April 28, 2015 / 5:49 PM / 4 years ago

National Football League says it will give up its tax-exempt status

WASHINGTON (Reuters) - The NFL’s front office will voluntarily give up its decades-old tax-exempt status, eliminating a “distraction” for the league that for years has been “mischaracterized,” Commissioner Roger Goodell said on Tuesday.

NFL Commissioner Roger Goodell speaks to the media before Super Bowl XLIX in Phoenix, Arizona January 30, 2015. REUTERS/Lucy Nicholson

National Football League teams pay taxes on their profits, but the league’s central office has gotten a pass since it is listed as a non-profit trade or industry association, a designation that has been criticized by some members of Congress.

Goodell, in a memo announcing the change to the league’s 32 teams, said the “fact is that the business of the NFL has never been tax exempt.”

“Every dollar of income generated through television rights fees, licensing agreements, sponsorships, ticket sales, and other means is earned by the 32 clubs and is taxable there.”

He said that will still occur when the league office and Management Council file returns as taxable entities, and that the change “will make no material difference to our business.”

The NFL is the world’s most profitable sports league and has nearly $10 billion in annual revenues. While the central office is tax exempt, most of the profits are given to the teams, which do pay taxes.

Goodell said the league’s tax status has been “a distraction” and has been “mischaracterized repeatedly in recent years.”

Section 501(c)(6) of the Internal Revenue Code lists “professional football leagues” as deserving of tax-exempt status, a vestige of legislative wrangling that helped the NFL and its upstart rival, the American Football League, merge in 1966.

The congressional Joint Committee on Taxation estimates the 10-year cost to the taxpayer of the NFL exemption is about $109 million.

Representative Jason Chaffetz, a Utah Republican and chairman of the House Oversight Committee, told Reuters in March he wanted Goodell to testify before Congress on why he thought the NFL front office deserved tax-exempt status.

Chaffetz, and the committee’s ranking member, Elijah Cummings, a Maryland Democrat, said in a statement they were “extremely pleased” with the NFL’s decision.

“Congress has tried to tackle this issue before, but we made it one of our committee’s priorities this year,” they said. “It is rewarding to see such an important and positive step toward restoring basic fairness.”

The National Basketball Association never sought tax-exempt status, while Major League Baseball dropped it in 2008.

Among the entities that remain “tax-exempt organizations” are the National Hockey League, the Professional Golfers Association and the U.S. Tennis Association.

(This version of the story adds details and Chaffetz’s statement)

Reporting by Steve Ginsburg; Editing by Susan Heavey, Lisa Lambert and Eric Beech

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