OPINION: End special tax breaks for pro leagues
Who can possibly deny that professional sports leagues are for-profit businesses?
For example, the PGA Tour in 2019 took in $1.5 billion in revenues and paid out $110 million in salaries and wages to its own officials and hundreds of millions more to players. The Tour ended up with a profit of more than $250 million from 2016 to 2019 – and if it were considered a normal company, it would have paid about $80 million in federal corporate taxes.
Instead the Tour gets a special tax exemption and pays nothing.
I have introduced a bill in Congress to end this special-interest loophole and require the PGA Tour, as well as the Ladies Professional Golf Association and the National Hockey League, to pay taxes like any other business.
Closing the loophole is a matter of common sense and fairness, and the Properly Reducing Overexemptions for Sports Act (or PRO Sports Act) would save taxpayers hundreds of millions of dollars over the next decade.
Professional sports leagues are the biggest unworthy beneficiaries of Section 501(c)(6) of the Internal Revenue Code, which is meant to give tax-exempt status to trade associations and similar organizations. But the 1986 law was written specifically to include “professional football leagues.”
Football and other sports, however, have been willing to make the necessary adjustments. In 2015, under pressure from Congress and the public, the National Football League gave up its tax-exempt status. Major League Baseball did the same eight years earlier. The National Basketball Association, meanwhile, was never a nonprofit.
A 501(c)(6) association, says the IRS, must promote the “common interest” of its members and not “engage in a regular business of a kind ordinarily carried on for profit.” But professional sports leagues are clearly designed to make a profit. And their promotion of their members’ “common interests” is questionable, as most leagues prohibit their players from participating in competing leagues.
To counter this, many professional sports leagues emphasize their charitable giving, but this is a proposition that Paula Lavigne, an investigative reporter for ESPN, found to be a myth.
As part of her 2013 ESPN investigative piece, Lavigne interviewed Ken Berger, who was then the CEO of the charity watchdog Charity Navigator. Berger told Lavigne that the “lion’s share” of the money from supposed charitable events wasn’t going to charity; instead it was used to finance “big prizes, cash prizes for athletes and all the promotion around” the events.
Rick Clemons, a former Major League Baseball executive who now teaches at Howard University, recently pointed out that “most of the PGA Tour’s charitable contributions are actually raised and dispersed by local nonprofit organizations that help oversee and manage individual tournaments that the PGA Tour sponsors.”
In her piece for ESPN, Lavigne specifically examined the PGA’s FedEx St. Jude Classic in Memphis, Tennessee. This is even hosted by a nonprofit called Youth Programs Inc. During one tournament, she wrote, Youth Programs collected and spent $15.3 million, including about $6 million in prize money for the golfers and $5 million in TV promotion.
“The amount actually spent on charity — the money given to St. Jude’s — was $1.5 million,” Lavigne wrote, “or 10 percent of tournament expenses.” And out of the $1.5 million, only $253,742 was actual cash to the research hospital. The remaining money, Lavigne noted, “went to St. Jude ads aired during the televised tournament, pro-am entry fees and air travel for celebrities.”
Of course, if my legislation prevails, professional sports leagues would be free to deduct legitimate charitable contributions from their incomes, giving the organizations an even bigger incentive than they have now to make such donations. However, what these big money leagues would not be able to do is shield all their profits thanks to an ill-advised loophole.
I support lowering taxes rates for all Americans. But there is no reason why professional sports should be allowed to simply avoid taxes by labeling themselves as something they are not.
U.S. Rep. Greg Steube represents Florida’s 17th Congressional District.