"ONE" President Romney Loophole Candidate!..
..exerpt from Sen. Coburn's WasteBook 2012...
2) Professional sports loophole – (Taxes) $91 million
The National Football League (NFL), the National Hockey League (NHL), and the Professional Golfers’ Association (PGA) classify themselves as non-profit organizations to exempt themselves from federal income taxes on earnings. Smaller sports leagues, such as the National Lacrosse League, are also using the tax status. Taxpayers may be losing at least $91 million subsidizing these tax loopholes for professional sports leagues that generate billions of dollars annually in profits.28 Taxpayers should not be asked to subsidize sports organizations already benefiting widely from willing fans and turning a profit, while claiming to be non-profit organizations.
Touchdown! Grass is always greener when a sports league can score with loopholes to avoid paying taxes.
In 2010, the registered NFL nonprofit alone received $184 million from its 32 member teams. 29 It holds over $1 billion in assets.30 Together with its subsidiaries and teams – many of which are for-profit, taxed entities – the NFL generates an estimated $9 billion annually.31 Each of its teams are among the top 50 most expensive sports teams in the world, ranking alongside the world’s famous soccer teams. Almost half of professional football teams are valued at over $1 billion.
The PGA generated over $900 million in revenue, mostly through television rights, tournament earnings and sponsorships, and royalties. In 2009, the NHL received nearly $76 million from its member teams.
League commissioners and officials benefit from the nonprofit status of their organizations. Roger Goodell, commissioner of the NFL, reported $11.6 million in salary and perks in 2010 alone.35 Goodell’s salary will reportedly reach $20 million in 2019.36 Steve Bornstein, the executive vice president of media, made $12.2 million in 2010.37 Former NFL commissioner Paul Tagliabue earned $8.5 million from the league in 2010.38 The league paid five other officials a total of $19.2 million in just one year.39 In comparison, the next highest salary of a traditional nonprofit CEO is $3.4 million.
Tim Finchem, commissioner of the PGA Tour, earned $5.2 million in 2010.41 The NHL’s commissioner, Gary Bettman, received $4.3 million in 2009.
These organizations are taking advantage of the provision of the tax code that allows industry and trade groups, such as the U.S. Chamber of Commerce or the Natural Resources Defense Council, to qualify as non-profit and tax-exempt. None of these groups can promote a specific brand within an industry but each may promote an industry as a whole. Qualifying organizations pay taxes on few types of income and expenditures, including lobbying. State and local governments usually exempt these organizations from state income and sales tax as well, a boon worth an estimated $10 billion to the nonprofit sector.
Seeing the advantage in operating largely tax-free, the NFL, NHL, and PGA are registered with the Internal Revenue Service (IRS) as nonprofit organizations. These leagues assert they help the professional sport in each of their leagues. For example, on its 2010 tax return, the NFL described itself as a "trade association promoting interests of its 32 member clubs."44 The NHL said its mission is "to perpetuate professional hockey in the US and Canada."45 These benign statements aside, major professional sports leagues are hardly in the business of simply promoting the hockey, football, or golf industry. They are in fact businesses – designed to make money.
The history of the NFL’s tax exemption status stems from the 1966 merger of the then-American Football League and NFL. Congress passed a law granting specific antitrust exemptions to the new NFL.46 At that time, it also added "professional football leagues" to the list of entities eligible for nonprofit status.47 According to the IRS, "Section 501(c)(6) of the Internal Revenue Code provides for the 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" (emphasis added).
One major sports league – Major League Baseball – filed as a nonprofit for years, but chose to become a for-profit limited liability corporation in 2007. At least partly motivating the change was an opposition to the IRS’ new salary transparency rules for nonprofits, which require releasing information on salaries above $150,000.49 The NFL lobbied strenuously in Washington against an expansion of the disclosure reporting, but found little support.
Major professional sports leagues should no longer be eligible for general federal tax exemption. Removing them from federal nonprofit status may also benefit states and localities, which lose out on much needed revenue. For example, the NFL may have lived every taxpayer’s dream at this year’s Super Bowl in Indianapolis. According to the Indianapolis Business Journal, "Hotels and restaurants [did not tax] National Football League employees … The NFL [used] its tax-exempt status as a 501(c)(6) to avoid paying taxes, in addition to fuel, auto rental and admissions taxes."
Hardworking taxpayers should not be forced to provide funding to offset tax giveaways to lucrative major professional sports teams and leagues. Based on publicly available information about the NFL and NHL alone, barring major leagues from using the non-profit status may generate at least $91 million of federal revenue every year.
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