NFL commissioner Roger Goodell has reportedly told owners and members of congress that the league is going to ask to put an end to its tax-exempt status. This move will make the league’s office a taxable entity, without really impacting the league’s profit margin.
Goodell sent a letter to members of congress and team owners to inform them of his decision on Tuesday. He claims that this decision is about eliminating a “distraction”.
“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,” Goodell wrote. “This will remain the case even when the league office and Management Council file returns as taxable entities, and the change in filing status will make no material difference to our business.” — Bloomberg
The NFL is projected to turnover $109 million in taxes to the federal government — the league pulled in estimated $10 billion in revenue in 2014 — in 2015. Basically a drop in the bucket for a league that has continued to see its revenue increases over the last several years.
While the IRS requires non-profit groups file annual federal tax returns, and make some of them public, the government doesn’t require them to turn any money over to the government. In the NFL’s case, none of the money the league office pulled in (TV contracts, NFL Network, etc.) were taxed; what was taxed was how the league redistributed the money among its 32 franchises, and the revenue generated by said franchises.
The league’s tax-exempt status has come under fire, especially when you realize Goodell makes $44 million a year before taxes ($35.1 million after). That makes the decision to request an end to the exemption isn’t surprising, the league needs a boost PR wise and starting to pay federal taxes (a minimal amount) is a big step in the right direction.
Once congress approves the removal of the exemption, the NHL will be the only professional sports league with it — MLB asked to have theirs removed in 2007, and the NBA never received it.