How the NFL avoids paying millions in taxes

[Jesus Malverde]

With all eyes on the Super Bowl, the Seahawks and the NFL, KIRO 7 took a closer look at the NFL’s financial paperwork.

It turns out the league is a nonprofit.

When KIRO 7 told Seahawks fans, they found it hard believe.

Tax documents show the NFL is a nonprofit that makes $250 million a year in the form of dues from all NFL member teams. The league pays no federal incomes taxes on that money.

http://www.kirotv.com/news/news/how-nfl-avoids-paying-millions-taxes/nc7xT/

[LittleBlue]

1. This has been debunked numerous times

99.9% of the money flows through the teams who do pay taxes. The NFL as a corporation actually makes a loss due to the big salaries they pay their employees, which are taxed at the individual level, and wouldn't pay corporate taxes anyway.

[Jesus Malverde]

2. The Subsidies are extensive, unusual, unfair and occur at all levels.

NJ gives NFL super tax break for Super Bowl, and pays for security

http://www.nj.com/super-bowl/index.ssf/2014/02/nj_gave_nfl_8_million_tax_break_and_pass_on_security_costs_to_land_the_2014_super_bowl.html

[LittleBlue]

3. Once again, another myth

Read the article

The state agreed to suspend the sales tax

The state. The OP is about a federal corporate tax exemption, and your article is about a deal the state made to get the Super Bowl. Fed gov =/= State of New Jersey. State sales tax =/= federal corporate income tax.

[Sissyk]

7. +1000

But, it's unfair!!

How I wish that was the only thing unfair in this world.

[LittleBlue]

9. The thing is

I don't mind if the voters of the State of New Jersey criticize any tax deal. It's their right as voters. Personally I'd love to have a SB in exchange for a relatively minor ticket sales tax exemption. An extra few hundred thousand people all paying a fortune in sales tax (elsewhere) and hotel tax makes it easily worth it.

But this federal thing has to be understood and put into context. The exemption is largely a legal anachronism that probably isn't changed because it's irrelevant since LLCs came into existence.

From what I've seen, it's being used by journalists who don't like football. They're misrepresenting the tax implications of this to "prove" a football-related injustice.

[Jesus Malverde]

8. follow along... I said at all levels...

We'll start with the unfair non profit federal designation.

Throw in millions of dollars of homeland security enforcement for their trademarks.

Throw down a few more millions for dramatic flyovers by the department of defense...

Throw in some more millions for stadium subsidies and public transportation infrastructure...

Throw in some more millions for law enforcement to secure these events..

Pretty soon we see an exercise largely subsidized with public dollars where the profit goes to private parties.

The NFL is a parasitic enterprise feeding off the goodwill of the taxpayer.

[cherokeeprogressive]

13. I thought the DoD suspended flyovers at sporting events.

[Jesus Malverde]

17. This year will feature a a U.S. Army rotary-wing aircraft flyover

http://www.huffingtonpost.com/dorian-de-wind/super-bowl-xlviii-patrols_b_4710131.html

In honor of American servicemen and women around the world, NFL Films takes a look at the always exciting pregame flyby.
http://www.nfl.com/videos/nfl-videos/09000d5d80924c91/Salute-the-sky

[Cerridwen]

10. From your link as provided in your post #5:

You wrote:

The state. The OP is about a federal corporate tax exemption, and your article is about a deal the state made to get the Super Bowl. Fed gov =/= State of New Jersey. State sales tax =/= federal corporate income tax.

From the article in the link you provided in post #5:

“The NFL is exempt for federal and state income tax under section 501c6 of the federal tax code, which is very different from the sections that exempt charities and other philanthropic organizations,” Chair of the Nonprofit Organizations Practice at Venable Law Firm, Jeff Tenenbaum explains, “A 501c6 organization, which is typically reserved for trade and professional associations and chambers of commerce and some sports leagues, is a category that… carries with it exemption from paying federal and state corporate income tax on your net income.” (emphasis added)

I would suggest you read the entire article you linked as it doesn't say what I think you think it says; your selective quoting aside.

[Jesus Malverde]

11. I haven't made it through the RT piece yet but it's got gems like..

Teams pay the organization about $6 million in dues annually. However, as SportsFans.org reports, team owners are not taxed on that money since it is considered a donation to a nonprofit organization.

[LittleBlue]

16. $6m in nonprofit donation

or a $6m deduction for licensing fees. It all comes off the bottom regardless.

[Cerridwen]

18. The article does not support what the link provider thinks it supports.

Although I don't care for rt as a source, I chose to stay with that article since my searches weren't bringing up anything else. Selecting quotes that support your argument while ignoring the context in which those quotes are made is at the very least, poor reading skills.

[LittleBlue]

12. Yes. There's absolutely nothing wrong with what I've said

That article is about state sales tax, not federal sales tax.

They have an anachronistic federal income tax exemption that is completely irrelevant because they would pay no income tax regardless of how their entity is registered (nonprofit, S-corp, C-corp, doesn't matter).

THEY WOULD NOT PAY STATE OR FEDERAL INCOME TAXES REGARDLESS OF THE EXEMPTION! They could be registered in Turkey or North Korea, you don't pay income tax in any country/state if you have losses.

Does that make sense?

[Cerridwen]

4. Link(s), please.

I've not ever read or heard this. I'd like to read about it.

Thanks.

[LittleBlue]

5. Sure

In spite of the fact that the NFL in its entirety is the most profitable sport in the US, the league itself is actually operating in the red. In 2011 alone, the NFL reported $77 million in losses.

“The expenses outweigh the revenues so it is actually losing money. So the irony is if it were a taxable entity it wouldn’t be paying any tax because, like any tax-paying entity, if you exceed your revenues you don’t pay any tax, there’s no net income,” Tenenbaum points out.

http://rt.com/usa/nfl-lose-nonprofit-status-863/

There are numerous sources if you google "NFL tax loss"

Last year's was $54 million. They probably have hundreds of millions in carry forward losses because they lose roughly $50m or more every year.

The point I want everyone to understand is that whatever the NFL's former practices were, perhaps 40 years ago they did make big money, the actual corporation today is nothing more than a pass-through entity through which salaries are paid. Since the amount is adjusted through license, the NFL can just adjust the amount they get so that they never pay taxes. They exist, after all, just to cover salaries and a few relatively minor expenses. The power and money exists solely within the individual teams.

[Cerridwen]

14. I searched what you suggested; "NFL tax loss" with and without quotes.

DuckDuckGo gave me nada. (with quotes)

Google did the same. (with quotes)

I removed the quotes. Still came up empty handed and found a lot of "the NFL is getting tax breaks and making millions at taxpayers' expense" hits instead.

After reading the link you provided to rt (?! really?!), with the exception of your quote, the entire article was about the NFL taking advantage of the tax code which it, the NFL, lobbied to have specially written for itself and how taxpayers are footing the bill for multi-million dollar "executive contracts," reported "losses," highly expensive sports arenas, the land on which they are built and the upkeep and maintenance of those arenas.

Just as upthread you missed the part about the NFL receiving tax-exempt status at the federal ~and~ state level, you seem to have missed the entirety of the message of the article.

[LittleBlue]

15. Right at the top of google currently

The most recent numbers available are for the years ending March 31, 2012 and March 31, 2011. There are losses in both years – $77,628,857 and $52,195,047 respectively.

http://www.forbes.com/sites/peterjreilly/2014/02/01/flap-about-nfl-tax-exemption-seems-silly/

lobbied to have specially written for itself and how taxpayers are footing the bill for multi-million dollar "executive contracts," reported "losses," highly expensive sports arenas, the land on which they are built and the upkeep and maintenance of those arenas.

Please provide quotes and I will explain anything individually you want.

[Cerridwen]

19. Right at the top of your google search; not mine.

Google has an algorithm that filters searches; some part of which, I believe, is based on search history of the individual/computer doing the search.

Do you have any sources that are reliable as to their objectivity? So far you've presented the anti-American rt that exploits any criticism of the US for its own agenda and the pro-business forbes that has never met an exploitive business it didn't approve.

Actually, never mind.

I find trying to explain how organizations hide monies, play the "legal" loopholes, and exploit other people's money for "fun and profit" makes me nauseous. To do so when dealing with selective, out of context, quotes while ignoring the context and overall message is not a tactic I care engage much beyond what I have to this point.

[LittleBlue]

21. It's difficult to explain to someone who doesn't want to understand

I'm a CPA who works in taxation trying to explain how this works, and you keep questioning sources rather than confront the reality that the NFL files losses on their income taxes. And rather than trying to understand the issue you've become argumentative about information you can find with a basic google search.

Let me make this very clear to you for one final time. No one in any part of the 1st world, no matter the loopholes, pays income tax when there is no income. You may examine their sales tax, their property tax, VAT (in Europe), whatever, but this is income tax. And when there is no income, there is no tax. On top of that, those losses are carried forward so that in the unlikely event that they make an income in the future, it's offset by the hundreds of millions in losses they have saved in the past. That's basic tax law.

You can believe whatever you want, but that has no bearing on reality of how tax law works. It's a little disappointing that you presented yourself as just an inquisitive person looking for information and yet it seems you've taken a stand on the issue without really caring about the tax laws. Nothing here is exploitative that doesn't happen every day at mom and pop type S-corps, LLPs and LLCs. The NFL pays its taxes, it's just that the teams and the individuals pay it, not a central corporation. It's not a trick or loophole at all, just a peculiarity of the way the NFL is structured.

[Jesus Malverde]

6. How the NFL Fleeces Taxpayers

Last year was a busy one for public giveaways to the National Football League. In Virginia, Republican Governor Bob McDonnell, who styles himself as a budget-slashing conservative crusader, took $4 million from taxpayers’ pockets and handed the money to the Washington Redskins, for the team to upgrade a workout facility. Hoping to avoid scrutiny, McDonnell approved the gift while the state legislature was out of session. The Redskins’ owner, Dan Snyder, has a net worth estimated by Forbes at $1 billion. But even billionaires like to receive expensive gifts.

Taxpayers in Hamilton County, Ohio, which includes Cincinnati, were hit with a bill for $26 million in debt service for the stadiums where the NFL’s Bengals and Major League Baseball’s Reds play, plus another $7 million to cover the direct operating costs for the Bengals’ field. Pro-sports subsidies exceeded the $23.6 million that the county cut from health-and-human-services spending in the current two-year budget (and represent a sizable chunk of the $119 million cut from Hamilton County schools). Press materials distributed by the Bengals declare that the team gives back about $1 million annually to Ohio community groups. Sound generous? That’s about 4 percent of the public subsidy the Bengals receive annually from Ohio taxpayers.

In Minnesota, the Vikings wanted a new stadium, and were vaguely threatening to decamp to another state if they didn’t get it. The Minnesota legislature, facing a $1.1 billion budget deficit, extracted $506 million from taxpayers as a gift to the team, covering roughly half the cost of the new facility. Some legislators argued that the Vikings should reveal their finances: privately held, the team is not required to disclose operating data, despite the public subsidies it receives. In the end, the Minnesota legislature folded, giving away public money without the Vikings’ disclosing information in return. The team’s principal owner, Zygmunt Wilf, had a 2011 net worth estimated at $322 million; with the new stadium deal, the Vikings’ value rose about $200 million, by Forbes’s estimate, further enriching Wilf and his family. They will make a token annual payment of $13 million to use the stadium, keeping the lion’s share of all NFL ticket, concession, parking, and, most important, television revenues.

After approving the $506 million handout, Minnesota Governor Mark Dayton said, “I’m not one to defend the economics of professional sports … Any deal you make in that world doesn’t make sense from the way the rest of us look at it.” Even by the standards of political pandering, Dayton’s irresponsibility was breathtaking.

In California, the City of Santa Clara broke ground on a $1.3 billion stadium for the 49ers. Officially, the deal includes $116 million in public funding, with private capital making up the rest. At least, that’s the way the deal was announced. A new government entity, the Santa Clara Stadium Authority, is borrowing $950 million, largely from a consortium led by Goldman Sachs, to provide the majority of the “private” financing. Who are the board members of the Santa Clara Stadium Authority? The members of the Santa Clara City Council. In effect, the city of Santa Clara is providing most of the “private” funding. Should something go wrong, taxpayers will likely take the hit.

The 49ers will pay Santa Clara $24.5 million annually in rent for four decades, which makes the deal, from the team’s standpoint, a 40-year loan amortized at less than 1 percent interest. At the time of the agreement, 30-year Treasury bonds were selling for 3 percent, meaning the Santa Clara contract values the NFL as a better risk than the United States government.

Although most of the capital for the new stadium is being underwritten by the public, most football revenue generated within the facility will be pocketed by Denise DeBartolo York, whose net worth is estimated at $1.1 billion, and members of her family. York took control of the team in 2000 from her brother, Edward DeBartolo Jr., after he pleaded guilty to concealing an extortion plot by a former governor of Louisiana. Brother and sister inherited their money from their father, Edward DeBartolo Sr., a shopping-mall developer who became one of the nation’s richest men before his death in 1994. A generation ago, the DeBartolos made their money the old-fashioned way, by hard work in the free market. Today, the family’s wealth rests on political influence and California tax subsidies. Nearly all NFL franchises are family-owned, converting public subsidies and tax favors into high living for a modern-day feudal elite.

Pro-football coaches talk about accountability and self-reliance, yet pro-football owners routinely binge on giveaways and handouts. A year after Hurricane Katrina hit New Orleans, the Saints resumed hosting NFL games: justifiably, a national feel-good story. The finances were another matter. Taxpayers have, in stages, provided about $1 billion to build and later renovate what is now known as the Mercedes-Benz Superdome. (All monetary figures in this article have been converted to 2013 dollars.) The Saints’ owner, Tom Benson, whose net worth Forbes estimates at $1.2 billion, keeps nearly all revenue from ticket sales, concessions, parking, and broadcast rights. Taxpayers even footed the bill for the addition of leather stadium seats with cup holders to cradle the drinks they are charged for at concession stands. And corporate welfare for the Saints doesn’t stop at stadium construction and renovation costs. Though Louisiana Governor Bobby Jindal claims to be an anti-spending conservative, each year the state of Louisiana forcibly extracts up to $6 million from its residents’ pockets and gives the cash to Benson as an “inducement payment”—the actual term used—to keep Benson from developing a wandering eye.

http://www.theatlantic.com/magazine/archive/2013/10/how-the-nfl-fleeces-taxpayers/309448/

[countryjake]

20. Thank you for posting this truth about the NFL

I thought of posting it myself, after this story aired here, but then I figured it might be insulting to a bunch of football lovers this week. I commend KIRO 7 for having the nerve to do such an investigation and taking it to the street, to the many fans in Seattle during this lead-up to the Super Bowl. There was a video with that article, but it doesn't seem to be available anymore.

A perfect example of corporate capitalism, conservatives will defend it to the end, despite claims that such "loopholes" will be fixed.

[Jesus Malverde]

22. bump... nt

[Jenoch]

23. The American Medical Association

does not pay taxes and neither does the American Bar Association.