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The Unsportsmanlike Tax Evasion of the NFL

Although this outrage being perpetrated against the American taxpayer is deplorable, the NFL isn't the only offender. (Incidentally, the National Basketball Association operates under for-profit status.) But it sure is the biggest. No other non-profit in the country has both multi-billion dollar per year revenue, as well as monopoly status.

As LilDebbie correctly points out, the ways in which the NFL surreptitiously fleeces the public go largely unnoticed. For starters, there is the nuclear option: the NFL can decide to move teams from city to city, with some ownership strings attached. To prevent this happening, cities have to keep building larger and more ridiculous stadiums. Then there is ticketing. Ticket prices run an average of $75 each. Get ready to cough up $3000 for two Superbowl tickets at the time of this writing.

The monopoly power of the NFL was challenged January 13, 2010 in American Needle v. NFL. In essence, the Supreme Court weighed whether the NFL comprised 32 separate team entities, or whether all 32 teams fell under the umbrella of a single, cohesive NFL unit with an exclusive licensing deal with Reebok. As Justice Sonia Sotomayor stated, "You are seeking, through this ruling, what you haven't gotten from Congress: an absolute bar to an antitrust claim."

Not having read this whole crap myself, I don't know and will never understand the IRS tax code. But from my limited understanding, the NFL (as a non-profit entity) has to disclose the salaries of all "key employees". For years, this (somehow) only included the commissioner. Then in late 2008, the IRS came a'knocking. The NFL was to turn over the names and salaries of all personnel that made more than $150,000 a year to keep their tax-exempt status.

So what happened? Having investigated this thoroughly (read: done a few quick searches on the Google), I suspect that Commissioner of Football, Roger Goodell, decided to take one for the team. The back-door deal might have looked something like the following: the NFL would make some select campaign contributions while the top brass would take a pay cut, and in exchange no one would lose their jobs or their tax exemptions.

I think this worked because a) It was quiet, b) In its heart of hearts, the news media doesn't really want to burn the NFL even if it is gouging the taxpayer, and c) Relative to other commissioners of major league sports, Goodell doesn't make much money anyway, and somehow people felt sorry for him. Plus, the heads of some major news outlets could have been easily mollified. He gets great seats.

All of this loose interpretation of fairness in income has created a culture of greed in the NFL. A lockout looms for 2011. The details are in TFA, but in essence, the players' salaries are gouging the profits of the owners. This leaves the owners of some small-market clubs like the Jacksonville Jaguars with razor thin margins, and they feel that they're at a disadvantage against the larger organizations like the Philadelphia Eagles, Dallas Cowboys, or Miami Dolphins. With the upcoming sunset of the collective bargaining agreement in 2010, the possibility of a lockout for 2011 is looking more and more likely. It will be bitter medicine for the NFL if it happens, IMO.

The main point of all this is that the NFL, along with the National Hockey League and Major League Baseball, are making a mockery of the U.S. tax law by distracting taxpayers with the show. It is time for the great money-spinning engine that is the NFL to stop maintaining the laughable notion that is is a non-profit entity


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