The NFL: Not-for-Profit, Not for Loss Either

NfLI use this blog to write about things I read about, hear about or think about.  Some of these things uplift and inspire me, some simply amaze me or cause me dismay, some concern me.  In an interview with NPR’s Robert Siegel aired on September 24, Gregg Easterbrook, author of THE KING OF SPORTS: FOOTBALLS IMPACT ON AMERICA, pointed out the following about the National Football League:

It’s a scandal that I can’t understand why people aren’t marching in the streets over, I suppose. The headquarters of the National Football League is chartered as a nonprofit — and treated by the IRS as a nonprofit — due to a few key words that were slipped into a piece of legislation 50 years ago. The individual teams probably pay corporate income taxes, but we don’t know since most of them don’t disclose any figures. Most of them receive public subsidies but don’t disclose anything. The top of the NFL — Roger Goodell, the commissioner — his $30-million-a-year paycheck comes from what looks on paper to be a tax-exempt philanthropy.

… Judith Grant Long, a researcher at Harvard, calculates that 70 percent of the cost of NFL stadia has been paid for by taxpayers. In general, the public subsidizes pro football to the tune of around $1 billion a year, is what I calculated in my book. And yet it’s phenomenally profitable — subsidized up one side, down the other, and yet a very profitable business.

The NFL is a not-for-profit organization?   Even with its trademark sales which earn billions of dollars? It creates millionaires, and yet was chartered as a non-profit organization.  Some of its franchises’ stadiums are apparently bankrolled to the tune of $1 billion per year by taxpayers.  It is a sport which seems to roll in dough, and yet its franchises rely on the taxpayer’s dole?   Cities are willing to use lots of tax payer’s dollars to build the stadiums which are used for maybe 10 games per year.    Where are the watchdogs of the public’s tax dollars while all this is going on?  Probably watching the NFL in the deluxe stadium boxes.

A somewhat deflated Cleveland Browns football celebrating their return to the NFL
A somewhat deflated Cleveland Browns football celebrating their return to the NFL

King of SportsGregg Easterbrook’s comment that Roger Goodell, the commissioner of the NFL gets “a  $30-million-a-year paycheck from what looks on paper to be a tax-exempt philanthropy”, takes the cake for me.   Maybe if the Tea Party organizations had used the name of the Boston Patriots they would have had less problems from the IRS.

According to TIME magazine:  “Under Internal Revenue Service rules, nonprofits are not prohibited from taking in more money than they spend. They just
can’t distribute the overage to shareholders — because they don’t have any shareholders.”

I saw that the calculated average cost to take a family of 4 to an NFL game was $444 in 2012.  But one can assuage one’s guilt for that extravagant expense by amusing oneself with the thought that you are making a donation to a non-profit organization.

FORBES reports that on the average each of the NFL teams generated $286,000,000/team   in revenue for the NFL  in 2012.   FORBES also reports that the Detroit Lions were the only team in 2012 to report an operating loss, so maybe they qualify as a not-for-profit since that was the 4th year in a row that they operated at a loss. The Cleveland Browns, the team I grew up rooting for, are pathetic enough that they might be considered a charity case.   Of course the media seems to see the value in the not-for-profit NFL:  THE WALL STREET JOURNAL reported in 2011 that the NFL owners had approved $27,900,000,000 in TV deals.  THE NFL’s revenues continue to grow yearly and THE WALL STREET JOURNAL claims the NFL really runs American television.

The good fortunes of the NFL reminded me of the story in TIME  reporting on not-for-profit hospitals, which because of their status pay no taxes to the IRS.  Studies however show that the 2900 not-for-profit hospitals in the US average an operating profit margin of 11.7%.  This figure includes all those hospitals which operate with an actual loss.  In some communities these hospitals are among the largest employers  in town with some of the highest salaried employees for the region in which they operate.

The problem of course is not that some businesses are successful and very profitable, but rather the title they can hold, “not for profit”, and the tax benefits it bestows on them that enables them to become even more profitable.   Most cities welcome these kind of non-profit organizations for they are good for business.