“Flag on the Play” for a Multi-Million Dollar Nonprofit

Despite its classification as a nonprofit organization, the NFL fails to conform to typical standards, calling into question whether it really deserves its tax exempt status.

Two February 7th Events – One nonprofit rose over $450 million dollars and the other worked toward a goal of $15,000.  Which one is the true nonprofit organization?

On February 7th, the Courage Center held its 4th annual benefit for Camp Courage, which offers safe, accessible, natural environments for children with disabilities.  Founded in Minnesota in 1928, the Courage Center is a nonprofit organization that set a goal of $15,000 dollars for its Dance with Courage event.

On the same day, the National Football League (NFL), a registered nonprofit organization, successfully raised an estimated $463 million dollars through its annual Super Bowl event, according to Sports Research Institute.  The event was seen by over 100 million people and an estimated 112,000 people were in attendance.  Some other interesting facts include:

  • The highest donation category for the Camp Courage event was the “Mikhail Baryshnikov” level at $100.  The Super Bowl sold 30-second commercial advertising space for approximately $2.6 million dollars a spot. 
  • The NFL’s CEO Roger Goodell is reportedly paid over $10 million dollars, which is approximately three times more than the top nonprofit CEO salary cited by Money Magazine, James Mongan of Partners HealthCare Systems in Massachusetts.  Mr. Goodell makes nearly 44 times more than the CEO at the Courage Center according to 990 records.
  • The NFL has 13 subsidiaries, seven of them tax exempt.  The smallest of the seven tax exempt subsidiaries are those that are dedicated toward philanthropic causes, including NFL Charities and the NFL Youth Fund.  Rick Cohen, in his Nonprofit Quarterly blog The Cohen Report (8/12/08), cited that in the 2005 990, the NFL gave away to charitable causes slightly under $10 million dollars.  This is approximately one tenth of 1% of its annual revenue.  Foundations are required by law to distribute annually at least 5 percent of their net assets.
  • The NFL’s 2009 annual revenue is $7.6 Billion dollars, according to Forbes Magazine.  That would make it over $2 billion more in revenue than the Mayo Foundation, the largest U.S. charity cited by Forbes.  The league’s least valued team, the Oakland Raiders at $797 million dollars, is greater than many large for-profit companies.

Something is wrong with this scenario.  I am not sure if the NFL truly complies with the nonprofit corporation definition of operating for educational, charitable, social, religious, civic or humanitarian purposes.

While the proceeds of the Camp Courage event will be dedicated toward advancing the lives of children and adults experiencing barriers to health and independence, the proceeds of the Super Bowl will go to the NFL’s mission of “promoting interests of its 32 member clubs”.  The mission statement originally filed by the NFL is unknown.  According to Josh Peter of the New Orleans Times-Picayune, the “NFL said it has lost its copy of the application it filed with the IRS in 1942, and the IRS also said it was unable to find a copy of the application.” 

I guess this is equal to the dog eating your homework and so I am sure advancing the interests of the Washington Redskins is equal to the missions of organizations like the Courage Center or smaller “folding-table organizations” that earn their non-profit status each and every day.
I am an avid football fan.  I played throughout high school and college.  I enjoy a Vikings or Jets game on Sundays.  That said, there is something very wrong about the NFL being a tax exempt organization and my greatest challenge is how the nonprofit sector can be manipulated in this way.  What is even more worrisome is how much more other tax exempt statuses are being manipulated in this fashion.

Read more stories by John Brothers.

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  • Pat O'Toole's avatar

    BY Pat O'Toole

    ON February 19, 2010 01:18 PM

    From the IRS website: “Section 501(c)(6) of the Internal Revenue Code provides for the exemption of business leagues, chambers of commerce, real estate boards, boards of trade, and professional football leagues, which are not organized for profit and no part of the net earnings of which inures to the benefit of any private shareholder or individual.”

    Seriously? “Professional football leagues” make up their own category? That is overtly arbitrary.

  • Agnes Vishnevkin's avatar

    BY Agnes Vishnevkin

    ON February 19, 2010 02:32 PM

    The requirement for an organization to operate for “educational, charitable, social, religious, civic or humanitarian purposes” applies only to 501(c)(3) charitable organizations, and donations to these organizations are tax deductible. 

    I agree that it seems arbitrary for professional football to get a special mention in IRS regulations and that NFL is treated as a not for profit enterprise by the IRS.  However, as a 501(c)(6) organization they are not expected to be involved in charitable activities.

  • Jennifer Rader, FundScribe's avatar

    BY Jennifer Rader, FundScribe

    ON February 19, 2010 02:58 PM

    Great article & uncover, John.  What I find interesting is in this statement, “....which are not organized for profit and no part of the net earnings of which inures to the benefit of any private shareholder or individual.”  I would say a ton of folks benefit from the NFL as an “organization.”

  • Mark, Generated from Facebook.com by SSIR's avatar

    BY Mark, Generated from Facebook.com by SSIR

    ON February 22, 2010 12:00 PM

    Comparing a 501c3 to a 501c6 organization and lumping both in the same mission category is apples to oranges. That said, it doesn’t seem that the NFL really meets the IRS inurement requirements of business leagues. No doubt their expensive legal fees were well spent in getting courts to rule otherwise. The author however, should have done a bit more homework before writing this piece.

  • John Brothers, Generated from Facebook.com by SSIR's avatar

    BY John Brothers, Generated from Facebook.com by SSIR

    ON February 22, 2010 12:01 PM

    Mark, Thanks for the response on my blog post. I did do research/homework and do understand the different mission categories, and think my point I was trying to make was that under any section, it might be questionable. Grassley and others have had opinions on the NFL’s nonprofit justification, although this opens up a whole other arena of issues. Thanks again and look forward to your thoughts on my future posts.

  • Mark, Generated from Facebook.com by SSIR's avatar

    BY Mark, Generated from Facebook.com by SSIR

    ON February 22, 2010 12:02 PM

    Hi John. I have no problem supporting the dubios classification for 501 status, but I think the point here is that a c6 organization differs to radically from a c3 to compare the two. I would have liked to see you use a chamber of commerce comparison instead since both have the same designation. Inurement is the key issue…and where the NFL’s status as a 501c6 seems to fall apart. I agree that it’s ridiculous though.

  • BY Andrew Delaney

    ON April 25, 2010 02:43 PM

    John, this is a good post. Mark’s point is valid about the difference between the exemptions. But what interests me the most about this issue is how the NFL, specifically, got this exemption in the first place. You see, before 1966, there was no exemption for “football leagues”—that was written into what we now call the AFL-NFL Merger Act. The AFL-NFL Merger Act was section 6 of “A Bill Suspending the Investment Tax Credit and Accelerated Depreciation Allowance.” In my opinion, this got passed without anyone really thinking about it. It’s just kind of slipped in there at the end. For example, take a look at Lyndon Johnson’s signing statement—not a word about football. http://www.presidency.ucsb.edu/ws/index.php?pid=28011

    Thanks for the post. It’s about time to change the laws on this front.

  • Bruce Noland's avatar

    BY Bruce Noland

    ON October 9, 2010 07:44 AM

    The NFL opened the door for many other “sports leagues.” The National Hot rod Association is a sports league? This 125+ million dollar per year company has been running the same game for nearly 60 years.

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