The Sports Xchange

Commissioner Roger Goodell informed team owners on Tuesday that the NFL is giving up the tax-exempt, not-for-profit status the league was granted in 1942.

Going forward, the league will operate as as a taxable entity just as each team has done through the years. The NFL had come under criticism from Congress and others in recent years because of the federal tax exemption.

Goodell wrote in a memo sent to teams that the change would not affect the the league office.

“As you know, for several years the NFL has discussed the tax exempt status of the league office and the Management Council, and more than a year ago the Finance Committee began a study of whether to relinquish the exemptions. That study has now concluded, and has confirmed that a change in the tax status will not alter the function or operation of the league office or Management Council in any way.

“At the Annual Meeting in March, the full ownership granted the Finance Committee and Management Council Executive Committee (CEC) the authority to change the tax status of the league office and the Management Council. I write to report to you that last week each committee exercised that authority and voted to have the league office and Management Council file tax returns as taxable entities for our 2015 fiscal year.

“The league office was first granted tax-exempt status by the IRS in 1942, and the IRS has repeatedly confirmed that status over the years. The Management Council has a similar tax status and organizational structure. As you know, the effects of the tax exempt status of the league office have been mischaracterized repeatedly in recent years. The fact is that the business of the NFL has never been tax exempt. Every dollar of income generated through television rights fees, licensing agreements, sponsorships, ticket sales, and other means is earned by the 32 clubs and is taxable there. This will remain the case even when the league office and Management Council file returns as taxable entities, and the change in filing status will make no material difference to our business. As a result, the Committees decided to eliminate this distraction.

“Recently Congress has questioned whether sports league associations should, as a matter of federal tax policy, be tax exempt. We will notify interested members of Congress of this decision by NFL ownership.”

Goodell, in particular, had come under fire because of his salary, which has exceeded $30 million per year. With the move to give up the tax-exempt status, the NFL no longer will be required to publicly disclose Goodell’s salary.

“The income generated by football has always been earned by the 32 clubs and taxable there,” said Houston Texans owner Robert McNair, chairman of the league’s finance committee. “This is the case whether the league office is tax exempt or taxable. The owners have decided to eliminate the distraction associated with misunderstanding of the league office’s status, so the league office will in the future file returns as a taxable entity.”