# The NFL is Tax Exempt... WTF?! **URL:** \ **Category:** The Game Room\ **Created:** [May 22, 2013, 1:22pm UTC](https://boards.straightdope.com/t/the-nfl-is-tax-exempt-wtf/659011 "2013-05-22T13:22:32Z")\ **Posts on this page:** 9\ **Page:** 5
**Author:** ![Really\_Not\_All\_That\_Bright](https://avatars.discourse-cdn.com/v4/letter/r/e8c25b/32.png) [@Really\_Not\_All\_That\_Bright](https://boards.straightdope.com/u/Really_Not_All_That_Bright)\ **Post date:** [May 24, 2013, 5:02pm UTC](https://boards.straightdope.com/t/the-nfl-is-tax-exempt-wtf/659011/81 "2013-05-24T17:02:33Z")
You’ve pointed to one purported form of special treatment. What are the others? ---
**Author:** ![Gangster\_Octopus](https://avatars.discourse-cdn.com/v4/letter/g/a8b319/32.png) [@Gangster\_Octopus](https://boards.straightdope.com/u/Gangster_Octopus)\ **Post date:** [May 24, 2013, 5:07pm UTC](https://boards.straightdope.com/t/the-nfl-is-tax-exempt-wtf/659011/82 "2013-05-24T17:07:09Z")
> [@Amateur\_Barbarian](#): > > No, it’s not. There are two factions here: one questioning why this segment of American business - a very large, very profitable, very heavy on public funding segment - gets endless special treatment and exemptions, and faction that just doesn’t see any problem with it, cuz, you know, it’s the Cowboys/Yankees/Lakers/whatever. But the teams DO pay taxes ---
**Author:** ![Munch](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/munch/32/5281_2.png) [@Munch](https://boards.straightdope.com/u/Munch)\ **Post date:** [May 24, 2013, 5:11pm UTC](https://boards.straightdope.com/t/the-nfl-is-tax-exempt-wtf/659011/83 "2013-05-24T17:11:46Z")
> [@Amateur\_Barbarian](#): > > one questioning why this segment of American business - a very large, very profitable, very heavy on public funding segment Oh, I think I see. You’re talking about the organizations that receive public funding, make massive amounts of cash, etc. That makes sense. What doesn’t make sense is why you seem to think that means the NFL - because what you’re talking about is the NFL’s members - the actual teams. THEY’RE the ones making all the money, getting the public funding. Direct your ire where it should be directed. > [@](#): > > Not being dead drunk on sportsophilia, I’m in the first faction. :rolleyes: You forgot the third faction - the one that can comprehend how the NFL easily fits into the tax designation 501(c)(6) and then integrates that into the discussion. I mean, the NFL has been around since 1920 - it’s not like their status has been a recent development, and likely far exceeds the NFL being in the top 3 of the country’s favorite past times. ---
**Author:** ![Quimby](https://avatars.discourse-cdn.com/v4/letter/q/22d042/32.png) [@Quimby](https://boards.straightdope.com/u/Quimby)\ **Post date:** [May 24, 2013, 8:43pm UTC](https://boards.straightdope.com/t/the-nfl-is-tax-exempt-wtf/659011/84 "2013-05-24T20:43:58Z")
> [@Really\_Not\_All\_That\_Bright](#): > > _Who_ is sheltering assets in the NFL, exactly? The teams pay into the NFL and take a deduction as charitable contribution and then get money back in no interest loans. ETA: Someone above said that the NFL made no profit. That is untrue. According to this [article](http://www.nj.com/giants/index.ssf/2013/05/the_us_senate_is_going_after_n.html) NFL Ventures turned a pure profit of $1.295 billion in 2010. ---
**Author:** ![Freddy\_the\_Pig](https://avatars.discourse-cdn.com/v4/letter/f/a587f6/32.png) [@Freddy\_the\_Pig](https://boards.straightdope.com/u/Freddy_the_Pig)\ **Post date:** [May 24, 2013, 8:46pm UTC](https://boards.straightdope.com/t/the-nfl-is-tax-exempt-wtf/659011/85 "2013-05-24T20:46:40Z")
> [@Martin\_Hyde](#): > > . . . I’m not really seeing anything about the NFL that would make them seem like anything other than a big, powerful trade organization. Other trade organizations, however, are generally open to any person or organization that meets the membership requirements and pays dues. The NFL is _exclusive_–it carries only a fixed number of teams, which it votes to admit at periodic intervals subject only to its own discretion. This exclusivity means that it lacks the public character associated with other “business leagues, chambers of commerce, real estate boards, and boards of trade” enumerated in Section 501(c)(6). I don’t believe professional sports leagues ever should have been granted 501(c)(6) status. I’m not sure why or when they were. The NFL got a few words added in 1966 to include “professional football leagues (whether or not administering a pension fund for football players)”. Apparently they were fearful that operating a pension fund would cause them to _lose_ the 501(c)(6) status that they already held. This fear was probably unfounded, since MLB has been operating a pension fund since 1947 and didn’t lose its 501(c)(6) status until 2008, when it gave it up voluntarily. Then we have the issue of the stadium fund . . . > [@Martin Hyde](#): > > Aside from the zero interest loan (which I’ve yet to see definitively shown to be going on–and I’m just saying that in hopes of someone presenting an article fully explaining it, not to say I don’t believe you) . . . Here is an article [about the most recent stadium loan](http://www.mercurynews.com/southbayfootball/ci_19878108), to the San Francisco 49ers in 2012. > [@](#): > > Though the NFL has been secretive about how exactly it funds stadiums, the funds come from the league’s general pool of revenue, said Stanford University professor Roger Noll, a sports economist. . . . The NFL usually gives a combination of grants and low-interest loans to teams to build stadiums, Noll said, though it’s unclear what exactly the 49ers are getting, and York wouldn’t get into specifics. The 49ers owner, however, rejected characterizing the NFL’s contribution as a straight loan, saying it amounted to “NFL support” for the project, composed of a “fairly intricate” combination that will go toward financing construction of the stadium on a parking lot adjacent to the Great America theme park. According to [another article](http://msfiduciary.com/2011/01/31/nfl-vs-irs-a-super-bowl-of-epic-proportions/), “according to its 2008 Form 990 disclosure, the League (had) over $700 million in loans outstanding in the program at 0% interest”. The details of the loans are in any case unimportant. The important thing is that the loan money clearly “inures to the benefit of a private shareholder or individual”. _Even under existing law_, this should disqualify the NFL from 501(c)(6) status. It is not clear to me why it doesn’t. I would prefer to go further and disqualify professional sports leagues from 501(c)(6) altogether. They lack any public character, are outside of the spirit in which 501(c)(6) was created, and are inextricably and deeply bound up with the profit-making activities of their member/owners. ---
**Author:** ![Martin\_Hyde](https://avatars.discourse-cdn.com/v4/letter/m/47e85d/32.png) [@Martin\_Hyde](https://boards.straightdope.com/u/Martin_Hyde)\ **Post date:** [May 24, 2013, 9:02pm UTC](https://boards.straightdope.com/t/the-nfl-is-tax-exempt-wtf/659011/86 "2013-05-24T21:02:48Z")
> [@Quimby](#): > > The teams pay into the NFL and take a deduction as charitable contribution and then get money back in no interest loans. > > ETA: Someone above said that the NFL made no profit. That is untrue. According to this [article](http://www.nj.com/giants/index.ssf/2013/05/the_us_senate_is_going_after_n.html) NFL Ventures turned a pure profit of $1.295 billion in 2010. I’d argue they almost certainly are **not** considered “charitable contributions.” A business contribution to the Chamber of Commerce is not considered charitable, it is just considered a deductible business expense because it is seen that valid business purposes are advanced via membership in a trade organization and thus spending to that end is no different than spending to raise awareness for your product (advertising), spending to enhance your production (capital expenditure) etc. ---
**Author:** ![Martin\_Hyde](https://avatars.discourse-cdn.com/v4/letter/m/47e85d/32.png) [@Martin\_Hyde](https://boards.straightdope.com/u/Martin_Hyde)\ **Post date:** [May 24, 2013, 9:14pm UTC](https://boards.straightdope.com/t/the-nfl-is-tax-exempt-wtf/659011/87 "2013-05-24T21:14:03Z")
> [@Freddy\_the\_Pig](#): > > Other trade organizations, however, are generally open to any person or organization that meets the membership requirements and pays dues. The NFL is _exclusive_–it carries only a fixed number of teams, which it votes to admit at periodic intervals subject only to its own discretion. This exclusivity means that it lacks the public character associated with other “business leagues, chambers of commerce, real estate boards, and boards of trade” enumerated in Section 501(c)(6). So you’re actually not just arguing that you think the NFL _shouldn’t_ be a 501(c)(6), you’re arguing that under _current tax code_ it is illegal for them to be so? I highly doubt that, given the code was specifically changed to cover football leagues it seems doubtful that is the state of current law. > [@](#): > > Then we have the issue of the stadium fund . . . Here is an article [about the most recent stadium loan](http://www.mercurynews.com/southbayfootball/ci_19878108), to the San Francisco 49ers in 2012. According to [another article](http://msfiduciary.com/2011/01/31/nfl-vs-irs-a-super-bowl-of-epic-proportions/), “according to its 2008 Form 990 disclosure, the League (had) over $700 million in loans outstanding in the program at 0% interest”. > > The details of the loans are in any case unimportant. The important thing is that the loan money clearly “inures to the benefit of a private shareholder or individual”. _Even under existing law_, this should disqualify the NFL from 501(c)(6) status. It is not clear to me why it doesn’t. No one has addressed my earlier point, interest free loans almost always have tax implications. They’re either considered a gift, or the IRS will consider that you’ve received “phantom interest” and consider some portion of the repayments to be taxable income. So it is unlikely the 0% loans are a tax dodge. It appears from [this](http://www.irs.gov/pub/irs-tege/eotopick03.pdf) document that loan-making activity is a reason to deny tax-exempt status under 501(c)(6) if **that is the primary purpose of the organization** , but that it would appear permissible if that were not the case. So if the NFL solely existed to do these loans, that would appear to be a valid reason to end its 501(c)(6) organization status. For example, an organization existed solely to collect dues from credit-unions and then make interest free loans to member organizations in financial trouble. That was deemed unacceptable because the primary purpose of the organization was to perform a particular service (making of interest free loans.) The NFL could probably successfully argue their primary purpose is not the performance of a particular service since they provide a wide range of member benefits in many different areas. Further, the stadium fund from the article you linked was said to have been non-existent for a few years since it ran dry. So it obviously could not constitute the primary purpose of the NFL. > [@](#): > > I would prefer to go further and disqualify professional sports leagues from 501(c)(6) altogether. They lack any public character, are outside of the spirit in which 501(c)(6) was created, and are inextricably and deeply bound up with the profit-making activities of their member/owners. Maybe so, but ultimately that would just result in the NFL being a pass-through organization, which it mostly is anyway. I see my example about (taxable) agricultural cooperatives was ignored. But while they are taxable, they can functionally operate such that they have “no profit” and that is probably exactly what the NFL would do. Because the NFL doesn’t exist to generate profit for the NFL “organization” but for the individual ownership groups of the 30 teams. Since the NFL organization has no shareholders there is no interested party that wants the “organization” to accrue profits. That’s precisely the same as an ag cooperative, aside from maybe the administrators wanting to pad their salaries, there is no stakeholder in an ag cooperative that wants the collectively owned entity to accumulate profits. I’m fairly convinced both by the behavior of ag cooperatives and the MLB, that most likely being 501(c)(6) provides only marginal benefit to the NFL, maybe it was more important in the past but I think it’s easier to structure “pass-through” entities these days in general that incur no real tax liability and it would not be that hard to structure the NFL that way. But that actually **isn’t really a bad thing** , all the money that is made through the agreements that the NFL structures and the royalties it overseas the collection of and etc goes back to the team’s ownership where it is taxed as income. So both right now and if the NFL was a taxable pass-through (like an ag cooperative) I think total revenue raised would probably be the same and you’d probably still have an organization at the top collectively owned (as opposed to being a non-owned membership “organization”) that itself pays little to no tax. ---
**Author:** ![Freddy\_the\_Pig](https://avatars.discourse-cdn.com/v4/letter/f/a587f6/32.png) [@Freddy\_the\_Pig](https://boards.straightdope.com/u/Freddy_the_Pig)\ **Post date:** [May 24, 2013, 9:44pm UTC](https://boards.straightdope.com/t/the-nfl-is-tax-exempt-wtf/659011/88 "2013-05-24T21:44:00Z")
> [@Martin\_Hyde](#): > > Maybe so, but ultimately that would just result in the NFL being a pass-through organization, which it mostly is anyway. I’m fine with that. In fact, that is what I **want** to see happen. Profits belong with the teams, and I don’t want to see even a small fraction of them deferred or hidden as appears to be taking place with the stadium fund. Furthermore I don’t want to see the league reap the ancillary 501(c)(6) benefits referenced in some of the articles upthread, such as exemptions from state and local hotel taxes. These benefits are trivial relative to the size of the league, but they are not zero and they should be stopped. ---
**Author:** ![Zakalwe](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/zakalwe/32/270_2.png) [@Zakalwe](https://boards.straightdope.com/u/Zakalwe)\ **Post date:** [May 25, 2013, 1:40am UTC](https://boards.straightdope.com/t/the-nfl-is-tax-exempt-wtf/659011/89 "2013-05-25T01:40:31Z")
> [@Amateur\_Barbarian](#): > > No, it’s not. There are two factions here: one questioning why this segment of American business - a very large, very profitable, very heavy on public funding segment - gets endless special treatment and exemptions, and faction that just doesn’t see any problem with it, cuz, you know, it’s the Cowboys/Yankees/Lakers/whatever. > > Not being dead drunk on sportsophilia, I’m in the first faction. What special treatment? Try building a large factory with thousands of jobs at stake. Cities will knife each other getting in line to give you tax breaks, grant money, match money, etc - if you just choose their city! Major league franchises (any sport) are no different. There’s an argument to be made about the ROI, but measuring overall economic impact is a fuzzy field at best. [Previous page](https://boards.straightdope.com/t/the-nfl-is-tax-exempt-wtf/659011.md?page=4)