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Should the NFL be tax-exempt?

Should the NFL be tax-exempt?

Yes, that NFL -- the National Football League.  The NFL that raked in $184 million from its 32 member teams, holds over $1 billion in assets and generates an estimated $9 billion annually.  Why on earth would they be tax-exempt?

As it turns out, they already are.

A new reportfrom Sen. Tom Coburn outlines some of the biggest wastes and loopholes in America's tax system, including this so-called professional sports loophole:

The National Football League (NFL), the National Hockey League (NHL), and the Professional Golfers’ Association (PGA) classify themselves as non-profit organizations to exempt themselves from federal income taxes on earnings. Smaller sports leagues, such as the National Lacrosse League, are also using the tax status. Taxpayers may be losing at least $91 million subsidizing these tax loopholes for professional sports leagues that generate billions of dollars annually in profits.

While I'm surprised to hear that the PGA churns out such big profits for such a boring sport, I'm even more surprised to learn that these sports institutions are tax dodgers masquerading as non-profit organizations.  Coburn explains further:

These organizations are taking advantage of the provision of the tax code that allows industry and trade groups, such as the U.S. Chamber of Commerce or the Natural Resources Defense Council, to qualify as non-profit and tax-exempt. None of these groups can promote a specific brand within an industry but each may promote an industry as a whole.  Qualifying organizations pay taxes on few types of income and expenditures, including lobbying. State and local governments usually exempt these organizations from state income and sales tax as well, a boon worth an estimated $10 billion to the nonprofit sector.

Seeing the advantage in operating largely tax-free, the NFL, NHL, and PGA are registered with the Internal Revenue Service (IRS) as nonprofit organizations. These leagues assert they help the professional sport in each of their leagues. For example, on its 2010 tax return, the NFL described itself as a “trade association promoting interests of its 32 member clubs.”  The NHL said its mission is “to perpetuate professional hockey in the US and Canada.” These benign statements aside, major professional sports leagues are hardly in the business of simply promoting the hockey, football, or golf industry. They are in fact businesses – designed to make money.

For more on Coburn's Wastebook 2012, click here.

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