NFL Commissioner Roger Goodell yesterday informed owners in a memo that the league would transition to a taxable structure, describing the league’s tax-exempt status as a distraction and having been mischaracterized. While the league's 32 teams pay taxes, and it was the few hundred million dollars that they paid the NFL’s N.Y. HQ to operate the league that was tax exempt, many outsiders were under the impression the league paid no taxes on its billions of dollars in revenues. Goodell in his memo said altering the tax status would not change the function or operation of the league office. He also noted in the memo the NFL would notify members of Congress who had made an issue about the league’s tax status. Because the tax returns are trailing by 11 months, one more public return will be filed next February for the 12-month period ending March 31, 2015. The returns include top executive compensation, including for Goodell, meaning that will mark the last time his pay is publicly disclosed. Of the big four sports leagues, only the NHL will now have tax-exempt status for its league office (Daniel Kaplan, Staff Writer). SI.com's Michael McCann noted the league's tax-exempt status "has only benefited a tiny portion of NFL income." Each year, the league receives about $6M per team in membership dues, money which "pays the rent" for the N.Y. office and the salaries of league officials. With a "very modest benefit from the tax-exempt status, it’s a wonder why the NFL hasn’t already dropped it" (SI.com, 4/28). NBC’s Lester Holt called the decision a "major shift" for the league ("Nightly News," NBC, 4/28). But ESPN's Michael Wilbon said, "It’s a minimal financial hit. Goodell’s salary no longer disclosed. So what?” ("PTI," ESPN, 4/28).
CUTTING OUT A DISTRACTION: In N.Y., Ken Belson notes the league is dropping its decades-old status "in response to critics, including some members of Congress, who say that the government is losing millions of dollars in potential revenue." Goodell in his memo wrote it had been a "distraction." Belson notes that "'distraction' included politicians demanding that the league office drop its tax-exempt status." The league office’s tax-exempt status, its "use of public airwaves to broadcast games and its antitrust exemption are a few of the ways that Congress has leverage over the league." Meanwhile, it is "unclear how much in taxes the NFL's league office avoided through its tax-exempt status." The "extra tax bill may be worth it, though, if the league office is no longer under scrutiny for its tax-exempt status and for how much it pays its top executives, including Goodell." Jeffrey Tenenbaum, who chairs the nonprofit organizations practice at DC law firm Venable, said, “They’ve done their own political and financial calculation and determined that while there might be a tax hit, the political hit they were taking was not worth it" (N.Y. TIMES, 4/29). The WALL STREET JOURNAL's Jonathan Clegg notes the size of the NFL’s tax bill "is unclear." A '13 report by U.S. Sen. Tom Coburn (R-Okla.) calling for the NFL and NHL to "give up their tax-exempt status estimated that such a move would generate" $91M annually for the federal government. But Congress’ Joint Committee on Taxation "pegged the amount" at just $109M over the next 10 years (WALL STREET JOURNAL, 4/29). U.S. Sen. Cory Booker (D-N.J.) said the decision "is the right thing to do." He added, "That the billion-dollar business of professional football was for decades taking advantage of a tax status more appropriate for churches and charities defied logic and common sense" (NJ.com, 4/28).
STRICTLY A PR DECISION? In Boston, Jordan Graham cites experts as saying that the decision "is a shrewd public relations play by the NFL that will have little effect on the multi-billion-dollar behemoth’s bottom line ... and blocks its critics in Congress who had seized on the issue in recent years." MIT Sloan School of Management sports marketing professor Ben Shields: “After a crisis-filled 2014 season, the NFL is continuing its efforts at image rehabilitation, and this is one strategy in that overall goal. It’s part of a larger effort to restore trust and credibility.” Boston-based tax attorney Travis Blais: "The NFL's tax exempt status was more of a PR problem than it was worth, it doesn't actually save that much money" (BOSTON HERALD, 4/29). Author Bruce Hopkins said, "This has gotten to be too public of an issue for them, and it's probably kind of embarrassing. I think it is more smoke than fire, and it shouldn't make any difference to them. They just don't want to the attention given to it." USA TODAY's Brent Schrotenboer cites tax experts as saying that the NFL's decision "was largely symbolic and not likely to result in significant new tax bills" (USA TODAY, 4/29). In S.F., Kathleen Pender notes the decision "won't cost the league much because it doesn't make much money." Residual profits "flow through to the teams, which pay taxes." USC Sports Business Institute Exec Dir David Carter: "From a PR and political standpoint, giving it up is the right thing to do" (S.F. CHRONICLE, 4/29).
PLAYING SHADOW BALL: In L.A., Michael Hiltzik writes it is a "fair bet that the league got tired of its ostensible tax exemption being a punching bag for congressmen and senators trying to look fiscally responsible, and for members of the public grousing about the league's billionaires pocketing huge sums tax-free." This move will "make the NFL even more secretive than it is now." Fans can "expect the NFL central office to run a very tight ship in terms of tax liability as a fully taxable entity." The "only big change in its abandonment of the tax exemption is that you'll know a little bit less about it" (L.A. TIMES, 4/29). In DC, Harwell & Hobson note the move ends one of the country's "most baffling corporate tax breaks," granting the "mega-business more secrecy about its inner financial workings" (WASHINGTON POST, 4/29).
