WRAL Investigates

Big-time sports tax breaks: 'How much does it bother you?'

Posted February 4, 2013

— The National Football League is a $9 billion-a-year industry, but it's a nonprofit in the eyes of the Internal Revenue Service. The league pays no corporate income taxes. The Atlantic Coast Conference gets the same treatment as a charity, even though it pulled in $293 million in revenue last year, according to Forbes.

The WRAL Investigates team looked at the nonprofit exemptions, which were built into the tax code long before big TV money deals.

A check of the NFL’s latest tax return shows the league office reported nearly $1 billion in assets, $183 million in annual revenue and spent even more, actually losing money.

“It's not a profit center in itself. It's simply a facilitator, a kind of distributing unit,” said Duke University tax law professor Rich Schmalbeck, who points out that the real profit flows to NFL teams, which eventually pay some tax on the big TV, gate and merchandizing money.

The league office revenue comes mainly from team assessments. The $183 million averages out to about $6 million per team. Those dues that teams such as the Carolina Panthers pay can then be written off because the NFL is technically a nonprofit. The league paid Commissioner Roger Goodell $11,554,000, according to 2011 tax forms.

Counter that tax break with a proposal in Charlotte to increase the meals tax to pay for $125 million in Bank Of America Stadium renovations.

“How much does it bother you that the rich – in this case the NFL, the extremely rich – are getting benefits that I, as a small business owner, don't get?” said David Glenn, a sports radio host and attorney.

Glenn says he believes that’s a fair question, especially since the NFL won its exempt status in the 1960s, long before the mammoth TV deals.

“It is an example where the powerful get advantages, but it's one of a million examples where that is the case,” Glenn added.

The Pro Golfers Association reports $14 million in profit, tax-free thanks to its nonprofit status. The NCAA also didn’t have to pay taxes on its $40.7 million in net revenue.

“College sports, I think, are very problematic when it comes to charitable organizations,” Schmalbeck said.

Just like the Susan G. Komen Foundation and the SPCA, the NCAA and college athletic conferences enjoy what is called 501(c)(3) tax status, no corporate income or property taxes and contributions are deductible.

The Atlantic Coast Conference's mission statement defends its nonprofit status: The league "exists to promote and regulate inter-collegiate athletic programs" and to "maximize the educational and athletic opportunities of its student-athletes."

“If you think that that is not part of the core educational enterprise, then the tax treatment is probably one of many complaints you have about the system.” Schmalbeck said.

The ACC’s $3.6 billion television deal is all tax free. The reason is the conference and all the member schools, such as Duke University, North Carolina State University and the University of North Carolina at Chapel Hill, are nonprofits. The ACC's latest tax returns show the conference brought in $167 million and didn't pay tax on its $1 million in net revenue.

After salaries and operating expenses at the ACC, the vast majority of revenue flows directly to the member schools tax free, and there's another benefit. The ACC pays no property tax to local government for its $2.6 million headquarters in Greensboro. ACC Commissioner John Swofford was paid $1,460,768 in base compensation last year.

“If they ever lose the educational exception, if they ever also lose the amateur athletics exception, they can always apply for a religious exception, because we all know in the state of North Carolina college basketball is frequently treated like a religion,” Glenn joked.

Nonprofit or not, changing the tax game for big-time sports won't come easy.

“Every time college sports and the IRS go to war, the IRS ends up licking its wounds,” Schmalbeck said.

The tax breaks for big sports are on the radar. The NFL was singled out for its nonprofit status in the 2012 Wastebook from Oklahoma Congressman Tom Coburn. As for the fans, they aren't walking away. Some say they just wish for a fairer playing field.

“If you're bringing in so much money from so many people, I think you should be taxed at some point,” said sports fan Mike Litton.

It would take serious political will for lawmakers to take on the tax status of the NFL and college sports, and there's no sign anything will change anytime soon.

The ACC and NFL referred WRAL Investigates to IRS tax codes and mission statements but declined requests to comment.

Tuesday on WRAL News at 6 p.m., WRAL Investigates looks at another nonprofit – private country clubs.


This story is closed for comments.

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  • oldmanjoel Feb 6, 2013

    THE FEDERAL RESERVE is setup the EXACT same way. It's technically a not for profit corporation, but so is the NFL. But wait, the Federal Reserve is part of the federal government, WRONG! Go look it up yourself, it's right on their website.
    The FEDERAL RESERVE is the same structure as the NFL, and they both are FOR profit.

  • Crumps Br0ther Feb 6, 2013

    the only rich people that can be evil are republicans right?

  • ldestefano63 Feb 6, 2013

    It bothers me alot ! All these big corps & Businesses pay millions to people who can figure out all the ways they can get out of paying their share of taxes. Why is it left on us, the ones that actually bust our tails working everyday? The tax laws only benefit those with enough money to dodge them

  • tc35d Feb 6, 2013

    True Tax reform will never happen as long as politicians have to worry about getting re-elected. There are way too many special interest groups that represent a small population but have lots of money that will always get their way in congress. If a legislator has say 5yrs to get things done, and doesn't need to spend the money or the time running for re-election then they can act for the good of the country and not about the money in their campaign coffers.

    They have talked at the national and state level about tax reform for years, but nothing of any substance gets off the ground because the risk to the lawmakers of stepping on the wrong foot and getting thrown out at the next election is too great. I really don't think the founding fathers of this nation thought that people would make a profession out of politics.

  • wth50beau Feb 5, 2013

    Last year the Federal Government subsidized transportation in Indianapolis to and around the Super Bowl to the tune of $142,000.00+ taxpayer dollars. Superbowl tickets range in price from $2,000.00 to 14,000.00. I guess the attendees didn't have any money left to pay the $1.75 bus fare to the arena?

  • kcollier39 Feb 5, 2013

    nothing new here,same as it has always been and always will be.the rich keep getting richer.

  • 426X3 Feb 5, 2013

    Hey I know. Quit watching professional sports. Quit buying all the products these overpaid so-called athletes promote.

  • Honesty first Feb 5, 2013

    how many millions in taxpayer money was used to build the PNC arena? Don't forget to count the value of the land as well. What does NCSU pay to use the arena and for upkeep. Apples to apples my friend

  • aspenstreet1717 Feb 5, 2013

    All the owners,employees and players pay loads of tax. It acts as a conduit.

  • Barfly Feb 5, 2013

    "Nascar should go Non profit!!" roadrunner99

    "The "fiscal cliff" deal reached by the Senate and the White House on New Year's Eve, and passed in legislative form by the Senate early New Year's Day, includes many giveaways to special interests--including an extension of a perk enjoyed by "motorsports entertainment complexes" otherwise known as the "NASCAR tax credit." The provision, under section 168(i)(15) of the federal tax code, allows speedways to write off their costs over seven years. Typically, such expensing occurs over a much longer period of time, from 15 to 39 years. The cost of the NASCAR tax credit to taxpayers has been estimated at some $40 million--over and above any tax incentives provided by state and local authorities. Hollywood films also enjoy a tax incentive extension in the "fiscal cliff" deal."