NFL gives up tax exemption

NFL gives up tax exemption
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The National Football League on Tuesday decided to give up the tax-exempt status for its league office, agreeing to the demands of lawmakers who denounced it as an unconscionable giveaway.

Roger Goodell, the league’s commissioner, essentially told NFL owners in a memo that the tax incentive wasn’t worth what had become a years-long public relations hassle. But the move also offers the league new ways to shield information — including Goodell’s $44 million salary in 2012 — from public view.

In his memo, Goodell insisted that the league’s tax status has “been mischaracterized repeatedly,” noting that the government taxes income from TV rights fees, ticket sales and any other revenue generated by the 32 professional football teams.

He added that abandoning the tax exemption wouldn’t change how the NFL operates. With that in mind, both Goodell and Bob McNair, the owner of the Houston Texans, said it was past time for the league to get rid of the “distraction” caused by the tax exemption.

“The fact is that the business of the NFL has never been tax exempt,” Goodell wrote. 

For Goodell and the NFL, the tax exemption had become a ripe target without doing all that much to help the league’s bottom line.

Lawmakers, including House Oversight Committee Chairman Jason ChaffetzJason ChaffetzFive memorable moments from Hillary Clinton’s newest book Clinton says she mistook Chaffetz for Priebus at Trump's inauguration Curtis wins GOP primary for House seat vacated by Jason Chaffetz MORE (R-Utah), former Sen. Tom CoburnTom Coburn-trillion debt puts US fiscal house on very shaky ground Al Franken: 'I make fun of the people who deserved it' The more complex the tax code, the more the wealthy benefit MORE (R-Okla.) and Sen. Angus KingAngus Stanley KingSenate's defense authorization would set cyber doctrine Washington dysfunction is damaging national security Booker signs on to Sanders's 'Medicare-for-all' bill MORE (I-Maine) had all sought to end the NFL’s exemption, making the case that a sports league that made roughly $10 billion a year shouldn’t be classified like a trade association for tax purposes. 

Senate Minority Leader Harry ReidHarry ReidThe Memo: Trump pulls off a stone-cold stunner The Memo: Ending DACA a risky move for Trump Manchin pressed from both sides in reelection fight MORE (D-Nev.) and Sen. Maria CantwellMaria Elaine CantwellSenate energy bill is misguided gift to Trump’s dirty fossil fuel agenda Help states solve their housing problems with the Affordable Housing Credit Improvement Act Time to pass the U.S. OUTDOOR Act to support American jobs and consumers MORE (D-Wash.) previously proposed stripping the NFL of its tax exemption as long as the Washington Redskins kept their team name.

On Tuesday, lawmakers cast the NFL’s decision as a victory, though it gives them one less method for exerting pressure on the league.

“It is rewarding to see such an important and positive step toward restoring basic fairness,” Chaffetz and the Oversight panel’s top Democrat, Rep. Elijah Cummings (Md.), said in a statement. 

“We hope other professional sports organizations in similar situations will follow the positive example set by the NFL, and we look forward to rightfully returning millions of dollars to the federal treasury as a result.”

Congressional scorekeepers have projected that legislation rolling back the league’s tax exemption would raise roughly $109 million over a decade. Other major sports leagues, such as Major League Baseball and the National Basketball Association, had either surrendered or never had a tax exemption. 

The NFL had been clinging to its tax exemption at a time when lawmakers were showing interest in an array of other issues facing the league, including concussions and domestic violence accusations against several prominent players.

Under the previous setup, the IRS treated the NFL’s league office the same way it does the Chamber of Commerce and other trade associations organized as 501(c)(6) nonprofits. In his memo, Goodell said the IRS first gave the league tax-exempt status during World War II, more than seven decades ago.

The NFL’s decision leaves the National Hockey League as the only major North American sports league with a tax exemption, though various professional organizations for golf and tennis also are on the IRS’s exemption list. 

The league’s move mirrors a decision the MLB made to drop its exemption in 2007, when professional baseball was in the midst of a burgeoning controversy over performance enhancing drugs. The MLB reportedly decided its league office should pay taxes, in part, to avoid reporting certain operational details, like salaries, required of nonprofit organizations.

But lawmakers said Tuesday that they had other ways to put pressure on the NFL.

Reid said Tuesday that the tax exemption was a small issue compared to all the problems the NFL is facing, including what he called the league’s “kowtowing” to the Redskins.

“We know that they have an ongoing crisis with the head injuries,” Reid added. “So the National Football League has a lot more problems than the subsidy that they get from taxpayers.”

And Sen. Chuck GrassleyCharles (Chuck) Ernest GrassleyGrassley: 'Good chance' Senate panel will consider bills to protect Mueller Overnight Finance: CBO to release limited analysis of ObamaCare repeal bill | DOJ investigates Equifax stock sales | House weighs tougher rules for banks dealing with North Korea GOP state lawmakers meet to plan possible constitutional convention MORE (R-Iowa), a former chairman of the tax-writing Finance Committee, noted that the NFL still enjoys an exemption from antitrust charges thanks to Congress, which gives lawmakers a point of entry for any issues they might have with the league.

“If you’ve got any questions about the NFL, there’s a way to ask them,” he said.

Peter Schroeder contributed.