This week, the National Football League relinquished its tax exempt status. The NFL and had been exempt from taxes since the 1940s, although each franchise pays taxes on the money it makes.
The NFL made $10 billion last year, so how much will this change in tax status affect the bottom line? Let's take a look:
The NFL had been incorporated as a 501(c)(6) organization. Under this designation, "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" are exempt from paying taxes.
While it may sound odd that a league with annual revenues in the billions of dollars was technically a non-profit organization, NFL Commissioner Roger Goodell contends "the business of the NFL has never been tax exempt," adding, "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."
Tax-exempt companies, however, are required to publicly disclose the salaries for their highest-paid employees. This had become a problem for Goodell, whose $35 million in annual compensation has opened him up to increased scrutiny in recent years.
Most think that the NFL is giving up its tax exempt status to keep executive pay secret. Goodell contends the NFL is voluntarily eliminating a "distraction." Major League Baseball gave up its tax exemption in 2007, and the NBA was never tax-exempt.
The AP reports Goodell also sent a memo to all 32 teams, noting that "a change in the tax status will not alter the function or operation of the league office or Management Council in any way." Whether paying taxes will cut into the leagues profits remains to be seen. Or not seen -- without the public reporting requirements associated with tax exempt status, fans may know even less about the league's finances.
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