The Strategic Retreat

It Doesn’t Matter That The NFL Is Nonprofit

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Twice yesterday I was faced with articles decrying the NFL for being a nonprofit. Once was on Facebook and once on reddit. I try not to get too involved in either of those places. People take things personal when you call out their political stances on Facebook and, in general, I try not to get too involved in the schoolyard squabbles of reddit. Having heated online debates with anonymous kids just isn’t how I wish to live my life.

I often fail in my cosplay of Switzerland though, because deep down I’m a know-it-all. And, faulty facts and logic bother me way more than opinions I disagree with. I often should just let these things go, but I can’t. Besides, I’ve had a few football related posts in a row. I may as well keep that train rolling.

Here’s the thing, most people who are pissed that the NFL is a non-profit are people that were deceived by manipulative reporting. It’s a fault of modern journalism and basically comes down to the fact you can’t trust news sources(other than The Strategic Retreat, we got your back). They take a half truth, multiple it with another half truth, whip you into a frenzy and then shove you out into the world to spread what has become a one-quarter truth amongst your friends.

Half truth: The NFL is a Nonprofit.

Half truth: The NFL has an annual revenue of $9.5 Billion.

One Quarter truth: The NFL is a nonprofit with an annual revenue of $9.5 Billion.

No truth: The NFL is exploiting nonprofit status to avoid taxes on $9.5 billion.

Let’s break it down.

The NFL is a Nonprofit.

The NFL is a Section 501(c)(6) nonprofit. This type of nonprofit is for business leagues, boards of trades, chambers of commerce and surprisingly specifically, football leagues. See, lots of business groups can be governed by nonprofits. The governing group isn’t seeking a profit but it operates for the good of those it governs, and they are most definitely trying to make a profit.

There are lots of classes of nonprofits. You know that frat house you walked passed on your way to Econ 101, with a bunch of passed out bros on the front lawn? Non-profit.

What the NFL isn’t is a charity. That would be a Section 501(c)(3).

The NFL doesn’t have $9.5 Billion in revenue.

The NFL, the Section 501(c)(6) company, has about $200M to $250M in revenue each year. The primary source of revenue for the NFL comes from annual dues from each team. These dues are roughly $6M per year, per team. This amount is written off as a business expense by each team as a necessary cost of doing business.

NFL executives are paid very well. We know this due to the NFL being tax exempt and having their tax returns as public record. The top 8 employees receive around 25% of the NFL’s total revenue, in some years even more. A few years ago Goodell, the commissioner, brought home around $30M. That’s a lot of money, but it’s also a separate issue.

If what I say is true where does the $9.5B number come from? Good question, and one that many reporters failed to find out before creating sensationalist and misleading news stories. The teams in the NFL bring in $9.5 billion annually.

The teams of the NFL bring in this money. This is the money made by the individual teams in the NFL, the for-profit, tax-paying teams of the NFL. Not the tax exempt Section 501(c) NFL.

The teams of the NFL bring in a lot of money, and they pay taxes on that money.

The NFL isn’t unfairly profiting from being tax-exempt.

The Section 501 arm of the NFL doesn’t make a profit. If you’re a business and you don’t make a profit, you don’t(generally) pay taxes. It doesn’t matter if they bring in $1 or $1 Trillion, if your operating budget exceeds your revenue you don’t have a profit. The U.S. doesn’t tax on revenue.

Roger Goodell gets paid too much.

So? So does Mark Sanchez. The difference is Roger Goodell gets paid too much whilst actually doing his job well*.

Roger Goodell doesn’t work for a charity, it’s not a Section 501(c)(3). He doesn’t siphon money away from orphaned kids, or siphon the life blood away from naive donators. He is paid from the dues collected from very successful companies.

Steve Jobs made $1 a year. People didn’t complain about that. Plenty of CEOs make a lot more than Goodell. And sure, people do complain about that. But the thing is, being a non-profit has nothing to do with his pay. It’s intellectually dishonest to compare his pay to that of companies that exist off of charitable donations.

In summation, the NFL isn’t avoiding taxes by having non-profit status. Some unscrupulous person/people set out to confuse the issue by pretending that the revenue of teams is the revenue of the non-profit body and that revenue would somehow be taxed at a for-profit. That’s it. That’s the whole story.

Now, if you want to sit around and bitch about how much the top brass makes; go for it. That’s a common pass-time of football fans. But if you’re spending your time, shaping laws that will do absolutely nothing because you’re confused by the issue -rather than try to stop domestic spying or a continually worsening national infrastructure- you’re a pandering jerkface.

*Good at the maximizing profit portion of his job, in other aspects he’s the San Jose of commissioners.

About Jeff

Jeff was born in the back of a War Game Store on the day the first Star Trek movie came out, to a computer programmer mother and a father who wrote the story for Dragon's Lair. Jeff has an MBA, a CSM, and a penchant for sticking his nose where it doesn't belong.