Is the NFL a Tax-Exempt Non-Profit Organization? -No
The National Football League (NFL) used to enjoy the status of being a tax-exempt entity, due to it being a non-profit organization. The tax exemption only applied to the league offices, and not the teams.
The business model for the NFL was to operate as a tax-exempt business, and to pass the revenue along to the teams in the league through profit-sharing. Then the teams would be the ones that would have the liability of taxes.
That has since changed.
NFL Tax-Exempt Status History
For the longest time, the NFL was a tax-exempt entity. In 2015, however, the NFL gave up its tax-exemption benefit. The transformation began in 2014 when the NFL was dealing with bad public relations due to how it responded to domestic abuse cases involving players. There was a lot of controversy regarding how appropriately the NFL was handling such matters.
Around that time, Senator Cory Booker of New Jersey wanted to introduce a bill that would disallow professional sports leagues from having the status of tax-exempt non-profit organizations. Booker noted that the local and state governments would benefit, since the NFL at the time earned about $9.5 billion in revenue. (Source: “The NFL Is Not a Nonprofit,” Slate, September 18, 2014.)
With the NFL being in the news for domestic abuse cases and for not paying taxes, the league decided to give up its tax exemption status in 2015. This resulted in the NFL paying taxes for the first time in more than 70 years.
Is NFL Revenue Taxed? –Yes
By giving up its tax exemption status in 2015, the NFL now pays corporate taxes to the government.
Are NFL Teams Tax-Free? –No
Each NFL team pays taxes to the local, state, and federal governments. Since NFL teams are based in different cities and states, there isn’t a standard tax rate that they all pay. The federal tax rate is the same across the board for all of the teams, but the state and municipal tax rates are different.
Will the Government Revoke NFL Tax-Exempt Status? -No
Due to the recent controversy of some NFL players taking a knee during the national anthem before games, the Trump administration and many Republicans have said that they want the NFL to stop getting access to tax breaks. Presently, however, the NFL does not receive any tax exemptions, other than the tax breaks that are also available to many other businesses.
The largest financial break is the public funding of NFL stadiums. This amounts to billions of tax dollars being diverted to stadiums—money which could be used for social programs, infrastructure, or tax credits to low- and middle-income Americans.
There is a popular belief that, when governments invest in professional sports stadiums, more tourists will spend money in the areas where the stadiums are located, which will boost local economic activity and create jobs and, therefore, result in and more taxes being collected in the end.
With this belief in mind, governments have typically given tax breaks to professional sports teams, such as discounts on their property taxes, utilities, and the services that police provide at their events.
There is a high possibility that, with Trump in power, some or all of the federal tax breaks given to NFL teams could be pared back. One major reason is the battle of words that the NFL and some of its players have been engaging in with Trump.
It started with Trump addressing the players who were kneeling during the playing of the national anthem. Trump then continued the verbal conflict by discussing the business of the NFL. For example, just recently, Trump tweeted, “Why is the NFL getting massive tax breaks while at the same time disrespecting our Anthem, Flag and Country? Change tax law!” (Source: “Twitter post,” Donald J. Trump Twitter account, October 10, 2017, 3:13 a.m.)
Time will tell whether there will be any changes to the tax breaks that are given to the NFL and other professional sports leagues.
Are NFL Players Tax-Exempt? -No
We all know that NFL players get paid millions of dollars for performing their duties in front of millions of people. One topic that is not often looked is how sports athletes get taxed, and whether there are any exemptions given to NFL players.
Professional athletes do not get any special tax breaks or exemptions. They pay different tax rates, however, based on which cities their teams are based. For example, a player suiting up for the New York Giants will pay a higher tax rate than a player for the Dallas Cowboys. That’s because there is no state income tax in Texas (only sales tax), while state income taxes in New York State are on the high end, compared to other U.S. states.
There is one strategy that players and their agents use, however: deferring income. For instance, let’s say a player signs a $10.0-million contract over five years. The annual income paid out per year would amount to $2.0 million. The agent and athlete would at times sit down with the team and ask for a longer-term payout. In this situation, the player would still be paid $10.0 million, but over eight years instead of five. This would lower the annual payout to $1.2 million, and possibly lower the amount of taxes due.