Monday, October 29, 2012

A Business That Makes Millions is Tax Exempt – Why?

Because Congress Said So

One of the most astounding tax facts ever uncovered is that the National Football League is a tax exempt company.  No not the teams themselves, the League.  Here are the details from Jay Bookman, (and thanks to Paul Caron)

Once in a while, I run across something that I did not know and it leaves me flabbergasted.

For example, I did not know that the National Football League, the colossus of professional sports, is classified as a non-profit — a tax-free non-profit, to be more specific. That’s right: The NFL has its own exemption, written into federal law, that makes it exempt from federal corporate taxes.

So how big and profitable is the NFL?

In 2010, the registered NFL nonprofit alone received $184 million from its 32 member teams. It holds over $1 billion in assets. Together with its subsidiaries and teams – many of which are for-profit, taxed entities – the NFL generates an estimated $9 billion annually. Each of its teams are among the top 50 most expensive sports teams in the world, ranking alongside the world’s famous soccer teams. Almost half of professional football teams are valued at over $1 billion….

League commissioners and officials benefit from the nonprofit status of their organizations. Roger Goodell, commissioner of the NFL, reported $11.6 million in salary and perks in 2010 alone. Goodell’s salary will reportedly reach $20 million in 2019. Steve Bornstein, the executive vice president of media, made $12.2 million in 2010. Former NFL commissioner Paul Tagliabue earned $8.5 million from the league in 2010. The league paid five other officials a total of $19.2 million in just one year. In comparison, the next highest salary of a traditional nonprofit CEO is $3.4 million.

And how did this happen?  Gosh, take a guess.  Lobbyists

The NFL’s exemption stems from a 1966 law, passed at the time of the merger with the old American Football League, specifically allowing “professional football leagues” to enjoy 501(c)(6) status as tax-exempt trade organizations. Other leagues have piggy-backed on that legislation to claim that status themselves.

And no, state and local governments are not immune from the desire to aid billionaires.

As the Coburn report points out, “state and local governments usually exempt these organizations from state income and sales tax as well….” As the Indiana Business Journal reported, that proved to be a nice little perk when the Super Bowl was held in Indianapolis this year, because “hotels and restaurants … won’t be taxing National Football League employees. They’re exempt from paying, according to an Indiana Department of Revenue directive. The NFL is using its tax-exempt status as a 501(c)(6) to avoid paying the taxes, in addition to fuel, auto rental and admissions taxes.”

And of course, everyone wants to look out for the taxpayers, who are being asked to fund new stadiums.  For example in Atlanta

a hotel-motel tax was used to build the Georgia Dome and would also be used to help finance the proposed new open-air stadium demanded by the Falcons. If Georgia tax law is like that of many states, the NFL and its employees would be exempted from paying the tax that everyone else must pay to subsidize stadiums built for a highly profitable industry.

But don’t expect any politicians to move any time soon to end these tax breaks.  It is easier to cut benefits for poor people, and beside, if they ended the benefits they wouldn’t get those free tickets to the corporate box to watch the games, insulated from the taxpayers whose welfare they care nothing about.

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