Roger Goodell Announces NFL Will Forego Its Tax Exempt Status
When you're under a public relations siege, largely due to your own failings as a leader and a disciplinarian, making the noise go away has a price point. What is the number that makes it worth it for at least some of the public scrutiny to subside?
Of course, the answer to that question depends on a few variables, including just how big an overall revenue pie exists to pay for the P.R. masking agent. For NFL commissioner Roger Goodell, that answer appears to be about $109 million of his league's money over the next decade.
That's the estimated cost to the NFL's central office in foregoing its tax exempt status on a go-forward basis, an announcement that the league made yesterday and a maneuver whose public perception magnitude will far outweigh its actual magnitude.
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Thanks to Section 501(c)(6) of the Internal Revenue Code, which specifically provides a tax exemption to "professional football leagues," the NFL league office has been tax exempt virtually forever. The "National Football League" as a tax exempt entity is one of those things that, when the average fan or media member hears it, gives off an immediate air of privilege for the billionaires who run the league and is open to massive misinterpretation.
The general misconception is that this exemption allows the 32 teams to forego paying income tax each year, which is actually untrue. In his letter to Congress, dated Tuesday, Goodell writes:
"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," Goodell wrote. "This will remain the case even when the league office and Management Council file returns as taxable entities, and the change in filing status will make no material difference to our business."
In other words, "business as usual" for the NFL has already included the 32 ownership groups paying income tax on the portions of the huge $10 billion revenue pie that flow through their coffers. Where the league office will now feel a financial hit is in about $109 million in income taxes that it will pay out over the next decade on centralized league revenue streams, a relative pittance proportional to what the league makes.
It's another wrinkle of Goodell's chess move on Tuesday that makes the elimination of the tax exempt status so enticing to the league and, even more so, to Goodell personally. By the league no longer having a tax exemption, Goodell doesn't have to disclose his income, which at $35 million for 2013, had become a huge lightning rod for criticism given his complete mishandling of league issues like the Ray Rice domestic violence case, former players' suffering from years of concussions, and the controversy over the Washington Redskins' team name.
GIven that momentum had been growing in the House and Congress to revoke the league's tax exempt status in recent years (but never enough momentum to actually overturn it), Goodell's move on Tuesday was very pleasing to politicians:
"It is rewarding to see such an important and positive step toward restoring basic fairness," Republican Jason Chaffetz of Utah and Democrat Elijah Cummings of Maryland said in a joint statement. "We hope other professional sports organizations in similar situations will follow the positive example set by the NFL, and we look forward to rightfully returning millions of dollars to the federal treasury as a result."
In reality, the decision by Goodell is a relative parking ticket which the league will gladly pay in order to convey the impression that they're not above paying taxes like the lest of us regular Americans, and which Goodell will happily rubber stamp so that less of his personal income data is floating around for people to beg the question "Why does a guy so seemingly incompetent at crucial facets of his job make so much money?"
So when you see the headlines about the league's voluntary "concession," don't be fooled. For NFL owners, nothing has changed. For Roger Goodell, this was not some benevolent move to ensure that the league is "in this thing with the rest of us regular folk."
This was another maneuver of Goodell self preservation, plain and simple, self preservation for a guy who would never make one percent of what he makes in his current job doing anything else.
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