Legal procedure: Critics cry foul as NFL defends nonprofit status

[Double Barrel]

Legal procedure: Critics cry foul as NFL defends nonprofit status

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 - more than 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.

----------------------------

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.

----------------------------

“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.

Full story

I think what surprised me the most about the story was the "$29.4 million in salary to NFL Commissioner Roger Goodell". There is no doubt that he's the owners' little bulldog and everything he advocates is representative of their perspectives.

As far as the article, what would be the repercussions for the NFL if their tax-exempt status was removed?

 

[gwallaia]

If you take a walk, I'll tax your feet.
If you get too cold, I'll tax the heat.
If you are the NFL, you should be taxed to Hell.

I say tax'em.

 

[Dan B.]

I think what surprised me the most about the story was the "$29.4 million in salary to NFL Commissioner Roger Goodell". There is no doubt that he's the owners' little bulldog and everything he advocates is representative of their perspectives.

As far as the article, what would be the repercussions for the NFL if their tax-exempt status was removed?

They'd become the IFL and relocate to Bermuda or Cayman Islands.

 

[qqert]

they should tax the catholic church and all other religions before they tax the nfl.

 

[Dutchrudder]

They just need to put controls on this kind of stuff. If the IRS wants a company to be worthy of charity status, then force them to show that say 75% or more of their revenue goes towards charity. If a company goes lower than that, then they owe taxes on all the revenue from that year. A single year's taxes would go a long way towards making these charities do something good with all that money. I'm fine with charity, regardless of the source or mission, just make it worth the taxpayer's while, instead of just assuming everyone does a good job at it.

I think that would cut down on the ridiculous salaries some of these folks get for being on the boards of charities, and force them to actually fund meaningful programs. I'm sure there would be some screwy accounting that could get around this stuff, but I don't expect many of them to do that.

 

[TexansBull]

they should tax the catholic church and all other religions before they tax the nfl.

That makes no sense at all.

Sent from my RM-820_nam_att_100 using Board Express

 

[mattieuk]

Speaking as someone who works in accountancy for non-profit organisations up north of the 49th...

It is murky territory. I presume that each year the NFL (I'll call this NFL Ltd. when referring to the mothership company) has a whopping amount of income, yet as it is classed as a non-profit (and acts effectively as a 'flow through' company for the teams) they carry forward their income as retained earnings, which are not taxed. Any funds would then be distributed to the teams, who quite rightly pay whatever rate of tax they are federally and state(ly?) required to. No issue so far for me there.

The issue comes as the valuation of teams is intrinsically linked to NFL Ltd. In other words, the more valuable the league is in terms of assets and revenue generation, the more valuable the individual franchise is.

Now, imagine that the NFL Ltd. is keeping $2 billion dollars of retained earnings in their central accounts each year, rather than this being funneled down to the tax paying entities (the teams) then we have a question to be answered. Why should the owners be getting the benefit of the income, through the strengthened position of NFL Ltd. which determines the value of their franchise.

Therefore, if that is the situation which is occuring (I presume it is, however surprising there is little information in the public realm I've seen regarding the balance sheet of NFL Ltd.), then the onus is on the IRS/politicians to visit whether any earnings should be classified as a taxable benefit to the ownership. If they are carrying over substantial amounts of funds year on year, then I think most people would agree that absolutely these benefits should be taxable.

 

[eriadoc]

Speaking as someone who works in accountancy for non-profit organisations up north of the 49th...

It is murky territory. I presume that each year the NFL (I'll call this NFL Ltd. when referring to the mothership company) has a whopping amount of income, yet as it is classed as a non-profit (and acts effectively as a 'flow through' company for the teams) they carry forward their income as retained earnings, which are not taxed. Any funds would then be distributed to the teams, who quite rightly pay whatever rate of tax they are federally and state(ly?) required to. No issue so far for me there.

The issue comes as the valuation of teams is intrinsically linked to NFL Ltd. In other words, the more valuable the league is in terms of assets and revenue generation, the more valuable the individual franchise is.

Now, imagine that the NFL Ltd. is keeping $2 billion dollars of retained earnings in their central accounts each year, rather than this being funneled down to the tax paying entities (the teams) then we have a question to be answered. Why should the owners be getting the benefit of the income, through the strengthened position of NFL Ltd. which determines the value of their franchise.

Therefore, if that is the situation which is occuring (I presume it is, however surprising there is little information in the public realm I've seen regarding the balance sheet of NFL Ltd.), then the onus is on the IRS/politicians to visit whether any earnings should be classified as a taxable benefit to the ownership. If they are carrying over substantial amounts of funds year on year, then I think most people would agree that absolutely these benefits should be taxable.

That's a great way of explaining that. Thanks for that.

 

[mattieuk]

That's a great way of explaining that. Thanks for that.

Thanks - although do note that I'm making some huge assumptions on the situation., with limited information, with little knowledge of specific US non-profit dealings. That said, this is the only way that I can see there being exceptions with the current system from rational bodies looking at it (providing they fully understand that the teams are taxed etc.). From a little more reading up, it does look like the NFL allocates a good chunk of money into funds like stadium loan funds for teams which is held by the NFL, enjoying tax-exempt status - so it would seem that this would be the funds that protestors could have a legitimate problem with.

It is a situation which is way over the heads of may of us (likely including myself), and I assume there are millionaire accountants and lawyers everywhere with a situation like this. However, if we can relate it to an everyday situation, we can all have semi-valid knee-jerk opinions.

I guess the paralell that could be drawn to 'everyday Joe' life is that of a condo. A HOA (homeowner association) would be a non-profit, as it is just acting on behalf of the individual (condo) owners. The issues would arise when the obviuosly legitimately tax-exempt HOA fee income paid by the owners is supplemented by a giant advertising board on the front of the building, or by a cell phone tower at the top of the building.