Republican Sen. Tom Coburn of Oklahoma has introduced legislation to end a tax break that treats the National Football League and some other sports organizations as nonprofit enterprises, giving a taxpayer-funded subsidy to thriving businesses.
Coburn's bill, the Properly Reducing Overexemptions for Sports Act (PRO Sports Act), would do away with the tax break currently enjoyed by the league offices of the National Football League, the National Hockey League, golf's PGA Tour, and the Ladies Professional Golf Association — whose combined annual gross receipts total about $2 billion.
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"Whatever justification there was for treating the NFL's headquarters as a tax-exempt trade association has long since been overtaken by events,” said Bonner Cohen, a senior fellow with the National Center for Public Policy Research. "Once tax breaks, subsidies, mandates or whatever goodies Washington comes up with are in place, it's almost impossible to get rid of them."
Cohen asked: "Can the NFL's headquarters stand on its own two feet? Of course, it can and it should."
The tax breaks apply only to the league office, while the NFL's 32 teams pay taxes on their revenues. The League Office receives funding from the teams to cover activities including office rent, League Office salaries, and game officiating.
The Internal Revenue Service section 501(c)(6) grants the break for those "business leagues, chambers of commerce, real estate boards, boards of trade, or professional football leagues" and other entities that represent a trade or industry.
The tax break has been available for decades. It was enacted to encourage the NFL's growth. But some policy experts deem it a form of crony capitalism that benefits some of the wealthiest Americans.
"Tax exemptions like this one are corporate welfare and government cronyism," said Steve Stanek, a research fellow at The Heartland Institute and the managing editor of the organization's "Budget and Tax News" publication. "Good tax policy would end them."
Stanek said halting the benefit and inserting in its place a system that doesn't allow for "manipulation of taxes" would remove government from the "corrupt business of doling out favors to the politically and financially powerful."
Ending the benefit is a tough sell, however. Coburn has been pushing for the scale-back of the nonprofit label for professional sport for years. But he's mostly been a lone voice on Capitol Hill — amid a sea of congressional members who have taken millions of campaign dollars from the sports industry.
Coburn's bill was read twice on the Senate floor on the same day it was introduced in September, sent to the Finance Committee, and quietly pushed to the side. The bill has no co-sponsors.
The group Rootstrikers, created in 2011 by Harvard law school professor Lawrence Lessig and political activist Joe Trippi to fight political corruption, hopes to give momentum to the issue and has started an online petition to support Coburn's bill.
"Lobbyists demonstrated their prowess by adding, 'or professional football leagues' to the language regulating 501(c)(6) nonprofit organizations back in 1966, and it has remained there ever since," says the petition, which has gained over 6,300 signatures.
"The NFL has spent $3.6 million lobbying in recent years, and contributed more than $1.6 million to members of Congress. It leads all professional sports leagues in lobbying expenditures. No wonder Senator Coburn has yet to gain the support of his colleagues," the petition states.
Major League Baseball gave up its nonprofit status in 2008. Coburn has argued that if all the professional league offices followed suit, Americans could recapture the estimated $91 million that goes each year for the subsidy.
In his 2012 Waste Book — a summary of congressional pork, waste and flighty expenditures — Coburn wrote that "hardworking taxpayers should not be forced to provide funding to offset tax giveaways to lucrative major professional sports teams and leagues."
Coburn’s numbers aren't uncontested. ESPN reported that while Coburn's Waste Book said taxpayers could gain $91 million in a year’s time from pulling the nonprofit status of the NFL and NHL, the Joint Committee on Taxation reported that figure was more in the range of $109 million over 10 years.
Still, Stanek said the matter is more of principle than purse.
"Ending the tax exemption would not lead to great benefits for the American people because the money would be swallowed up in deficit budgets,” he said.
“But it should be ended anyway. It was granted to give the NFL a boost. Now we have the absurdity of a pro sports league, owned by multimillionaires and multibillionaires, most of whose workers are paid hundreds of thousands and millions of dollars a year, bringing in billions of dollars and calling itself a nonprofit."
Stanek said "to throw salt in the wound," these wealthy sports owners have "extorted billions of dollars from taxpayers around the country with threats to take their ball and play somewhere else if taxpayers don't pay for the NFL's playgrounds."
Stanek questioned the public benefit of taxpayers footing the bill for sporting arenas.
He said: "Almost every independent economic study shows communities have little or no economic gain from them because the money people spend at sporting events would have been spent in others ways, on things like going to the movies, restaurant dinners and other entertainment."
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