Dirty Secret of Some Pro Sports Leagues: They’re Nonprofits

When you think of the National Football League, the National Hockey League and the Professional Golfers’ Association, big money comes to mind, from ticket prices to players’ salaries to those massive broadcast contracts.

What you don’t think of is “nonprofit status,” but all three entities receive tax reprieves from the IRS, something some members of Congress hope to change as it wrestles with an ambitious overhaul of the U.S. tax code.

Sen. Tom Coburn, the Oklahoma Republican who is usually found backing crackpot ideas like impeaching President Obama and denying global warming, has tapped a vein of sanity as he presses for a change in the laws that put these pro sports ventures on the same tax footing as the local food bank. And although it should be noted that about a third of the NHL franchises are losing money, the bigger question is, should taxpayers be supporting entertainment businesses? According to Bloomberg News:

The tax-exempt status of profit-making sports leagues has long raised concern among some lawmakers. Congress is drafting a plan for the biggest changes to tax rules since 1986. Officials are looking to end some long-standing breaks, and there is a debate between the political parties about finding ways to bring in more revenue and help reduce the national debt.

“To bring in more revenue to the government is obviously something that has some appeal,” said Michael McCann, professor at the University of New Hampshire School of Law and director of its Sports and Entertainment Law Institute.

The Congressional Joint Committee on Taxation estimates that stripping the nonprofit status from pro sports leagues would bring in about $109 million in federal tax revenues over a 10-year span — not enough to balance the budget, but a fair chunk of change. And it would also push us a few baby steps closer to a more equitable tax system.

Also, the NCAA enjoys tax-exempt status, but Major League Baseball and some other pro sports leagues do not, a function of how the leagues were created. And although the NCAA sports programs are big budget at the big schools, most smaller colleges lose money on their programs, and there is less interest among the reformers in stripping away that status for fear of doing more damage than good.

Incidentally, the NFL paid its commissioner, Roger Goodell, $29.5 million, including a $22.3 million bonus, over the 2011-12 budget year. Not exactly nonprofit management scale.

—Posted by Scott Martelle.