NFL logo on field

b&b29 So, um, the NFL’s a Non Profit

Tis the season to give back to your favorite non profits, and what better place to give than the… wait? The NFL is a non profit?

That’s exactly what we said when we first found out, so we did some research and found ourselves down a non profit rabbit loop hole matrix. Or something like that. Many sports teams are actually classified as “trade associations” and have 501c status, which means they don’t pay taxes on their revenue.

We break down how that works and what the implications are. Happy holidays indeed!

Episode Highlights:

Pam: The NFL is a nonprofit…they have a 501c6 status, so they’re not a public charity. They’re not the red cross….they don’t pay taxes. They’re tax exempt.

Pam: The CEO of the NFL made $44 million last year, from his nonprofit.

Pam: 501c3 is public charities. So, that’s stuff where you give a donation to a charity and you get a tax break for it. The charity is tax exempt from all the income that they make. And there’s a couple different classifications for the IRS. There’s 501c4’s for the political organizations like Human Rights Campaign is a 501c4, because they do political lobbying, and then there’s trade association nonprofits. So, places like the American Medical Association for Doctors, the U.S. Chamber of Commerce, the National Dairy Counsel. Any organization that is meant to help a body of people…If you’re a doctor you can join the AMA, essentially, so they get nonprofit status.

Pam: 1966, Congress actually inserted the phrase “professional football leagues,” so now the [501c6] code reads: “business leagues, chamber of commerce, real estate wards of trades, or professional football leagues.” …So what was going on was the NFL and the AFL were trying to merge, the American Football League, they were a rival league, and Congress was saying that this was violating anti-trust laws. And so, their loophole for it was “Well, just make us a nonprofit.”

Pam: The 501c6 status the NFL has is that of a trade association. So, the thing with trade associations is they get nonprofit status because they’re working for the benefit of an entire industry. So, again, the American Medical Association is working for the benefit of doctors. So, as a doctor, you can join the American Medical Association and have access to resources that all doctors can have access to. So, as long as you’re a doctor you can join the AMA. So, it has to be open to any business in the industry that would like to join. Like the U.S. Chamber of Commerce, the Dairy Council, that kind of stuff. You have to let people into your trade organization. It has to be an open thing as long as you meet the criteria. The NFL has 32 teams as part of their ‘trade group,’ and, the thing is, if you wanted to start a professional football league you couldn’t just join the NFL. That’s the distinction between a trade association that has nonprofit status and an entity like the NFL which is pretty exclusive. They control exactly who goes in and who goes out.

Pam: This professional football league provision in the 501c6 set a precedent for other sports leagues to be able to get nonprofit status.

Dyalekt: The average NFL career is three years.

Pam: The 32 teams (that make up the NFL) are not nonprofits, right? So, nonprofits are required to disclose what their financials are, but private companies are not required to disclose what their financials are. So, basically these teams can make whatever claims they want and they don’t have to disclose their private financial data to the government even though they’re getting government funding, because they are technically a private entity.

Pam: 12 teams have actually made money off the subsidies. The stadium didn’t cost as much to build as they got money for.

Pam: The cost of 70% of all NFL stadiums have been provided by the taxpayers.