After last evening’s pair of Monday Night Football games, the National Football League’s regular season has officially kicked off. In the nonprofit world, this means enlivening the annual debate regarding the nonprofit status of many professional sports leagues. Despite cogent arguments on both sides of the line, the offense will be forced to punt; policymakers are expected to once again run out the clock on this fairly contentious debate.
Last week, the New York Times posted a simple question on their Room for Debate: “Should pro sports leagues enjoy nonprofit status or are taxpayers paying too many of their bills?” The topic elicited five responses – three from professors, one from a nonpartisan watchdog president, and one from a D.C.-based journalist. The five opinions are split down the middle, with two articles arguing for revoking the tax-exempt status and three articles favoring the status quo (albeit, rather loosely).
On the one hand, the arguments opposed to the tax-exempt allege the NFL, as an entity, has for-profit goals. As Ryan Alexander of Taxpayers for Common Sense noted, “The NFL helps teams make money through joint business ventures – a fine goal for football teams, but not one taxpayers need to subsidize.” Additionally, Alexander notes that a loophole had to be drafted just to count the NFL as a 501(c)(6) organization in the first place; expectedly, the author argues the league is not a trade association. A more blunt position by journalist Patrick Hruby argued the nonprofit status is “utterly nonsensical” and “downright offensive.” Hruby continues, contending the NFL (“as a whole”) facilitates $9 billion of revenue, lacks charitable giving (of its charitable giving, over 90 percent went to the Pro Football Hall of Fame), and redirects funds that could otherwise be serving a greater public good.
On the other hand, arguments “in favor” of the tax-exempt status hinge more on the alternative’s futility. Professor Andrew Zimbalist notes
For the NFL, [the decision to remain a nonprofit] is likely because of a small and idiosyncratic tax liability if the league were to transition out of 501(c)(6) status.
Professor Judith Grant Long continues in this same vein:
[R]evoking the nonprofit status of sports leagues is unlikely to yield much of a windfall for taxpayers.
To provide further context, Professor Richard Steinberg reminds us
Many commercial organizations are nonprofits as billion-dollar universities sell education and hospital chains sell healthcare.
Unsurprisingly, the three professors add an interesting layer of nuance to an otherwise ideologically driven debate.
Pointed out by the authors noted above, the best hope for altering the current tax policy is through legislation. In the Senate, Tom Coburn (R-OK) and Angus King (I-ME) have sponsored S. 1524: Pro Sports Act, which aims “[t]o amend the Internal Revenue Code of 1986 to exclude major professional sports leagues from qualifying as tax-exempt organizations.” Across the hall in the House, Reps. Jason Chaffetz (R-UT) and Peter Visclosky (D-IN) have sponsored H.R. 3965, sharing its title with the Senate Bill.
Responding to a request from Senator Coburn, the Joint Committee on Taxation found that passing the bipartisan bill would increase revenues nearly $110 million from 2014-23. Perhaps this may not be enough incentive to pass the law. Remember, Senator Everett Dirksen (R-IL, 1951-69) once reportedly said: “A billion here, a billion there, and pretty soon you’re talking real money.” Regardless, GovTrack predicts a zero percent chance of either the Senate or House versions being enacted.
Despite the curious takes on this issue, however, Nonprofit Quarterly offers a sobering perspective:
As always, the writers in the Room for Debate are tooting whatever horns they happen to normally toot. Very little new ground is broken.
Though probably a fair account, the horns are worth tooting; at the very least, they help inform the electorate on the otherwise mundane topic of tax policy.
Though today’s debate ends in a draw, there is hope that November’s draft class won’t take a knee on collecting this nine-figure revenue.