Wednesday, April 29, 2015
The National Football League has announced that it will no longer file as a tax-exempt entity, notwithstanding its long-standing status as an organization described in section 501(c)(6) of the Internal Revenue Code. As reported in Bloomberg, NFL Commissioner Roger Goodell characterized the decision as eliminating a “distraction.” The Bloomberg piece also opines on the calculus behind the tax-exemption audible:
The league’s decision pre-empts a move to revoke the tax break that had been led by former Senator Tom Coburn of Oklahoma. That effort has gained some momentum in recent years, but not enough to pass either the House or the Senate. The NFL’s action removes a point of leverage for Congress in its continuing inquiries into the league’s handling of concussions and domestic violence.
For the NFL, the costs of losing the tax break are minimal, an estimated $109 million over the next decade. There are benefits for the league, too, including the end of federal disclosure requirements that put Goodell’s salary and some other league information in the public domain.
The tax cost of the league’s foregoing federal income tax exemption is not precisely known. According to the Wall Street Journal,
The size of the NFL’s tax bill is unclear. In 2013, a report by Sen. Tom Coburn (R., Okla.) calling for the NFL and National Hockey League to give up their tax-exempt status estimated that such a move would generate $91 million annually for the federal government. But Congress’s Joint Committee on Taxation pegged the amount at just $109 million over the next 10 years.
As to the benefit of not disclosing salaries to Monday morning quarterbacks, the Washington Post makes an interesting observation:
[T]he NFL’s executives will gain cover from criticism over their paychecks. The league’s 2013 tax filing revealed that, besides Goodell’s $44 million, six other executives drew seven-figure salaries and 298 employees made $100,000 or more.