Chaffetz Looks to Change Professional Sports Non-profit Tax Exempt Status

Jan 29, 2014

Washington, D.C. – Today, Congressman Jason Chaffetz introduced H.R. 3965, the Properly Reducing Overexemptions (PRO) for Sports Act, which would eliminate the 501(c)(6) tax-exemption for professional sports organizations with annual revenues over $10 million. Identical legislation was introduced in the Senate by Sen. Tom Coburn (R-OK).

Under H.R. 3965, organizations like the National Football League (NFL) and the National Hockey League (NHL) would lose their tax exemption. Currently, NFL and NHL franchises are taxable, but their leagues are not. 

"In reality, the NFL and the NHL are for-profit businesses, and they should be taxed as such. They are not charities nor are they traditional trade organizations like local chambers of commerce,” said Chaffetz.

H.R. 3965 is consistent with actions taken by the Tax Court with businesses that were previously classified as 501 (c)(6) organizations. For example, in 1953, the Tax Court revoked the 501 (c)(6) exemption for the American Automobile Association because "its principal activities were determined to consist of securing benefits and performing particular services for members." The Tax Court has also ruled "a trade association of manufacturers whose principal activity is the promotion of its members' products under the association's registered trademark does not qualify for exemption."

“My hope is that H.R. 3965 will become part of a comprehensive tax reform bill that would lower rates and broaden the base,” said Chaffetz. ”I am not looking for additional tax dollars for the federal government. Closing this loophole should be combined with closing several other loopholes in order to lower tax rates in a revenue-neutral manner."

According to the Joint Committee on Taxation, removing non-profit status for major professional sports leagues would increase federal revenues by $109 million over ten years.