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What the NFL Gains By Paying Taxes

You didn't think the NFL voluntarily relinquished its tax-exempt status out of the goodness of its own heart, did you?
Kirby Lee-USA TODAY Sports

Today, the NFL announced it would relinquish its tax exempt status for the league office and management council. This sounds like a big deal—the NFL is finally going to pay taxes!—but it's not. The NFL has always paid taxes on a vast majority of its income. Only the league office is tax-exempt; not the teams, which earn the lion's share of league revenue.

According to CNN analysis in 2014, the non-profit arm of the NFL claimed $326 million in income from April 2012 to March 2013, which basically came from the teams paying "membership dues." Ostensibly, this money is for league operations, such as their Park Avenue and D.C. offices, lobbyists, lawyers, and of course, Goodell's $44 million salary.


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So why would the NFL voluntarily pay taxes on that $326 million? The answer is simple: as long as the league is tax-exempt, its finances must be made public. That's why we know about the $326 million, and Goodell's $44 million.

As a private, tax-paying company, the NFL will now be within its rights to keep executive pay a secret. Any publicly-traded company has to at least inform its shareholders, and any tax-exempt entity needs to list executive pay in its annual 990s filed with the IRS. But now the NFL won't need to do that.

Try, for example, to find David W. MacLennan's salary. MacLennan is the CEO of Cargill, America's largest privately-held company, but there's no solid information on how much he or the company's other executives make. Same with Charles and David Koch of Koch Industries, the second-largest privately-held American company.

As for the taxes, Senator Tom Coburn, an Oklahoma Republican who has been an outspoken opponent of the NFL's tax-exempt status, told CNN the NFL is skirting some $10 million a year. For the NFL, that's pocket change. Hell, it's less than a quarter of Goodell's annual salary.

With increasing pressure in Washington regarding the tax-exempt status, the Washington football team's nickname, and a host of other issues, perhaps the NFL wanted to take a tool out of the politicians' toolbox. Now, when one of the NFL's dozens of lobbyists is out to dinner with a senator or Congressman at the Palm on Connecticut Avenue, they can't have the NFL's tax status thrown in their faces.

If the NFL has ever been good at anything, it's understanding leverage. After all, this is the league that's voluntarily kept a team out of the nation's second-largest TV market as a negotiating ploy in order to extract public subsidies for modern stadia across the country. The NFL's tax-exempt status simply wasn't that valuable to the NFL anymore, but it was incredibly valuable to its critics. Now they no longer have it.