Super Bowl Loophole

February 06, 2013
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In order to avoid harming economic growth by raising revenue through new taxation, Congress should first consider reducing wasteful spending and examining areas where tax revenue is lost. One possible source of lost revenue, according to Senator Tom Coburn, M.D (R-OK) in his publication, “Waste Book,” is the tax exempt status of several National Sports Leagues. 

Sports leagues like the NFL, PGA, and NHL, do not pay federal income tax on earnings. In order to claim non-profit status under IRC Section 501(c)(3), an organization’s purpose must be either religious, charitable, scientific, literary, educational, preventing cruelty to animals or children, testing public safety, or fostering national or international amateur sports.  However, professional sports leagues fall under IRC 501(c)(6), which “provides exemptions for business leagues, chambers of commerce, real estate boards, boards of trade, and professional football leagues (whether or not administering a pension fund for football players), 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.”  The same rule protects other sports leagues, not just football: “the status of a professional sports league, exempt under IRC 501 (c) (6), will not be adversely affected because its primary support is derived from the sale of television broadcasting rights to the tournaments it conducts. The sale of broadcast rights serves to increase public awareness of the sport.” Indeed, the public was made quite aware of the Super Bowl this past weekend, and Beyoncé. 

Here are some of the dollars involved in the biggest sports leagues:

NFL : “trade association promoting interests of its 32 member clubs”

  • $184,299,577 in revenue in 2010
  • $80,411,642 in salaries, other compensation, or employee benefits
  • $155,165,666 in other expenses
  • $872,947,229 in total assets

PGA: “To promote the enjoyment and involvement in the game and to contribute to the growth of the golf professional and the golf industry the PGA will accomplish this mission by enhancing the skills of golf professionals and the opportunities for amateurs, manufacturers, and the general public as a result, the PGA will evaluate the standards of the professional golfers’ vocation, stimulate interest in the game of golf, and promote the overall vitality of the game” 

  • $93,458,805 in revenue in 2010
  • $21,773,574 in Fees for Services (non-employees) Management
  • $98,773,538 in Payroll Taxes Other
  • $8,267,976 in Advertising and Promotions
  • $4,702,447 in Travel

NHL: “to perpetuate professional hockey in the US and Canada”

  • $89,117,461 in total revenue in 2010
  • $46,006,795 in salaries, other compensation, employees benefits
  • $378,926,644 in total assets

(All information above are from each leagues’ respective 990 forms. These forms are open to the public.)

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