Heard Off the Street: Is it time to tax the NFL?

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Even Super Bowl Sunday brings no respite from partisan bickering.

As fans of the Denver Broncos and the Seattle Seahawks imbibe in sacred pregame rituals in preparing for excruciating hours of hooey and advertising occasionally interrupted by 60 minutes of football, the debate continues over whether the $10 billion-a-year industry known as the National Football League should continue to benefit from the federal tax-exempt status it has enjoyed since 1942.

Way back then, the beneficiaries of the NFL's proposed $765 million concussion settlement, rejected by a federal judge last month, were mere gleams in their mothers' eyes.

"America loves football, but that doesn't mean American taxpayers should funnel millions of tax dollars to billionaires," opines Taxpayers for Common Sense, a watchdog that is challenging the call on the field.

The millions of dollars sport teams owners routinely extort from public officials for their taxpayer-subsidized playgrounds notwithstanding, just how much the NFL's tax-exempt status is worth is as debatable as a coach's decision to got for it on fourth and four.

According to the taxpayer group, Congress' Joint Committee on Taxation puts the 10-year price tag for the exemption at $109 million. But U.S. Sen. Tom Coburn, R-Okla., claims it's worth as much as $91 million annually.

Mr. Coburn, a polished practitioner when it comes to identifying federal waste, is sponsoring the Properly Reducing Overexemptions for Sports Act, which would deprive sports leagues with annual revenue of more than $10 million of their tax-exempt status. Other ventures that enjoy the privilege include the PGA Tour and the National Hockey League.

Thus far, the crusading Mr. Coburn has persuaded only one of his colleagues to cosponsor his proposal, Sen. Angus King, I-Maine. Mr. King stepped forward last week, as did U.S. Rep. Jason Chaffetz, R-Utah, who introduced a companion bill in the House.

Despite their Super Bowl Week pandering to the discontented, there is some thought that the effort to bring the NFL under the purview of the IRS could lapse when Mr. Coburn, who is suffering from cancer, retires at the end of the year, four years into his second six-year term.

"I don't know if someone else is going to take up the mantle or not," said Andrew Lundeen of the Tax Foundation. "I don't see it picking up much steam."

Mr. Lundeen said there is considerable confusion over what the exemption means to the league. The misconception, he said, is based largely on the uninformed opinion that, from a tax standpoint, the NFL is "one big, all-inclusive blob."

It's not.

According to a piece Mr. Lundeen posted on the foundation's website in September, "Congress could tax sports leagues all they want and not get any revenue, because sports leagues rarely finish years in the black."

The NFL's most recent Form 990 (the annual report nonprofits provide to the Internal Revenue Service) indicates the league had revenue of $255.3 million in 2011, up from $241 million the previous year. Of that, $254.6 million came from dues paid by its 32 teams, $183,200 from investment income, and $584,500 from fines paid by coaches and teams.

However, the league had expenses of nearly $333 million, resulting in a loss of $77.6 million. The NFL's expenses included compensation of $29.4 million that was paid to commissioner Roger Goodell.

The NFL's big money is earned through NFL Ventures, a limited partnership that controls the sale of television rights and merchandise. Profits from that partnership are taxed, Mr. Lundeen said.

Moreover, teams also pay income taxes, as do players and the NFL's staff.

"The teams and players are paying significant taxes already," said Joseph Nicola, a tax expert with Downtown accounting firm Sisterson & Co.

Mr. Nicola said nonprofits are taxed on their lobbying expenses. Members of the nonprofit cannot deduct the portion of their dues that goes toward lobbying. If the nonprofit does not disclose that percentage to members, it pays a flat 35 percent "proxy" tax on its lobbying costs. According to the PGA's Tour's latest filing with the IRS, the nonprofit paid a proxy tax of $50,227 in 2011.

According to the NFL's IRS filing, it has several nonprofit affiliates including NFL Charities; the NFL Management Council; and a trust that provides life insurance to inactive players and coaches.

The NFL's tax-exempt status was written into the tax code permanently in 1966, the year the league merged with the former American Football League. Since then, the NFL has been treated like the U.S. Chamber of Commerce, real estate associations and other membership groups that promote the interests of group members.

Critics contend that unlike professional nonprofits formed to promote an industry or profession, the NFL was organized to promote profits. As such, it should be taxed.

"I like the NFL, but I don't think it's unfair to ask their central office to pays its share in taxes," Mr. King said in a prepared statement Wednesday.

Len Boselovic: lboselovic@post-gazette.com or 412-263-1941.

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