President Donald Trump is continuing his PR war on the NFL by turning his attention to the league’s tax status. On Tuesday morning, the president tweeted, “Why is the NFL getting massive tax breaks while at the same time disrespecting our Anthem, Flag and Country? Change tax law!”
There’s just one problem: his information is two years outdated.
The NFL was indeed a 501(c)(6) tax-exempt trade organization, beginning in 1942. But it voluntarily gave up that classification in 2015.
And its tax exempt status was long misunderstood anyway.
How the NFL’s tax status worked in the past
For starters: only the league office, and not the 32 teams, had tax exemption.
In addition, the NFL was always different from a typical nonprofit: the 501(c)(6) status is for trade organizations. The U.S. Chamber of Commerce has the same label. Major League Baseball had the same status, but relinquished it in 2007. The National Hockey League, the PGA Tour, and the LPGA all still have it.
The revenue that the NFL gets from sponsorships, broadcast deals, and ticket sales was taxed even before it gave up its tax exemption.
The only money untaxed in the past was the league office’s income, i.e. profit, and it was only taxed if the league office made a profit. The NFL league office (separate from the teams) did not even become profitable until 2012.
What about stadium financing?
Many Twitter users on Tuesday defended Trump’s erroneous tweet by bringing up the issue of public financing for new stadiums.
Indeed, more than half of the NFL stadiums built since 1997 have received some amount of public financing help from local municipalities, and in many cases the construction is paid for in part by tax-exempt municipal bonds, all because cities believe that having an NFL stadium will boost their economy. (It usually does not.)
But this help is given to the franchises that build and own these stadiums. It is a completely separate issue from Trump’s claim that the NFL, as a league, gets “massive tax breaks.” (It does not.)
Nonetheless, White House spokesperson Sarah Huckabee Sanders shifted focus to stadium financing on Tuesday, saying: “Billions of taxpayer dollars continue to subsidize the constriction and renovation of professional sports stadiums.”
Why the NFL changed its tax status
In an April 28, 2015 letter to the NFL team owners, Commissioner Roger Goodell wrote that the NFL’s tax exemption had been “mischaracterized repeatedly.” And now Trump has mischaracterized it again. (Yahoo Finance has reached out to the NFL for a comment on Trump’s tweet.)
Even the fact-checking website Snopes calls the notion of the NFL’s tax exempt status “mostly false.” (Another current misconception about the league is that there is an ‘NFL rule’ players must stand for the anthem; there is no rule, but there is a ‘policy’ about it, and the NFL sees a distinction between the two.)
To be sure, relinquishing its tax exemption also meant the NFL no longer has to publicly disclose the salary of Goodell. That salary, in 2015 when last reported, was $32 million.
“A change in the tax status will not alter the function or operation of the league office or Management Council in any way,” Goodell wrote to the owners. “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. 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. As a result, the committees decided to eliminate this distraction.”
Of course, as Trump (and now Vice President Mike Pence) continues his war of words on the NFL, and issues edicts on everything from players protesting during the anthem to referees calling penalties, the “distraction” will only continue this season.
For more on the money of the NFL, listen to our Sportsbook podcast on the business of football.