By Kasia Kordas

June 24, 2015

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Photo credit:

On April 28, 2015, the National Football League announced that it would voluntarily give up its not-for-profit tax-exempt status, a status the league has held since 1942.[1]  After a yearlong study conducted by the league’s financial committee, the decision was submitted to the 32 team owners, who voted in favor of abandoning the league’s tax-exempt status.  The NFL, or the entity that is the NFL League Office, will now pay federal income taxes next April for its 2015 earnings.

The “Non-Profit” NFL Makes Millions

Prior to this decision, the NFL was considered a trade association under Section 501(c)(6) of the Internal Revenue Code, which exempted the league from paying federal income tax.[2]   In 1966, after successful lobbying by the league, the Internal Revenue Service rewrote Section 501(c)(6) of the Code specifically to include “professional football leagues” as associations exempt from paying federal income taxes.[3]  Even though the NFL makes hundreds of millions of dollars in revenue each year, the tax-exempt status reportedly only saved the league an estimated $10 million per year – a meager figure compared to the league’s overall revenue.[4]

Given the corporate structure of the league, the revenue earned by the NFL as a whole is divided equally and paid to each of the 32 teams.  While the NFL League Office was exempt from paying federal income taxes under Section 501(c)(6), each of the individual NFL teams have paid and will continue to pay taxes annually on the individual team’s share of the league’s overall earnings.[5]  The fact that teams have been paying taxes has been greatly stressed by NFL Commissioner, Roger Goodell, since the status change was announced in April.[6]  Goodell also emphasized that abandoning the league’s tax-exempt status “will make no material difference to [the] business.”[7]

The NFL Benefits from Paying Taxes

The exact motivation behind the league’s new tax status is unclear, but what is clear is that the NFL found that the benefits of filing income taxes outweigh the savings of the tax-exempt status.  The league is now able to silence the majority of critics and keep controversial salary information confidential.

In recent years, the league has received a great deal of criticism for its nonprofit status.[8]  The NFL is the highest grossing professional sports league in the world, clearly making it a for-profit enterprise.[9]  Members of Congress have introduced several bills over the years to limit or eliminate the NFL’s tax-exempt status, without success.[10]  By abandoning its tax-exempt status voluntarily, the NFL surprised critics who thought that only congressional action would end the league’s use of the exemption.  The NFL’s move temporarily halted the ongoing debate of whether a professional sports league should even qualify under Section 501(c)(6).[11]  Other critics are not pleased with the reformed tax status, arguing that the shift in tax status is just a publicity stunt to distract the public’s focus from more pressing issues that the league has faced recently, such as domestic violence.[12]

In addition to quieting some of the league’s critics, abandoning this tax-exempt status releases the NFL from an obligation to disclose the salaries of its commissioner and other top league executives.[13]  The ability to keep this sensitive information private seems to be a major motivation behind the decision to begin paying federal income taxes.  All Section 501(c)(6) tax-exempt organizations are required to make certain disclosures annually, including information such as income and activities over the year.[14]  Other professional sports leagues have abandoned their tax-exempt status to avoid disclosing the salaries of their top executives; this consequence may have tempted the NFL to do the same.[15]

Indeed, the large salaries paid to NFL executives have received much criticism in the past.  From 2008 to 2013, Commissioner Goodell was paid $140 million – an exorbitant sum for his position, according to some critics, and almost twice as much as the highest paid player in the league.[16]  According to the mandatory disclosures filed in 2013, seven NFL executives, including Goodell, made seven-figure salaries and 298 employees earned $100,000 or more.[17]  The salaries of NFL employees will no longer be disclosed, shielding the league from criticism of paying its employees overly high wages.

NFL May End Up Tax-Free After All

Experts can only speculate at this time as to what the NFL’s exact tax liability will be. The government may be cheering at the league’s decision to give up its tax-exempt status, but the NFL may have another plan.  If the NFL’s expenditures are equal to or greater than its earnings for 2015, there will be no income to tax.[18]  The league may effectively pay a low amount of tax or even possibly continue to be income-tax-free.

One conclusion is certain: the NFL will be filing a different tax return come April 15, 2016. The good press and privacy gained from this decision will be a win for the league, and the NFL may not have to pay any income tax after all.


[1]  See Gary Myers, NFL No Longer Non-Profit After Giving Up Tax Exempt Status, NY Daily News (Apr. 28, 2015), (stating that NFL will file taxes for 2015).

[2] See I.R.C. § 501(c)(6) (2012) (listing “business leagues, chambers of commerce, real-estate boards, boards of trade, or professional football leagues” as tax exempt organizations); see also Kristi Dosh, Examining NFL’s Tax-Exempt Status, ESPN (June 6, 2013), (differentiating NFL’s tax-exempt status from tax status of charitable organizations, which are exempt under IRC § 501(c)(3)).

[3] See Christian Schmed, Comment, Official Timeout on the Field: Critics Have Thrown a Red Flag and are Challenging the NFL’s Tax-Exempt Status, Calling for It to Be Revoked, 21 Jeffrey S. Moorad Sports L.J. 577, 582 (2014), available at (noting IRS’s 1966 addition to §501(c)(3)).

[4] See Chris Isidore, NFL Gives Up Tax Exempt Status, CNN Money (Apr. 28, 2015, 4:48 PM), (calling NFL’s potential tax liability “a rounding error for an enterprise the size of the NFL”); see also Daniel Roberts, NFL Drops Tax Exempt Status, Gains Good PR, Fortune (Apr. 29, 2015, 11:21 AM), (calling NFL’s estimated $10 million tax “negligible”).  But see Michael McCann, NFL Drops Its Tax-Exempt Status, But Other Pro Associations Will Benefit, Sports Illustrated (Apr. 28, 2015), (stating NFL operates at a loss, making its tax exemption ineffective, because “there was no income to exempt”).  In 2013, for example, the NFL’s revenue was $327 million.  See Drew Harwell & Will Hobson, The NFL is Dropping Its Tax-Exempt Status. Why That Ends Up Helping Them Out, Wash. Post (Apr. 28, 2015),

[5] See Harwell & Hobson, supra note 4 (quoting NFL Commissioner Roger Goodell as stating, “[e]very dollar of income generated through television rights fees, licensing agreements, sponsorships, ticket sales, and other means is earned by the 32 clubs and is taxable there”).

[6] See Darren Rovell, NFL League Office Relinquishing Tax-Exempt Status, ESPN (Apr. 28, 2015), (quoting Goodell as stating, “[t]he fact is that the business of the NFL has never been tax-exempt”).

[7] See Harwell & Hobson, supra note 4 (quoting Goodell in letter sent to team owners and members of Congress).

[8] See, e.g., Roberts, supra note 4 (quoting critics of NFL’s nonprofit tax-exempt status).

[9] See Ike Ejiochi, How the NFL Makes the Most Money of Any Pro Sport, CNBC (Sept. 4, 2014, 9:32 AM), (stating that Goodell plans to increase revenue to $25 billion by 2027).

[10] See Rovell, supra note 6 (“Last year, the Joint Committee on Taxation said that getting rid of the non-profit status for all pro sports leagues would boost federal revenues by $109 million over a decade.”).  Specifically, Rep. Jason Chaffetz (R-Utah), chairman of the House Committee on Oversight and Government Reform, has investigated whether professional sports leagues should qualify as Section 501(c)(6) organizations at all.  See Eric Kroh, NFL to Relinquish Front Office’s Tax-Exempt Status, Law360 (Apr. 28, 2015, 3:04 PM).

[11] See generally Schmed, supra note 3 (arguing why league does not pass seven-factor test that determines whether organization qualifies for Section 501(c)(6)); see also McCann, supra note 4 (calling PGA Tour and other tax-exempt sports associations “the real winners,” because “other leagues without scandals would have faced more substantial change[s]” than NFL if professional sports leagues no longer qualified under Section 501(c)(6)).

[12] See Maxwell Strachan, Why Did the NFL Voluntarily Give Up Its Tax-Exempt Status? Experts Weigh In, Huffington Post (Apr. 28, 2015), (“The move is nothing more than a ‘PR stunt’ meant to improve the league’s reputation without tackling more difficult issues.”).

[13] See Isidore, supra note 4 (discussing Goodell’s pay over the years and stating it will no longer be disclosed).

[14] For further information on mandatory disclosures for Section 501(c) organizations, see I.R.S., Form 990, available at

[15] See Jonathan Clegg, NFL to End Tax-Exempt Status, Wall St. J. (Apr. 28, 2015, 4:02 PM), (stating that MLB gave up 501(c)(6) tax-exempt status, NHL and PGA Tour are tax exempt, but NBA never opted for tax-exempt status).

[16] See Isidore, supra note 4 (adding up Goodell’s salary over last six years); see also Frank Schwab, Roger Goodell Made More Than $44 Million Last Year. Wait, What?, Yahoo! Sports (Feb. 14, 2014, 4:15 PM),–nfl.html (stating that Aaron Rodgers is highest paid NFL player in history, earning $22 million on average per season).

[17] See Harwell & Hobson, supra note 4.

[18] See McCann, supra note 4 (“In 2010, the NFL reported a loss of $52 million – which means the tax exemption had no impact since there was no income to exempt.”).


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