The National Football League said Tuesday it will give up its tax-exempt status, with Commissioner Roger Goodell saying complaints that the wealthy league was skimming millions of dollars from taxpayers had become a “distraction.”
The league will begin paying on its income earned this year, Mr. Goodell said in a letter to team owners.
“For several years the NFL has discussed the tax exempt status of the league office and the management council, and more than a year ago the finance committee began a study of whether to relinquish the exemptions,” Mr. Goodell said in his letter. “That study has now concluded, and has confirmed that a change in the tax status will not alter the function or operation of the league office or management council in any way.”
The decision could have ripple effects beyond just federal taxes, since the NFL has reportedly used its tax-exempt status to duck paying some state and local taxes on gas or car rentals.
In the wake of the NFL’s decision, the National Hockey League — another pro-sports league that claims tax-exempt status — said it is considering changes too.
Members of Congress had been pressing the league to drop its tax-exempt status, with former Sen. Tom Coburn including it in his annual Waste Book collection of stupid or bad government spending decisions.
Mr. Coburn had estimated that the league’s main office would pay about $10 million a year in federal taxes. The teams themselves already pay taxes on their operations.
“Today, taxpayers have scored a touchdown,” Mr. Coburn said in a statement after the NFL’s announcement. “Congress fumbled on this issue by not taking up and passing the PRO Sports Act last year. Fortunately, NFL acted on good conscience anyway. It’s time for the PGA Tour to follow NFL’s lead and give up its boondoggle, or for Congress to take it away.”
Major League Baseball gave up its tax-exempt status last decade, becoming a for-profit limited liability corporation in 2007.
But both the NHL and the PGA Tour still claim tax-exempt status, and Rep. Jason Chaffetz, chairman of the House oversight committee, said he hopes those organizations will follow the NFL’s lead.
Mr. Chaffetz has introduced legislation that would prohibit leagues with more than $10 million in annual revenue from holding tax-exempt status.
Ty Votaw, a spokesman for the PGA Tour, declined to comment Tuesday on his organization’s thinking in the wake of the NFL’s decision, but there may be some movement at the NHL.
“We are in the process of evaluating our status, but no decisions have been made at this time,” Bill Daly, deputy commissioner of the NHL, said in a statement.
The NFL provided a copy of its letter to the House Ways and Means Committee, which is the chief tax-writing panel on Capitol Hill.
Mr. Goodell, in his letter to teams, said the league was first approved for tax-exempt status in 1942. He said, however, that the status has been “mischaracterized repeatedly” in recent debates, and said the teams’ income from ticket sales, television licensing and sponsorships have always been subject to taxes.
The NFL was first recognized in 1942 as a nonprofit under the portion of the tax code governing trade associations.
In 1966, an exemption specifically aimed at pro football leagues was added to section 501(c)(6) of the tax code. That change was made to ensure that the league could keep its tax-exempt status even though it administered players’ pension funds.
Sen. Angus King, an independent from Maine who co-sponsored legislation with Mr. Coburn, praised the NFL’s decision.
“It’s common-sense that the league office of a successful multi-billion dollar sports organization should not enjoy the benefit of tax incentives — which come from the pockets of every day Americans — to boost their bottom lines,” Mr. King said.