When you think of a nonprofit, what do you envision—benevolent volunteers, helping those less privileged out of the kindness of their hearts? With contracts worth millions, huge advertising deals, and a rabid, loyal fan base, the National Football League probably doesn’t come to mind.
Tax-exempt status
The NFL is considered a nonprofit and tax-exempt under 501c6 status with the IRS. There are dozens of 501c sections. You can learn about the 501c sections in more detail here, but they separate the different subsections in the US tax code that a nonprofit must adhere to in order to be considered tax exempt. The 501c6 status is defined as business leagues, chambers of commerce, professional football leagues, boards of trade, and similar organizations that can receive tax-exempt status because they are not organized for profit, and none of the net earnings inures to the benefit of a private shareholder or individual. With the 501c6 tax-exempt status, the NFL receives federal and state tax breaks on income tax.
But don’t players and owners make millions of dollars?
Yes. However, the individual teams are not tax-exempt, although the League is. The individual teams are considered for-profit business entities, so they pay taxes. It is the league that is exempt, as it is now considered a “trade association” under IRS tax code, and must be “devoted to the improvement of business conditions of one or more lines of business as distinguished from the performance of particular services for individual persons,” and that “the interests of the community will be advanced” per the IRS. Each team within the NFL pays annual dues, which amounts to roughly $6 million. Teams are not taxed on this, because it is considered a donation.
Some see the NFL‘s tax-exempt status as a way for them to simply get out of paying taxes, and not a group whose primary purpose in to improve and benefit anyone or anything but their own pockets. Do you think the NFL should be stripped of its nonprofit, tax-exempt status? Sound off below.