After Decades Of Raking In Mountains Of Money, NFL Finally Decides To Abandon Not-For-Profit Status

(frankieleon)

Last season, the NFL generated $10.5 billion in revenue, of which a solid $1 billion was profit. That’s a lot of money. And yet despite basically being able to fill a Scrooge McDuck tower thousands of times over, the NFL has been a tax-exempt non-profit organization — until today.

As the Washington Post reports, NFL commissioner Roger Goodell sent a letter today to team owners and members of Congress, explaining why the league was dumping its tax-exempt status.

“The fact is that the business of the NFL has never been tax exempt,” Goodell said. “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 NFL has qualified as a nonprofit in the same way that trade groups do. In theory, the league simply promotes the work of the actual businesses: the teams. The teams, the logic runs, are the for-profit entities that churn up billions of dollars; the league is simply an umbrella organization that promotes their work, not its own.

With the NFL finally giving up its tax-exempt status, the NHL is the last remaining major league sport claiming to be a non-profit. Major League Baseball made the switch in 2007, and the NBA is already a for-profit organization.

So why would the NFL be willing to make the switch now? Because it won’t really hurt them, and it might even help. The amount of tax for which the league is expected to be liable is somewhere in the range of $10 million. For the NFL, that’s basically the change scraped out of the sofa cushions in America’s football-watching homes.

But by becoming tax-exempt, the NFL also gets the ability to stop publicly disclosing certain information — specifically, what its executive employees make. The WaPo reports that the organization’s 2013 tax filings showed Goodell made $44 million that year, six other executives made over $1 million, and almost 300 NFL employees got $100k or more.

In other words: the entire league will probably pay in tax less than 25% of what it pays its top man. And in return, they get to keep secrets. From their point of view, that’s a trade worth making.

The NFL is dropping its tax-exempt status. Why that ends up helping them out [Washington Post]