5 Outrageously Profitable Sports Non-Profits
After some rather high-profile events concerning major sports stars, it’s come to the attention of the populace that many of the nation’s sports leagues are actually operating as tax-exempt entities, like churches or charities. Naturally, news of this hasn’t really sat well with people and has led to many to call for the stripping of such status.
The most glaring example over the past few weeks has been the Ray Rice saga — a running back for the National Football League’s Baltimore Ravens, who was seen on video violently hitting his then-fiance, rendering her unconscious, then dragging her out of an elevator. This was followed by a few more incidents involving NFL players, putting the entire league under the microscope and its chairman Roger Goodell under intense scrutiny.
Now, the actions of some individuals within an organization does not mean that the organization itself has engaged in any wrongdoing. It’s debatable whether or not the NFL should be responsible for policing players off the field, but these recent incidents have certainly put the league in the limelight. All that attention has brought up the fact that the league operates as a non-profit, but the fact is the NFL is not alone.
The NFL is registered with the IRS as a 501 (c)6 organization, defined as such:
“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.”
Obviously, the NFL makes a lot of money. But the difference is that while the NFL itself is tax-exempt, the teams it organizes are not. The individual clubs do pay taxes, and revenue from television is included in that. A league spokesman lays it all out in an ESPN report, saying that “The NFL League Office is a not-for-profit organization. The NFL League Office receives funding from the 32 member clubs to cover its non-revenue overhead activities such as office rent, League Office salaries and game officiating. In addition, the NFL League Office collects revenues on behalf of the 32 member clubs and distributes those revenues to the clubs. All national revenues (e.g. broadcast TV payments) collected and paid to the member clubs, as well as local revenues earned individually by the clubs, are subject to tax at the club level.”
Obviously, there are a million details to consider, and whether or not the NFL should be allowed to continue operations as a registered non-profit can be debated for a long time. But the fact is they’re not the only sports league operating as a non-profit.
Here are five sports leagues, including the NFL, which are registered non-profit organizations in the United States.
1. The NFL
As mentioned previously, the NFL has easily become the most visible example of a non-profit professional sports league at the current time. The league’s popularity has never been higher, and the teams, executives and players themselves bring in monstrous profits annually. To put things in perspective, chairman Roger Goodell received a salary of over $44 million in 2012, according to a report from CNBC.
The league and the entities that operate under it hold tremendous levels of capital in licensing rights and real estate, many of which are subsidized by the public in the cities that are home to teams. The NFL is under fire right now, but with time, people will focus their attention elsewhere. However, it’s clear that the NFL could use some organizational restructuring and some heavy PR work in order to clean up its image.
2. The NHL
Like the NFL, the National Hockey League also operates as a non-profit organization. This comes in contrast to the NBA and Major League Baseball, both of which have opted to take a different organizational structure in order to reduce transparency, among other things. While the NHL lags considerably behind the NFL in terms of popularity, it is still a name recognized around the world for being the planet’s top platform for professional hockey. Revenues are starting to pick up steam recently as the league grows in popularity. Reports peg revenues topping $4 billion for this coming season. The NHL is catching any heat for its status in the eyes of the IRS like the NFL currently is, but a few high-profile off-ice incidents could change that in a hurry.
3. The NCAA
If there is a major sports organization that has been vilified to the fullest extent over the past few years, it’s the NCAA. The NCAA is the governing body that organizes sporting events between the nation’s student-athletes attending college. Football is the biggest money-maker, but basketball — especially the annual 68-team NCAA tournament — also pull in considerable amounts of money. The issue with the NCAA is that the players themselves are not allowed to share in any of the billions in revenue. Player’s likenesses are used to sell jerseys, video games and a myriad of other products, which they are not allowed to receive any part of as it would violate their amateur status. Many players receive lasting injuries during their playing days, and very few — less than 2 percent, with baseball being the only exception — going on to make money playing professionally.
4. The PGA
It might be surprising to learn that the PGA — the organization that manages professional golf — is also a non-profit organization. The PGA is known for holding tournaments at lavish country clubs and having marketing deals with some of the world’s most recognizable luxury brands; not really what you might associate with a non-profit. ESPN says that due to its non-profit status, the PGA has been able to dodge more than $200 million in taxes over the past two decades. Forbes reports that during 2011, the PGA’s annual report included more than $1 billion in revenue. The PGA has been able to slip under the radar for the time being, but like the NFL, if some high-profile incidents go down, it could easily draw the public’s ire.
5. The U.S. Olympic Committee
The U.S. Olympic Committee is different than the other organizations listed so far. As far as what they actually do, here is an excerpt from the organization’s mission statement:
“The United States Olympic Committee serves as both the National Olympic Committee and National Paralympic Committee for the United States. As such, the USOC is responsible for the training, entering and funding of U.S. teams for the Olympic, Paralympic, Youth Olympic, Pan American and Parapan American Games, while serving as a steward of the Olympic Movement throughout the country.”
Essentially, they train and run the U.S. Olympic teams. Great, no problem there. The USOC is funded through both private and corporate donations, and uses profits generated from its activities on the world’s stage to continue operations. The Olympics themselves have become a bit of a hot-button issue over the years, as many cities are often bankrupted by construction and worker welfare is not up to par. As the USOC makes money from broadcasting rights. The USOC’s status as a non-profit is a bit more understandable than its counterparts in the NFL or PGA, but it’s still a good thing for the public to understand its status in the eyes of the law.