Politics

Here's Exactly How the NFL Avoids Taxes

January 29th 2015

By:
Mike Vainisi

The NFL announced that it will make at least $4.5 million for each 30-second ad it runs on Super Bowl Sunday.

Pretty good for a non-profit.

That's right - the NFL, which makes more than $9 billion a year, is technically a non-profit. That means the league does not pay taxes. 

How is this possible?

The 32 NFL franchises that make up the NFL are for-profit enterprises. So, the Seattle Seahawks and New England Patriots -- this year's Super Bowl teams -- will be paying taxes in April. But the league is considered a non-profit, tax-exempt trade association. Not paying taxes makes it much easier for the league to pay $44.3 million in compensation to its commissioner, Roger Goodell. (Goodell's salary is $3.5 million -- but he pulled in a cool $40.35 million bonus.)

Former Sen. Tom Coburn (R-Okla.) tried in 2013 to close this loophole. Last year, Sen. Corey Booker (D-NJ) suggested the loophole be closed. Booker also proposed that the federal government use tax revenue collected from the NFL to help victims of domestic violence. This idea came after a revelations of multiple incidents of domestic violence involving NFL players.

So far, no luck. The NFL's millions spent lobbying Congress has surely helped protect the league's tax-exempt status.

Do other leagues not pay taxes?

A few leagues do. USA Today had a nice summary last year: The NHL, the NCAA, and the PGA Tour have a similar, tax-exempt status. Major League Baseball was tax-exempt until 2007, and the NBA has never had this status.

The NFL got its status as part of its overall deal with Congress in the 1960s to gain approval to merge with the old American Football League (AFL), also according to USA Today. (Fun fact: The league promised to put a team in New Orleans as part of this exchange. So, Saints fans, you should thank Congress for your team.)

How does this matter for people who don't care about football?

Loopholes such as this one result in lost tax revenue that the government could otherwise put toward programs you like.

This also gets to the difficulty of the tax reform. Every politician claims they have a desire to reform or "simplify" the tax code. House Speaker John Boehner (R-Ohio) and Senate Majority Leader Mitch McConnell (R-Ky.) -- the Republican leadership running Congress -- even mentioned tax reform on 60 Minutes last Sunday. President Obama also discussed making the tax code more fair during his State of the Union address last week. "Great! Both parties agree," you might think.

Not so fast. Closing a loophole like this is pretty difficult because closing a loophole also means raising taxes on somebody because if a loophole exists, someone is saving money because of it. And for every loophole like this one, there is someone like the NFL spending a lot of money to protect it. Sen. Booker said the NFL's tax loophole costs the government more than $100 million a year. That means the NFL spent less than $1.5 million in lobbying to save itself $100 million in taxes. Sounds like a good investment.