Tax-exempt status for sports leagues could cost taxpayers $90m or more per year

Patrick Hruby at Sports on Earth has a good, long article on “sports welfare” today, most of which focuses on Sen. Tom Coburn’s proposal to revoke the non-profit status of sports leagues. (Though there’s a good rundown of other past attempts to rein in federal sports subsidies as well, including Rep. David Minge’s late, lamented attempt to create an excise tax on stadium handouts.) Coburn’s plan is going nowhere for the moment, as did his attempt to bar the use of federal stimulus dollars on sports projects four years ago. But how big an effect would it have on the sports industry, and U.S. taxpayers?

Hruby attempts to break it down:

How much does this loophole cost taxpayers? Due to accounting vagaries, no one knows for sure. Given that the standard corporate tax rate is 35 percent — and that the NFL and NHL collectively received about $260 million in membership dues from their teams in 2010 — Coburn estimates that sports leagues are sheltering at least $91 million annually. But the actual amount is likely higher. After all, the PGA Tour and LPGA had combined gross receipts of more than $1 billion in 2010. A 2010 law review article by Vermont-based attorney Andrew Delaney notes that individual pro teams also can write off their league membership dues — a bit of what Delaney calls “creative asset priority reallocation” (read: perfectly legal money laundering) that amounts to an estimated $5 million-plus annual deduction for NFL clubs…

But wait. There’s more. As Delaney’s article notes, the NFL’s non-profit status subsidizes the astronomical salaries of executives like commissioner Roger Goodell ($11.6 million in 2010), media vice president Steve Bornstein ($12.2 million) and former commissioner Paul Tagliabue ($8.5 million). It also allowed the league in 2009 to pay 296 salaries over $100,000; fork over $7 million-plus for legal fees; spend nearly $1 million a month for office space; shell out $6.25 million for “travel services”; and pay 135 total independent contractors at least $100,000 apiece.

More infuriating still — or clever, depending on your perspective — is what the NFL does with the rest of its tax-deductible (by teams), tax-exempt (for the league) cash. According to Delaney, much of it goes to fund the NFL’s stadium construction financing program, which provides team owners with ultra-low interest loans. To obtain said loans, owners are required to secure public stadium funding; to pay back said loans, Delaney explains, personal seat licenses are sold tax-free through public agencies.

It’s likely even tougher than Hruby indicates to say how much more in taxes the sports leagues would have to pay if their non-profit status was revoked — for starters, I somehow doubt that the NFL and NHL would keep collecting membership dues in the same way if there weren’t a tax break associated with them. And PSLs sold by public agencies would continue to be tax-free regardless, unless Congress passes a separate provision making those subject to taxes.

Either way, though, stopping sports leagues that exist solely for the purpose of overseeing for-profit teams from being run as non-profits certainly couldn’t hurt. So why isn’t it being taken seriously?

“You hate to embarrass people, but that’s what it takes with something like this,” says a Capitol Hill staffer. “If [Congressional members] were pushed on this publicly, they couldn’t side with rich lobbyists or their special interest buddies in the NFL who give them free tickets.”

If Congresspeople can be embarrassed into action by being called out on obscure blogs for their craven opportunism, consider it done. Don’t make me come in there and testify again!

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4 comments on “Tax-exempt status for sports leagues could cost taxpayers $90m or more per year

  1. That is a very good article. I think there is more as well. A lot of the revenue in sports comes from “entertainment” tax deductible tickets (not all deductible but a considerable part of the revenue). College sports are even worse. Some of the bigger football programs create nearly half their revenue with tax-deductible booster donations. Huge chunks are deductible for tickets because you have to be a booster to be able to buy a ticket.

  2. It’s completely beyond me to explain why this is not a national outrage.

    Think about some of the epic battles we’ve had, about transportation, energy efficiency, national security, health care, the environment, and so forth…

    And we are certain $90M is a huge underestimate. I bet it’s 10 times that size.

    And it’s all okay. No problem. Funding gaps? Eh, just raise taxes, after all, it’s OUR TEAM we’re talking about! No analysis necessary!

    It’s nucking futs, Neil. And I have no rational explanation for it.

    Bridges on I-5 can crash into the river, no problem. But the team cannot leave! Not on my watch!

    What is wrong with us?

  3. Make sure you make your comments/ideas regarding these issues at, a bi-partisan effort by Senator Baucus and Rep. Camp. Pass the word around to like minded acquaintances. I made my comments about a week ago, but also included the tax breaks for college sports. I am really thankful for this website and hope to contribute sometime soon. I have been angry about these issues for a long time and am thankful for all the effort and information contained here.

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