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Last month, football-coach-turned-congressman Tom Osborne (R-Neb.) told a congressional hearing that federal lawmakers should not get involved in regulating sports.
Despite high-profile stories about the University of Colorado’s recruiting processes, the political footballer said he hadn’t changed his mind on the subject. Capitol Hill oversight of athletics, Osborne said, would be as unwise as letting “the Redskins come in and write tax policy.”
Perhaps Osborne should have used another franchise’s name to make his sarcastic point. After all, he’s an alum of the burgundy and gold—before getting into coaching, Osborne caught 29 passes playing here in the 1960 and 1961 seasons—who now does write tax policy.
But it’s worth mulling over Osborne’s comment. If the Redskins decided tax policy, well, before you know it, the National Football League would be designated as a nonprofit corporation.
Oh, wait a sec: The NFL already is designated as a nonprofit.
Really. It’s one of those quirky realities, right up there with Bernie Kosar’s being gentile: The NFL, that Park Avenue behemoth that signs multi-billion-dollar
television contracts and whose every move seems, to the Average Joe, to scream “For profit!” is, to the powers that be at the IRS, just another 501(c) organization.
A nonprofit.
“This is a situation where it quacks like a duck
and walks like a duck, but it’s not a duck,” says K.B. Forbes, executive director of Council of United Latinos, a nonprofit group that fights abuse of the tax system by nonprofit corporations.
Forbes’ organization—“a real nonprofit,” he says—devotes most of its energies and dollars going after urban hospitals that have been granted nonprofit status but treat patients as if making money were their raison d’être. So he’s not done much to tackle the football league’s designation.
But Forbes nevertheless regards the NFL’s tax status, which allows the league to avoid paying taxes on millions of dollars of revenues, as being as symptomatic of the government’s buddy-buddy relationship with Big Business as is the situation with some nonprofit hospitals.
“I guess the NFL can say they deserve [nonprofit status] because they teach the game of football to the community,” Forbes says. “But for a nonprofit, serving the community should mean more than that, and more than writing a check to the United Way.”
The NFL’s fiscal structure is a complex one. The league regards itself as a trade association with 32 individual members—the teams. Thirty-one of those teams are privately held for-profit corporations; the exception is the Green Bay Packers, the only publicly owned sports franchise in the country. (NFL bylaws now prohibit public ownership of any team other than the Packers.)
As the quick demise of the WFL and USFL proved, those teams would be less than worthless without the NFL’s branding. And the league itself is a cash cow: On its most recent Form 990, a filing required of all nonprofits, the NFL reported revenues of $130,306,192.
NFL spokesperson Greg Aiello concedes that “nonprofit” status “suggests a charitable organization” to the general public. But he attributes criticism of the league’s classification to “a misunderstanding and mischaracterization of how our operation works.”
“It’s like any other trade association,” Aiello says. “We’re set up to perform certain functions on behalf of the teams. We’re funded by other entries whose revenue is subject to all appropriate taxes. If the networks send us $100, then that $100 goes out to the teams, and it’s taxed at that level.”
Shawn McCarthy of the League of Fans says his group been concerned about the NFL’s tax breaks for some time. The organization, a Ralph Nader spinoff, has been trying to raise public awareness about the use of public money to build stadiums for use by privately owned professional sports franchises. Despite the amount of the people’s money at issue, that battle has been uphill.
“People don’t know how they use their nonprofit status, and that’s kind of a shame,” McCarthy says. “Whenever these issues come up, it’s like this sort of news just gets buried.”
McCarthy praised a 2002 report by Josh Peters of the New Orleans Times Picayune. Peters’ story showed how the NFL used its revenues to finance a low-interest-loan program for franchises with stadium-building projects. And, according to the story, in order to participate in the program, teams had to agree to raise ticket prices to get the money needed to repay the loans.
So, even though on paper it looked as if a big chunk of the construction costs were being paid by team owners or the league, the public’s real fiscal burden was a whole lot heavier than advertised.
But Forbes thinks a tide might be rising for reform of nonprofit laws and against superprofitable nonprofits. He cites the case of the Provena Covenant Medical Center in Urbana, Ill., which on Feb. 13 had its nonprofit status revoked by the state Department of Revenue for behaving more like a for-profit entity than its charter allowed.
Loss of that status meant Provena Covenant was suddenly liable for more than $1 million in property taxes for 2002.
After the regulators’ decision, hospital CEO Mark S. Wiener reportedly said the revocation would have “local, state, and national ramifications.”
Which would be fine with Forbes.
“The trend has been for these huge corporations to spend incredible amounts of money on consultants, for corporations to use for-profit tactics in a nonprofit structure,” he says. “It appears that the NFL has experts that can help them game the system. And we’re not talking about the game of football. This is about the game of paying taxes.” —Dave McKenna