With the NFL seemingly backed up against its own goal line following the league’s handling of domestic and child abuse incidents, some members of Congress have expressed a desire to look into taking away the league’s tax exempt status.
Currently, the league is classified as a 501(c)(6) organization. The IRS’ website describes a 501(c)(6) organization as:
“…a membership organization characteristically supported by dues. While such an organization may receive a substantial portion or even the primary part of its income from non-member sources, membership support, both in the form of dues and involvement in the organization’s activities, must be at a meaningful level.”
The initial purpose of this type of tax-exempt organization was to benefit chambers of commerce, specifically the U.S. Chamber of Commerce. As the IRS’ website describes, the Chamber argued to Congress in 1913 that “commercial organizations” that were not-for-profit should have some sort of tax exemption since chambers and trade associations attempt to make workers and communities that are involved in a given industry more successful. Since the Chamber was granted a tax exemption under this classification, other commercial organizations such as the Greater Washington Board of Trade and the National Association of Realtors.
According to CNBC, the NFL has been exempt from paying taxes since 1944. Juana Summers, a former Politico reporter and current education reporter for NPR, writes that football was first granted tax exemptions “to help trade associations bolster local economies by promoting teams and filling seats at games.” The NFL officially became a 501(c)(6) organization in 1966. Also in the mid-1960s, Congress granted football an antitrust exemption in order for NFL and and then-rival AFL to merge. The exemption (along with the Sports Broadcasting Act of 1961) allowed the new NFL to set their price for the right to broadcast the league’s games. This is why the NFL has the ability to get a deal like this more than 40 years after these laws passed.
In fact, Congress has had a history of threatening to take away antitrust and tax exemptions away from sports leagues when said leagues do not appear to be behaving.
Major League Baseball (MLB) had its antitrust exemption challenged many times in court on the grounds that the league’s “reserve clause” (which allowed teams to annually renew a player’s contract, keeping player salaries low, restricted the movement of players, and prevented the creation of free agency) was a violation of antitrust laws. In deciding against former St. Louis Cardinals outfielder Curt Flood in 1972, the U.S. Supreme Court upheld past decisions on the antitrust matter, but stated that Congress should seriously look into revoking baseball’s antitrust exemption if baseball owners did not agree to give players more rights (within five years, the reserve clause was dead and baseball had free agency and a salary arbitration process). Despite the fact Congress never came close to revoking baseball’s antitrust exemption, the threat of it even being considered was enough to force the hands of owners slightly.
Earlier this week, Senator Richard Blumenthal (D-Connecticut) said he would introduce a bill that would require America’s “Big Four” sports leagues- NFL, MLB, NBA, and NHL- to reapply for their respective antitrust exemptions every five years. Last year, Senator Tom Coburn (R-Oklahoma) introduced legislation that would revoke the tax exemptions from not only the NFL, but also the National Hockey League (NHL) and Professional Golfers Association (PGA). That bill did not gain much momentum, though it remains to be seen if it will be revisited in light of the NFL’s current issues.
The implications of the NFL losing its antitrust and/or tax exempt status are calculable. The league would be forced to pay up millions of dollars but would probably survive. But as a recent USA Today article points out, it is unlikely to ever happen, as the strong talk from lawmakers should be seen as largely “symbolic”. According to USA today, the NFL has given millions of dollars to the campaigns of various lawmakers. So even if legislation stripping the tax exempt status of the NFL was introduced into Congress, the likelihood of that bill passing would probably be low as lawmakers would not want to vote against their campaign donors.
Public opinion may also play a role in Congress likely declining to actually push legislation against the NFL. The 112th and 113th Congresses have been two of the least productive congresses in history in terms of laws passed. Topics of national importance ranging from immigration and border security to foreign aid and conflicts have long been ignored by lawmakers. The IRS and Department of Veterans Affairs have been involved in serious incidents in recent months. The already miniscule approval rating of Congress would surely go down if lawmakers made football its focus and passing laws along the lines of the ones suggested by Sen. Blumenthal and Sen. Coburn instead of trying to solve national security issues.
Will at least the threat of Congressional action force the NFL’s hand? And if so, what would the result of that threat be? Could the NFL introduce stricter penalties for all off-the-field issues? Does Commissioner Roger Goodell resign or get fired by NFL owners who fear Congressional action? The answers to all those questions remain to be seen.