The National Football League (NFL) will give up its status as a taxA tax is a mandatory payment or charge collected by local, state, and national governments from individuals or businesses to cover the costs of general government services, goods, and activities. -exempt organization, reports Richard Rubin at Bloomberg. Rubin calls it a "move with minimal financial effect and significant symbolic value." NFL Commissioner Roger Goodell said that the tax-exempt status was becoming a "distraction."
This is an accurate understanding of the issue. Over the last year, several lawmakers have introduced bills attempting to take away the NFL's tax-exempt status, largely because of their feelings on non-tax issues like domestic violence by players, or whether or not Washington should change its team name.
While those feelings may be legitimate, the tax status of the NFL itself doesn't have broad financial implications. Roger Goodell's letter reminds us why.
“Every dollar of income generated through television rights fees, licensing agreements, sponsorships, ticket sales, and other means is earned by the 32 clubs and is taxable there,” Goodell wrote. “This will remain the case even when the league office and Management Council file returns as taxable entities, and the change in filing status will make no material difference to our business.”
The tax-exempt portion of the NFL is the league office, which makes no money. It just collects some money from teams and spends it all on business expenses and (taxable) salaries. There is no "owner" of the NFL who reaps profits from the league office. Rather, the profits accrue to teams, which are taxable. Similarly, the (often staggering) salaries that accrue to individual players are also taxable.
In my past coverage of this subject, I wrote the following:
Here’s the problem with ending the “special tax breaks” for the NFL: it doesn’t do anything. It’s ineffective. It’s null. It’s a completely toothless strategy – as toothless as any game plan the Buccaneers have drawn up lately.
This remains true, whether the tax-exempt status was given up voluntarily or not. The only differences between then and today are that the league can now avoid a particular kind of congressional harassment, and maybe – just maybe – the Buccaneers will use the first overall draft pick wisely and compete effectively in 2015.
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