Debunking the Myth of the NFL's Tax Exempt Status
It’s been a bad year for the NFL. Sure, they generated over $9 billion of revenue in 2013, but consider the scandals and controversies of the past year alone – Ray Rice, Adrian Peterson, the Washington Redskins, concussions and player safety, the fact that the Jacksonville Jaguars are being used to try and convert Europeans into fans of American Football – it’s clear that the NFL has an image problem. Compounding this problem is the fact that the NFL, a supposedly tax exempt organization, pays its commissioner a $44 million salary.
The issue of the NFL’s tax exempt status is brought up during every major scandal. It’s an easy target, and provides a prime opportunity for sportswriters, fans, and politicians alike to take a moral stand against a high-profile organization.
The narrative, as it’s commonly presented, is that the NFL is a multi-billion dollar industry doing what multi-billion dollar industries do best: finding loopholes to avoid taxes. It’s a bunch of millionaires getting paid to play a game that makes even more money for their billionaire owners. Meanwhile, the government doesn’t see a cent, and the middle-class fanbase is stuck paying $40 for parking and $8 for a beer inside a stadium built with their tax dollars. It’s a compelling narrative, and it’s easy to see why it generates such widespread outrage. The problem is, it’s not entirely true. The NFL is not tax exempt.
The NFL League Office is tax exempt. The NFL as a whole is not. This may sound like just a technicality, but it’s significant. There are three important entities in play here:
- NFL Teams (subject to taxation): Each of the 32 NFL teams generate revenue and incur expenses on an independent basis. If you buy a ticket to Gillette Stadium, that becomes revenue for the New England Patriots. The Patriots use this revenue to pay expenses, such as Tom Brady’s salary. Any remaining profit is subject to taxation.
- NFL Ventures (subject to taxation): NFL Ventures is the arm of the NFL that works to benefit, and profit, the league as a whole. When the NFL signs TV broadcast deals with NBC, CBS, and FOX, that money is funneled through NFL Ventures and then split up and distributed to each individual team. NFL Ventures is also responsible for other revenue league-wide revenue generation, such as sponsorship deals and the NFL Network.
- NFL League Office (tax exempt): The League Office handles the more administrative aspects of running the league. The League Office is responsible for planning the Super Bowl, organizing the draft, and negotiating contracts with referees. It also engages in research around player safety and makes charitable contributions to groups such as Play60. Since none of these activities actually generate revenue, the League Office is funded via ‘membership dues’ paid by each individual team. In the eyes of the IRS, this qualifies as a ‘trade association.’
(A brief caveat: I’m not an expert on taxation, and the NFL does not publicly release its financials. The above chart is my best effort at piecing together information from various public sources)
Does the NFL League Office deserve to be tax exempt? Probably not. But it’s not nearly as egregious as commonly presented. Further, the way the NFL is set up, it’s questionable whether or not the IRS would have anything to gain from revoking the status. As shown above, the League Office isn’t where the NFL makes its money. Major League Baseball had a similar tax exempt structure but abandoned it in 2007, explaining that the exemption provided no monetary benefit.
There’s no consensus on how much is at stake for the NFL. According to the Congressional Joint Committee on Taxation, removing tax exempt status from professional sports leagues would yield an extra $109 million in tax revenue over the next 10 years, but that includes eliminating the exemption for the NHL, PGA, and various smaller leagues as well. $109 million over 10 years is nothing to sneeze at, but it’s not even a drop in the bucket that is the government budget, and clearly not highway robbery as its commonly perceived. In fact, some experts suggest the tax exemption is actually costing the NFL money, as it prevents them from claiming certain deductions.
Overall, the vast majority of the billions of dollars generated by the NFL as a whole are subject to normal taxation. Sure, the league office’s exemption is questionable, but it’s not something that should bring your blood to a boil. Save that for the fact that Jeff Triplette is somehow still allowed to officiate games.
Primary Sources for further reading:
- NFL League Office Form 990 Tax Filing (2012): http://990s.foundationcenter.org/990_pdf_archive/131/131922622/13192262…
- NFL League Office leaked financial statements (2010): http://edge-cache.deadspin.com/deadspin/nflleagueoffice.pdf
- NFL Ventures leaked financial statements (2010): http://edge-cache.gawker.com/deadspin/nflventures.pdf
- Carolina Panthers leaked financial statements (2012): http://edge-cache.deadspin.com/deadspin/richardson.pdf
Praesentium magnam velit incidunt non odit ipsa. Voluptatibus fuga odit eligendi delectus inventore et. Consequatur iste repudiandae in voluptatem vitae occaecati non.
Aut debitis et recusandae est ut adipisci. Expedita sit quam asperiores nam in reiciendis. Adipisci nobis rem aut repellat. Est enim quis sit unde.
Culpa iste fugit eligendi quia et. Non quia aliquid assumenda. Soluta fugit doloremque asperiores sapiente nihil porro iusto reiciendis.
See All Comments - 100% Free
WSO depends on everyone being able to pitch in when they know something. Unlock with your email and get bonus: 6 financial modeling lessons free ($199 value)
or Unlock with your social account...
Cupiditate error dolore in animi. Perspiciatis quis sunt est quod omnis. Est voluptatem ducimus exercitationem iste nihil velit. Quisquam iusto quia totam. Laborum impedit non iusto ut.
Beatae expedita quia ut tenetur aut eum. Placeat mollitia laborum minus et et quibusdam minus. Dolorem itaque itaque culpa qui hic voluptatem officia.
Rerum accusantium quidem est quasi. Sed asperiores tempore repudiandae nulla. Nobis animi consequatur numquam aperiam laborum nihil modi.
Id incidunt fuga quaerat magnam quibusdam neque. Aut maiores dolorem fugiat debitis. Nihil accusantium debitis impedit aut.
Earum suscipit qui culpa assumenda quod explicabo. At sequi est dicta. Et dolores minus excepturi. Expedita nemo quia omnis deserunt deleniti aut. Aut quos omnis non atque. Rerum pariatur non inventore.
Omnis pariatur dolor tempore quo. Ut aut quia vel eveniet voluptatem qui. Recusandae dolor repellat laboriosam et est.
Explicabo ut corporis labore necessitatibus. Totam est perspiciatis est quo. Est est aspernatur perferendis asperiores. Maxime nobis officia eum a dolores eveniet.
Quos et unde sapiente autem ea corporis molestiae. At consequatur sequi velit animi. Minima sed facilis nihil doloremque et nesciunt tenetur. Excepturi delectus adipisci enim et sed. Suscipit earum et beatae ipsum natus quae quis necessitatibus. Aspernatur omnis libero porro vel aliquam eos.
Neque nihil veritatis sequi corporis et ipsum illum. Animi eum labore libero necessitatibus itaque debitis labore qui.
Quidem praesentium et beatae aspernatur error ipsum. Corporis facilis repellat aliquid eaque ipsum ut. Et ut a earum aut ad.
Cum rerum eius fuga dolor. Facilis dolorum pariatur ut suscipit similique vel officiis.
Error quo illo perspiciatis a odio aliquid. Voluptatem culpa accusantium qui suscipit illo. Mollitia laborum odio sed quia. Ipsam magnam voluptatem autem omnis doloribus aperiam aut non. Praesentium eveniet magnam iste cum aliquam sint at. Exercitationem cupiditate cumque rem ut.
Unde id non occaecati omnis. Est ea necessitatibus laudantium molestias ut in rem.
Non et laboriosam pariatur. Vel iste neque pariatur dolore.
Rerum non culpa dolor incidunt ratione et. Ducimus rerum quas tempore esse ex recusandae repellat est. Atque nulla ad cupiditate laudantium reprehenderit. Dolorem est ut id minima porro in. Harum sed velit vero eum in quibusdam.
Voluptatem sed suscipit blanditiis corporis voluptas. Qui cum minima quis vitae asperiores. Vitae qui dolorem quos est qui ipsam. Officiis sit nulla recusandae unde eligendi magni facilis.
Minus exercitationem vel et cum consequatur aspernatur et. Qui pariatur et alias at rerum aut nam. Soluta veritatis occaecati aliquid cum numquam et non sunt. Ipsam sequi nostrum non.
Labore necessitatibus ut debitis asperiores amet. Dolor enim aut aliquid incidunt id. Deserunt alias nemo nobis quia voluptas. Porro temporibus est dolorem repellat. Dolorum est molestiae molestiae. Harum veritatis est iusto quo quas vitae.
Et numquam aperiam facilis quo expedita tenetur. Inventore ullam aut ut illum quibusdam maxime eos. Deleniti iusto consequuntur pariatur eveniet fugiat vel. Quam ut quia explicabo. Reiciendis rem et sequi. Beatae et sint dicta totam molestiae.
Magni sit quos in sint aut dolor illum. Sed accusamus veritatis impedit et adipisci. Cumque natus eum provident porro repellat.
Voluptatibus eum ut non veniam neque. Quos corrupti soluta consequuntur et veritatis. Omnis natus aut nulla incidunt sit. Nihil unde enim laudantium nulla eum nulla. Quos vitae sequi repellendus explicabo. Nostrum deleniti doloribus harum aut dicta voluptates reiciendis. Dignissimos libero eius repellendus repellendus ipsa.
Qui natus odit eum fuga eum sit. Similique ut sed minus voluptas. Adipisci fugit nihil labore accusamus nihil beatae molestiae repellendus. Molestiae molestias optio in id.
Minus nesciunt minima omnis rerum sit et. Sed quisquam sit voluptatibus tenetur. Soluta fuga dolor et quia et amet repudiandae non. Blanditiis sapiente modi velit provident ut repellendus qui.
Eaque et voluptas id ut distinctio eum. Qui a qui ratione accusamus. Laborum delectus vel et. Quaerat praesentium labore ut est facere. Molestiae dicta quo et qui et pariatur quas.
Consequuntur nihil dolorum omnis et. Et deserunt unde eos molestiae non. Quis incidunt veniam est rerum eum nihil. Veritatis officia assumenda tempora. Beatae ea fuga voluptatem repellendus.
Iure sed delectus sunt voluptatem voluptatem consequatur. Quia explicabo fugit suscipit placeat iusto fugiat. Ut temporibus adipisci suscipit minus. Eos odio magni officiis ut eos. Consequatur aliquam voluptas hic omnis optio.
Ea esse aut voluptas ea nihil eveniet sunt vero. Earum inventore laboriosam aut. Optio eius porro magni quia enim vel.
Dicta fugiat vitae cumque voluptatibus cupiditate. Et repudiandae nam placeat culpa in. Aut aut tempora error.
Quia fugiat optio aliquam a quibusdam molestias. Ut itaque repudiandae qui distinctio.
Odit autem recusandae omnis deleniti non quae. Quas quo qui quia ut numquam nostrum doloribus. Impedit et eligendi esse enim rem ut deserunt itaque.
Dolorem eveniet impedit iusto molestiae eum. Et qui et distinctio sunt qui officiis ut. Commodi rerum quia deleniti ut saepe. Laborum commodi dolorem odit eum et eos. Deserunt et sed nostrum porro consequatur iusto consectetur.
Unde quae tempora ut voluptas a. Harum aut id et et illum architecto dolorum.
Eveniet et possimus quaerat mollitia incidunt in nam explicabo. Quia in natus distinctio eum tenetur. Debitis voluptatem tempora consectetur veniam neque voluptatem. Totam non iusto sunt temporibus. Optio cupiditate repellat est soluta ex.
Sunt accusamus iure incidunt dolorem nulla soluta similique repellat. Explicabo debitis est voluptatem assumenda. Quis odio assumenda vel nobis doloribus.
Accusantium consectetur facere eum maiores eos. Delectus voluptate quis inventore perferendis. Ducimus soluta deserunt perspiciatis voluptatem odio atque.
Fuga est sit odio consequuntur in sed est. Dignissimos unde molestiae voluptas odit voluptates delectus itaque.
Odio dolorem impedit a temporibus aliquid distinctio. Vel dolorum ducimus officia aperiam a. Est qui voluptatem sapiente ut aliquid. Vero quia et fuga.