Each week during professional football season, along with tens of millions of other Americans, I can be found glued to a television rooting for an NFL team. Granted, as a New York Jets fan, this is an exercise that involves less cheering and lot more colorful language and face palming.
But in an increasingly politicized culture, football provides an outlet for Americans to get jazzed up about something that does not involve bitter ideological disputes and whose outcome doesn’t have major national or international implications.
Recently, however, two things that I love — politics and football — have intersected. The NFL’s poor handling of the Ray Rice domestic violence scandal and news of Adrian Peterson’s indictment in a child injury case brought more scrutiny to the league, which was already under fire for a litany of other issues. And lawmakers have seized on an opportunity.
Sen. Cory Booker, D-N.J., has proposed a bill to strip the NFL of its current nonprofit status over the league’s handling of domestic violence. Meanwhile, Sen. Maria Cantwell, D-Wash., has also threatened to do so, only in her case, it’s because the league hasn’t forced the Redskins to change their name.
In reality, however, lawmakers shouldn’t need an excuse to end the NFL’s tax-exempt nonprofit status. It should end because it’s bad policy that exemplifies the problems with the nation’s disastrous tax code.
The NFL’s nonprofit status was enshrined into law in a 1966 act meant to protect the league from antitrust issues surrounding its merger with the rival AFL (which was considered a lesser league until my Jets pulled off the greatest upset in football history in the 1969 Super Bowl).
The same law added, “professional football leagues” to the part of the tax code listing entities granted nonprofit status.
Though the league distributes lucrative television and licensing revenue among the 32 teams, which do pay taxes on their earnings, the teams also send dues to the NFL league office. The office does not pay taxes on those dues, and the fees could be deducted from the teams’ taxes.
The NFL reported total revenue of $326 million for the 2012 tax year, according to its most recent publicly available filing with the Internal Revenue Service. During that year alone, the NFL paid $44.2 million in compensation to commissioner Roger Goodell.
Goodell earned $105 million over the course of the five-year period from 2008 through 2012, according to a CNN report – more than any player.
Sen. Tom Coburn, R-Okla., has been fighting a lonely battle against the tax exemption for years, and in January, he introduced a bill that would have restricted the ability of sports leagues to claim nonprofit status if their annual revenue exceeded $10 million. His bill would not only affect the NFL, but the NHL, PGA Tour, and the LPGA as well and would generate $109 million in tax revenue over a decade, according to the Joint Committee on Taxation.
Major League Baseball once also claimed the tax exemption, but voluntarily switched to a for-profit in 2007, which avoided the requirement to disclose salaries above $150,000.
The idea of allowing professional sports leagues with huge revenue streams to file as nonprofit entities makes a mockery of the tax code.
But beyond that, maintaining the status quo gives opportunistic politicians a hammer that they can use to interfere with issues that should be beyond their purview.
Whatever one’s views about the controversy over the Redskins name (I personally find it anachronistic), the issue shouldn’t prompt the meddling of a U.S. senator.
If, however, the NFL is going to claim special interest carve outs in the tax code, senators won’t hesitate to jump into the fray, toppling down the barrier between politics and professional football.
