NFL gives up tax exemption

The National Football League on Tuesday decided to give up the tax-exempt status for its league office, agreeing to the demands of lawmakers who denounced it as an unconscionable giveaway.

Roger Goodell, the league’s commissioner, essentially told NFL owners in a memo that the tax incentive wasn’t worth what had become a years-long public relations hassle. But the move also offers the league new ways to shield information — including Goodell’s $44 million salary in 2012 — from public view.

In his memo, Goodell insisted that the league’s tax status has “been mischaracterized repeatedly,” noting that the government taxes income from TV rights fees, ticket sales and any other revenue generated by the 32 professional football teams.

He added that abandoning the tax exemption wouldn’t change how the NFL operates. With that in mind, both Goodell and Bob McNair, the owner of the Houston Texans, said it was past time for the league to get rid of the “distraction” caused by the tax exemption.

“The fact is that the business of the NFL has never been tax exempt,” Goodell wrote. 

For Goodell and the NFL, the tax exemption had become a ripe target without doing all that much to help the league’s bottom line.

Lawmakers, including House Oversight Committee Chairman Jason Chaffetz (R-Utah), former Sen. Tom Coburn (R-Okla.) and Sen. Angus King (I-Maine) had all sought to end the NFL’s exemption, making the case that a sports league that made roughly $10 billion a year shouldn’t be classified like a trade association for tax purposes. 

Senate Minority Leader Harry Reid (D-Nev.) and Sen. Maria Cantwell (D-Wash.) previously proposed stripping the NFL of its tax exemption as long as the Washington Redskins kept their team name.

On Tuesday, lawmakers cast the NFL’s decision as a victory, though it gives them one less method for exerting pressure on the league.

“It is rewarding to see such an important and positive step toward restoring basic fairness,” Chaffetz and the Oversight panel’s top Democrat, Rep. Elijah Cummings (Md.), said in a statement. 

“We hope other professional sports organizations in similar situations will follow the positive example set by the NFL, and we look forward to rightfully returning millions of dollars to the federal treasury as a result.”

Congressional scorekeepers have projected that legislation rolling back the league’s tax exemption would raise roughly $109 million over a decade. Other major sports leagues, such as Major League Baseball and the National Basketball Association, had either surrendered or never had a tax exemption. 

The NFL had been clinging to its tax exemption at a time when lawmakers were showing interest in an array of other issues facing the league, including concussions and domestic violence accusations against several prominent players.

Under the previous setup, the IRS treated the NFL’s league office the same way it does the Chamber of Commerce and other trade associations organized as 501(c)(6) nonprofits. In his memo, Goodell said the IRS first gave the league tax-exempt status during World War II, more than seven decades ago.

The NFL’s decision leaves the National Hockey League as the only major North American sports league with a tax exemption, though various professional organizations for golf and tennis also are on the IRS’s exemption list. 

The league’s move mirrors a decision the MLB made to drop its exemption in 2007, when professional baseball was in the midst of a burgeoning controversy over performance enhancing drugs. The MLB reportedly decided its league office should pay taxes, in part, to avoid reporting certain operational details, like salaries, required of nonprofit organizations.

But lawmakers said Tuesday that they had other ways to put pressure on the NFL.

Reid said Tuesday that the tax exemption was a small issue compared to all the problems the NFL is facing, including what he called the league’s “kowtowing” to the Redskins.

“We know that they have an ongoing crisis with the head injuries,” Reid added. “So the National Football League has a lot more problems than the subsidy that they get from taxpayers.”

And Sen. Chuck Grassley (R-Iowa), a former chairman of the tax-writing Finance Committee, noted that the NFL still enjoys an exemption from antitrust charges thanks to Congress, which gives lawmakers a point of entry for any issues they might have with the league.

“If you’ve got any questions about the NFL, there’s a way to ask them,” he said.

Peter Schroeder contributed.