OK, so fans aren't protesting in the streets now. But the NFL's tax status is still shocking. Photograph by Stuart Isett/Bloomberg
OK, so fans aren't protesting in the streets now. But the NFL's tax status is still shocking. Photograph by Stuart Isett/Bloomberg

The NFL enjoys vast support among the American public despite recent controversies, but when it comes to taxes, the league is best served by keeping fans in the dark.

A survey conducted last month by Fairleigh Dickinson University found that people overwhelmingly oppose tax breaks enjoyed by the league, while the majority had no idea the National Football League has nonprofit status. The poll, which questioned more than 1,000 people, found that 56 percent identified themselves as football fans, 69 percent don't think public money should be used to build stadiums, and 71 percent oppose tax breaks to keep an NFL team in town.

Most interesting, however, is how effective the NFL's public-relations machine has been at keeping its nonprofit status out of the public eye. Only 13 percent of those polled correctly identified the NFL as a nonprofit. It seems most people have a hard time reconciling tax breaks for a league flush with cash at a time when government budget cuts are threatening classrooms and even the IRS itself.

To clarify, the NFL is not categorized as a charity under the tax code; rather, it falls under Section 501(c)(6), which exempts trade or industry associations from taxation. In 1966, the tax code was amended to include professional football to facilitate the merger of the NFL and the American Football League, by granting the sport antitrust and tax exemptions. The IRS specifically mentions the sport in its statute:

IRC 501(c)(6) provides for exemption of business leagues, chambers of commerce, real estate boards, boards of trade, and professional football leagues (whether or not administering a pension fund for football players), which are not organized for profit and no part of the net earnings of which inures to the benefit of any private shareholder or individual.

The IRS further explains the type of "business league" that does not fall under these exemptions:

No part of a business league’s net earnings may inure to the benefit of any private shareholder or individual and it may not be organized for profit to engage in an activity ordinarily carried on for profit (even if the business is operated on a cooperative basis or produces only enough income to be self-sustaining).

With $9.5 billion in revenue, the NFL doesn't seem to fit this definition. The next-richest professional sports league, Major League Baseball, does not enjoy the same break.

There's a bipartisan campaign to amend the tax code, which is right in the wheelhouse of liberal activists calling for increased taxes on millionaires and conservative critics of government waste. Senator Tom Coburn, Republican of Oklahoma, recently announced he would retire from Congress, but not before introducing a bill that would strip the NFL of its nonprofit status. The PRO Sports Act proposes taxing any professional sports league that brings in at least $10 million. In such a politically polarized climate, it seems football might be our great uniter after all.

(Kavitha A. Davidson is a Bloomberg View columnist who writes about sports. Follow her on Twitter at @kavithadavidson.)

To contact the writer of this article:
Kavitha A. Davidson at kdavidson19@bloomberg.net.

To contact the editor responsible for this article:
Stacey Shick at sshick@bloomberg.net.