Imagine you are a passionate Cincinnati Bengals fan living in Pittsburgh, home of your arch-nemesis, the Steelers. Constantly being chastised and poked fun at for wearing the Bengal stripes would be hard enough. But what if you had to pay for the Steelers stadium on top of that?
Although this isn't a real-life example, it’s entirely possible because of the public subsidies that NFL teams receive. $260 million of the money used to pay for the Steelers' Heinz field came from Pennsylvania taxpayers. This practice isn’t isolated to Pittsburgh — several NFL teams receive taxpayer money to finance certain expenses. Judith Long, a professor in Harvard's urban planning department, estimates that 70% of the capital cost of NFL stadiums has been provided by taxpayers and not NFL owners.
Using public funds for stadiums seems a little sketchy, especially since teams such as the Panthers are making a decent profit. When you couple this with the fact that the NFL is a non-profit organization, it definitely raises some questions about the legitimacy of their financial structure.
The NFL considers itself a trade association and qualifies as a non-profit under §501(c)(6) of the Internal Revenue Code, which states that "...professional football leagues (whether or not administering a pension fund for football players)" are exempt from taxes as long as the league is "not organized for profit and no part of the net earnings of which inures to the benefit of any private shareholder or individual."
Of the $9.5 billion that the NFL takes in each year, it distributes most of it back to the 32 teams which are subject to taxes. Ticket revenues, broadcast television payments, and other sources of national revenue are distributed to the clubs and subsequently taxed. However, before doing all of this, the NFL has to cover some of its own expenses.
Roger Goodell, the league’s commissioner, received $9.9 million in 2009. That’s a pretty decent salary for a man heads a non-profit organization. Steve Bornsten, the president of the NFL Network, received $12.6 million from the NFL even though NFL Network is part of NFL Enterprise, LLC. Additionally, there are 296 NFL employees who made over $100,000 in 2010 and 135 independent contractors hired by the NFL made over $100,000. The league also spent $1.4 million on lobbying in 2009, according to Andrew Delaney in a Vermont Law Review article.
Sen. Tom Coburn (R-Okla) has decided to put an end to this. Although increasing taxes isn’t exactly at the top of Sen. Coburn's to-do list, he has recently introduced a bill that would strip the NFL (as well as the NHL and PGA tour) of their non-profit exemptions and subject them to taxation. Sen. Coburn claims that there may be an additional $91 million in annual government revenue if the NFL and NHL were no longer non-profit organizations. However, Sen. Coburn has had trouble garnering support for this measure, and the millions that the NFL spends on lobbying each year will certainly not help the senator’s fight. Would getting taxed really cripple an organization like the NFL? It's doubtful, and the additional government revenue would certainly be helpful.
When the NFL was organized in 1966 it may have seemed more like a non-profit, but that's certainly not true anymore. The NFL and the organizations under its umbrella produce billions in revenue each year. It's hard to believe that the NFL is “not organized for profit” in accordance with the Internal Revenue Code, although the NFL may structure itself to funnel money through the proper channels in order to avoid a literal breach of the tax code.