Perhaps the most famous tax break in America is the one bestowed by Congress on the NFL. It’s famous for its seeming illogic — the NFL, hugely profitable, being called a “nonprofit.”
And it’s famous, along with the antitrust exemption for pro football, for the number of times members of Congress have threatened subtly or otherwise to take it away.
The occasions range from the anger of then-Sen. John F. Kerry (D-Mass.) in 2007 over a blackout of a New England Patriots game to resentment about the name of the Washington, D.C., football team to concern about concussions to anger over what Republican Sen. Tom Coburn (Okla.) and Maine’s independent Sen. Angus King called “tax earmarks.”
“For every dollar that goes out in a case like this, that’s a dollar my constituents have to pay in income taxes,” King said. “When I talk to people about the NFL being a nonprofit tax-exempt organization, they’re just astounded.” A tax reform package sponsored by House Ways and Means Committee Chairman Dave Camp of Michigan is sitting in committee now. See Section 5301, “Repeal of tax-exempt status for professional sports leagues.”
Now, in the wake of the domestic abuse controversies in the NFL, the rumbling has started anew. Congress must now investigate the league’s handling of the domestic abuse charges, Democratic Rep. Jackie Speier of California said in a press release, as well as its “tolerance of performance enhancing drugs, the impact of traumatic brain injury on players later in life, and the tax-exempt status the NFL enjoys thanks to a loophole Congress created in the ’60s.”
But don’t count on anything happening — ever — to the exemptions enjoyed by pro sports. The NFL remains a heavy hitter in Washington. Its officials and political action committee donated more than $1.4 million to members of Congress during the past two election cycles, according to data compiled by the Center for Responsive Politics. It spends millions as well on as many as 26 lobbyists from top-tier Washington firms.
Plus, if Congress were to revoke the NFL’s nonprofit, tax-exempt status, it might have to so the same for the National Hockey League and the Professional Golfers Association, men’s and women’s. Major League Baseball and the National Basketball Association gave up their status in part because it wasn’t saving them much money, if any at all, and it meant revealing potentially embarrassing executive salary information.
Indeed, we wouldn’t know how much NFL Commissioner Roger Goodell made but for IRS disclosure requirements for nonprofits. And it’s the staggering sum — $74 million over a two-year period, according to Businessweek — that’s really fueled the controversy. Juxtaposed with the term “nonprofit,” the league looks awfully profitable for Goodell and other league executives. According to the New York Times, the NFL’s general counsel was paid $7.9 million in 2012, and its executive director $26.1 million.
“If the NFL were a real public company … the pay would be exorbitant,” said Businessweek. “According to data firm Equilar, a $37 million annual salary would put him right on the edge of the top-10 highest paid chief executive officers in the U.S.” Goodell’s compensation has been called “absurd” and a “stunner.”
In fact, by some calculations, the league — as opposed to the teams, which are not tax-exempt — would pay no taxes because it’s constantly in the red. The league itself is a bit of a money loser, according to Forbes and a CNBC calculation based on the latest available filings from 2012. Moves to take away the NFL’s tax exemption are “silly,” Peter Reilly wrote in Forbes. “Football in America makes about $10 billion annually,” said CNBC, and the NFL “actually wound up in the red for $304,462,262 that year.” Goodell, it noted, made more than $44 million.
But revoking the tax-exemption isn’t in the cards anyway. The NFL doesn’t lose games on Capitol Hill. Consider how it got its special status in the first place in the mid-1960s.
According to a book by Michael MacCambridge, as recounted in this 2010 New York Times article, it happened when Pete Rozelle, the NFL commissioner in the 1960s, wanted to merge the NFL and the old AFL and needed an act of Congress to get around antitrust laws.
As it happened, New Orleans was trying to get a football franchise about the same time. Two of the most powerful men in Congress, House Majority Whip Hale Boggs (D) and Senate Majority Whip Russell Long (D), were Louisianans who wanted something from Rozelle: a team. Long got the exemptions inserted into a foreign aid bill. Rozelle was grateful when he ran into Boggs in the Capitol one day.
As MacCambridge recounts, Rozelle said, “Congressman Boggs, I don’t know how I can ever thank you enough for this. This is a terrific thing you’ve done.”
Said Boggs: “What do you mean you don’t know how to thank me? New Orleans gets an immediate franchise in the NFL.”
Rozelle replied equivocally: “I’m going to do everything I can to make that happen,” which prompted Boggs to suggest they could always call off the vote. “Rozelle,” MacCambridge wrote, “took two giant strides after Boggs, turned him gently around and said, ‘It’s a deal, Congressman. You’ll get your franchise.'”
Boggs finished the conversation. “‘If this doesn’t work out you will regret this for the rest of your f—ing life.'”
It worked out.