My head hurts.
I thought that tax season was over; I even sent my tax forms in early this year, and already cashed my return check .
Then earlier this week, the NFL released a memo to its owners stating that the League has decided to drop its tax-exempt status as a 501(c)(6) non-profit. They will be filing as a corporation and accordingly will have to pay federal taxes on their earnings from this point forward. So back into taxes I climbed.
(A quick note: the NFL is REALLY good at dropping not great news at perfect times. “Hey everyone, we’re no longer non-profit.. look, draft! Mariota!”)
There was a lot of material to review and no TurboTax this time to make it easier. I learned a good many things that will likely not have any use beyond the scope of this article. For example, the NFL’s corporate structure is setup so that the league itself is actually segmented itself into several parts. The single portion of the NFL that is making this change is the League Office, which employs the commissioner and other support staff and personnel that help run the league, set scheduling, do charitable work, etc. This change in status is being done independent of the League’s 32 teams and other entities such as NFL Properties or NFL Ventures, which handle the massive television contracts from which much of the revenue is generated and disburse that revenue to the teams.
(For a really good rundown of the finer points of the NFL’s tax and financial arrangements, see here.)
The NFL was first granted its non-profit status in 1942, when it was a small league, nothing resembling the behemoth it has become. This status was affirmed in 1966, during the AFL/NFL merger when Commissioner Pete Rozelle got a pair of Louisiana congressmen to add language to an unrelated bill that specifically added “professional football leagues” to the list of exempt organizations that qualify for 501(c)(6) status. In return, the NFL’s next expansion franchise set up shop in New Orleans.
That same bill expanded the NFL’s antitrust exemption, which was originally granted in 1961 by the Sports Broadcasting Act, overruling a 1957 Supreme Court decision, Radovich v. National Football League which stipulated that … Zzzz… zzzz…
There is more where that came from but I’ll spare you (and frankly I’ll spare myself). It was at this point in my research, with the hour late and the caffeine fading, that I asked myself why?
Why am I digging so far into this? What am I really trying to find? A silver lining?
It’s very clear that the NFL is choosing to end this designation because they want to and it will have a clear benefit to them. Roger Goodell himself put it best when he said in the memo “the change will make no material difference to the NFL business.” He then went on to use the blanket NFL term for things that football people just don’t want to deal with anymore because they’re too troublesome: distraction.
Estimates peg the tax hit at roughly $10 million per year which is a drop in the bucket compared to the almost $10 billion in revenue that comes in every year. But they decided it’s better to take the hit and avoid some pesky things like divulging executive salaries and more importantly, having to testify before Congress if proposed legislation came up that tried to remove the exemption. Imagine Goodell sitting before a Congressional Panel having to answer questions about why the NFL should be a non-profit. Why he makes more than most CEOs. I almost feel cheated.
Even though I’d like to think that I don’t see the sports world through rose colored glasses anymore, it still had me fooled to a degree. If any other large corporation, even other “non-profit” entities were changing their tax status in some way it wouldn’t faze me. I would keep thinking about ways to oust Jed York.
But here I was in the early morning hours trying to dig up… something?
The NFL has proven time and time again that they fit the “it’s a business” cliche with absolute precision. Does the NFL cares about head injuries? Competitive balance? Even “the game?” Only to the extent that it helps or hurts the bottom line.
Think about it this way: Roger Goodell just put in a 12 month stint at his job that would get the vast majority of people fired. His salary figures since 2010:
- 2010 – $11 million
- 2011 – $29 million
- 2012 – $44 million
- 2013 – $35 million
And when his 2014 figure comes out, it will be the last one they’ll have to disclose.
What’s proven difficult is mentally separating fan-hood from the Leagues they play in, that’s the only explanation I can think of for why the NFL has its defenders among the fan population. Those ambitions and hopes get mixed up so whenever we think about our favorite teams, those warm fuzzies get carried over to the leagues they play in. Putting up walls to separate the two ultimately make the amorality easier to swallow. And trust me, it’ll help you get more sleep too.
It’s time to purge the phrase “I hope the league does the right thing” from our consciousness. That’s a dream that died many dollars ago.
Cover photo (AP Photo/Seth Wenig, File).
BRIAN WONG | @bigbwong
Brian Wong is a third-generation Chinese American and Bay Area native. NBA fan, Golden State Warriors fanatic. Brian is a 2015 Dat Winning fellow.