The National Football League and Non-Profit Status

Today, Roger Goodell's salary was announced as $44.2 million for the previous year, which caused some concern over the National Football League's non-profit status. Many people are asking, "The NFL is clearly making a fortune; how come they aren't taxed?" It's a fair question. But it conveys a fundamental misunderstanding of what non-profit means and how the NFL pays taxes.

Let's start with how much the NFL makes per year. That number is roughly $10 billion, by far the largest of any league in the country. You can be quibble about the amount Goodell is paid, but remember just how big of an organization he runs. That $10 billion comes from a variety of sources, including jersey sales, advertising revenue, television deals, etc. However, that money does not go into the NFL's coffers.

First, expenses are paid such as their own advertising, salaries (including Goodell), health and safety research, legal fees, and an assortment of various costs of doing business. Some of the money is donated to charity, including the money generated from player fines. After that, money is split evenly between the teams. That's correct; the New York Jets jersey you just bought gets split between the thirty-two teams. This is done to prevent large market teams from having a huge advantage over smaller markets.

That money is all taxed. But it's not charged to the NFL. The people making the salaries (including Goodell) and the teams all pay full taxes on that amount. That $10 billion is being taxed, but by different entites not named the NFL. The reason for this is because at the end of the year, the NFL's net profit is zero dollars. That's right, zero. That's where the "non-profit" part comes in. They don't keep money in their bank accounts; they aren't sitting on cash. The teams and individuals that get paid as a result of their revenue may, but they pay taxes. So while they're ending up flush with cash at the end of the year, the balance of the NFL's checkbook reads zero.

In short, Roger Goodell, the private citizen, and "New York Jets, LLC" all pay their full amount of income and employment taxes. So does every other team and salaried employee in the league. So when people say "The NFL isn't getting taxed, they're non-profit! This is ridiculous!," you can assert that they don't know what they're talking about. The money generated isn't getting taxed as it goes through the funnel (the NFL), but it does when it lands in its final destination.

note: this is a boiled down explanation of non-profit status and is intended merely to inform you upon its basic inner workings.