Should Congress Tax The NFL?

At a time when Congress is seeking new sources of tax revenue, Sen. Tom Coburn (R-OK) has a solution:  tax major sports leagues such as the Professional Golf Association (PGA) and the National Football League (NFL).

Coburn wants to revoke the tax-exempt status of the leagues; a move that Congress’ Joint Committee on Taxation estimates could raise $109 in new tax revenues over the next 10 years.  Not everyone in the Senate agrees, however – Coburn’s effort to attach his bill to the Marketplace Fairness Act failed.  And the NFL has been quick to point out that while the revenues collected by the league office are tax exempt, all of the dollars generated by the league and its teams are already subject to taxes.

The NFL has been tax-exempt since about 1942, and in 1966 Congress specifically amended the tax law to list professional football leagues as 501(c)(6) non-profit in a manner similar to trade associations.  That same legislation exempted the NFL from anti-trust legislation to help merge with the American Football League.

According to the IRS, 501 (c) 6 organizations are supposed to be business leagues that promote a common business interest but do not to engage in "a regular business of a kind ordinarily carried on for profit." The IRS says the activities of such organizations should be "directed to the improvement of business conditions of one or more lines of business rather than the performance of particular services for individual persons."

On its tax form, the NFL calls itself a "trade association promoting interests of its 32 member clubs." The league's tax form also lists $621 million in receivable loans — part of the lending program to member teams for stadiums.

Still, not all sports leagues see a benefit in being non-profit.  Major league Baseball gave up its tax-exempt status five years ago, following the trend of many 501©(6) organizations that have become for-profit entities to gain more flexibility in its operations.  And the NBA notes that it has never been not-for-profit.

Source:  USA Today and the Office of Sen. Tom Coburn