In The Atlantic, an excerpt from Gregg Easterbrook’s new book The King of Sports: Football’s Impact on America, talks about the fantastic legal and financial advantages enjoyed by the National Football League:
In his office at 345 Park Avenue in Manhattan, NFL Commissioner Roger Goodell must smile when Texas exempts the Cowboys’ stadium from taxes, or the governor of Minnesota bows low to kiss the feet of the NFL. The National Football League is about two things: producing high-quality sports entertainment, which it does very well, and exploiting taxpayers, which it also does very well. Goodell should know — his pay, about $30 million in 2011, flows from an organization that does not pay corporate taxes.
That’s right — extremely profitable and one of the most subsidized organizations in American history, the NFL also enjoys tax-exempt status. On paper, it is the Nonprofit Football League.
This situation came into being in the 1960s, when Congress granted antitrust waivers to what were then the National Football League and the American Football League, allowing them to merge, conduct a common draft, and jointly auction television rights. The merger was good for the sport, stabilizing pro football while ensuring quality of competition. But Congress gave away the store to the NFL while getting almost nothing for the public in return.
The 1961 Sports Broadcasting Act was the first piece of gift-wrapped legislation, granting the leagues legal permission to conduct television-broadcast negotiations in a way that otherwise would have been price collusion. Then, in 1966, Congress enacted Public Law 89‑800, which broadened the limited antitrust exemptions of the 1961 law. Essentially, the 1966 statute said that if the two pro-football leagues of that era merged — they would complete such a merger four years later, forming the current NFL — the new entity could act as a monopoly regarding television rights. Apple or ExxonMobil can only dream of legal permission to function as a monopoly: the 1966 law was effectively a license for NFL owners to print money. Yet this sweetheart deal was offered to the NFL in exchange only for its promise not to schedule games on Friday nights or Saturdays in autumn, when many high schools and colleges play football.
Public Law 89-800 had no name — unlike, say, the catchy USA Patriot Act or the Patient Protection and Affordable Care Act. Congress presumably wanted the bill to be low-profile, given that its effect was to increase NFL owners’ wealth at the expense of average people.
While Public Law 89-800 was being negotiated with congressional leaders, NFL lobbyists tossed in the sort of obscure provision that is the essence of the lobbyist’s art. The phrase or professional football leagues was added to Section 501(c)6 of 26 U.S.C., the Internal Revenue Code. Previously, a sentence in Section 501(c)6 had granted not-for-profit status to “business leagues, chambers of commerce, real-estate boards, or boards of trade.” Since 1966, the code has read: “business leagues, chambers of commerce, real-estate boards, boards of trade, or professional football leagues.”
The insertion of professional football leagues into the definition of not-for-profit organizations was a transparent sellout of public interest. This decision has saved the NFL uncounted millions in tax obligations, which means that ordinary people must pay higher taxes, public spending must decline, or the national debt must increase to make up for the shortfall. Nonprofit status applies to the NFL’s headquarters, which administers the league and its all-important television contracts. Individual teams are for-profit and presumably pay income taxes — though because all except the Green Bay Packers are privately held and do not disclose their finances, it’s impossible to be sure.
