to the 32 teams where all of that money is subject to taxation, said NFL attorney Spector.
The only tax-exempt slice of that football empire is the league office, which qualifies as a 501(c) 6 trade association, Spector said.
The IRS says it cannot comment on an individual entity.
“The NFL, those 32 teams who are making $9 billion, they’re not tax exempt. I think that’s what’s driving a lot of the confusion,” Spector said.
Even Woolard’s Change.org petition erroneously states: “… the NFL does not pay federal taxes.”
“People hear that the NFL is tax exempt,” Spector said, “and they think: ‘You’ve got to be kidding me. I just paid $200 for a ticket. The television networks are paying a billion dollars a year. Are you telling me they’re escaping tax on all that?’ And the answer is: No, they’re not escaping tax on any of that. The teams are paying tax on all of that money.
“You can imagine, it’s extremely frustrating to see the Change.org petition and it’s really frustrating to see (news) articles that say $9 billion is tax exempt. It just means that nobody has asked the question yet,” Spector said.
The NFL’s 990 federal tax form, filed to the IRS in 2012 and available for view at the nonprofit watchdog site GuideStar, shows that during the previous year the league office received $255.3 million in revenue (almost all of it via annual dues paid by the teams) while it spent a total of $332.9 million, including $2.3 million in grants given to community groups like United Way ($15,898) and March of Dimes ($10,000).
Using its tax-exempt revenues, the league office also paid $29.4 million in salary to NFL Commissioner Roger Goodell, for which he owed income taxes, and it paid $35.9 million to the New York City construction firm J.T. Magen & Company, which built out a new office space for the NFL bosses and their 1,546 employees after their previous lease expired and they opted to relocate to another part of Manhattan.