NFL Rakes In Super Bowl Profits, Gets Non-Profit Tax Exemptions

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The National Football League operates as a 501(c)6 non-profit association and has operated that way since the 1960s. This in no way means the NFL is a stranger to profit. It is in fact one of the most profitable sports leagues in the United States, making over $9 billion in profits from 2011 to 2012, according to Business Insider.

Being categorized as a 501(c)6 has many tax benefits, although charitable donations are not counted as tax deductible. The definition of a 501(c)6 as given by the IRS is as follows:

IRC 501(c)(6) provides for exemption of business leagues, chambers of commerce, real estate boards, boards of trade, and professional football leagues… which are not organized for profit and no part of the net earnings of which inures to the benefit of any private shareholder or individual.

Kick off for Super Bowl XLVII is hours away, and many fans are more eager to see the advertisements rather than the game itself, which netted $245 million in Super Bowl profits last year alone. As profits continue to climb, critics have argued the NFL is exploiting the tax loopholes by way of the (c)6 categorization. Tweet this fact:

On Capitol Hill, lawmakers have pointed to the NFL as a prime example of government waste. Tom Coburn (R-Oklahoma) released his ‘Wastebook 2012’ report in October, wherein calculations suggested that ending tax-exemption for professional sports organizations like the NFL and PGA would generate over $89.9 million in new tax revenue.

The Center for Responsive Politics reported yesterday, “the NFL spent $1.14 million on lobbying last year.” Political efforts have been mounted primarily from the NFL’s political action committee, Gridiron PAC, which was founded in 2008.

Almost $900,000 was spent on the 2012 election, more than half ($547,500) of which was given to federal candidates. Overall, donations were split, almost 50-50 between Democrats and Republicans. However, House Republicans received slightly more support from Gridiron PAC.

credit: Business Insider
credit: Business Insider

Labor and anti-trust lobbying has typically been the primary focus for the NFL’s political agenda. However, growing awareness of performance enhancing drugs and brain injuries sustained by players has refocused the PAC’s recent lobbying efforts.

Citizens For Responsibility and Ethics in Washington reports that the NFL has been “shoring up its defense in the face of congressional interest in player safety, drug testing, and labor issues.”

Growing scrutiny over tax exemptions for billion-dollar organizations, like ones mentioned in Sen. Coburn’s report, raises questions as to the legitimacy of the NFL’s 501(c)6 status. The exemption was passed in 1960 following an anti-trust exemption for the merger between the AFL and NFL.

Perhaps it is time to revisit this arrangement and consider what sensible tax policies should apply to organizations like the National Football League.

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Edward Bonnette
Edward Bonnette

So if there are no 'shareholders', where do the profits end up? Who are the main beneficiaries? The players and staff?