PricewaterhouseCoopers is anticipating that Super Bowl XLVIII will generate over $210 million in direct spending in the New York and New Jersey area, though the revenue generated by the Super Bowl and other pro football activities is leading some to question the NFL’s nonprofit, tax-exempt status.

According to PwC US, direct spending by the National Football League, along with businesses, visitors, and media on area lodging, transportation, food and beverage, entertainment, business services, and other hospitality and tourism activities related to Super Bowl XLVIII will total more than $210 million. PwC’s estimate is based on an analysis that considers some characteristics that happen to be unique to this year's event, such as the participating teams, the various attributes of the New York and New Jersey area, national economic conditions, and corporate and other related activities. 

PwC is excluding from its analysis the so-called “multiplier effect,” which accounts for "indirect" impacts, such as a concession company's purchase of goods from local producers and manufacturers, and "induced" impacts which occur when the income levels of residents rise as a result of increased economic activity and a portion of the increased income is re-spent within the local economy.

But all the hundreds of millions of dollars generated by the Super Bowl and the rest of the football season, post-season and off season activities of the NFL are making some wonder about how the organization can even be considered not-for-profit. True, the actual teams that are part of the NFL are not organized as nonprofits. They very much are considered to be in the profit-making business.

Kavitha Davidson, a columnist with Bloomberg View, recently wrote about a survey conducted last month by Fairleigh Dickinson University in Hackensack, N.J., which found that the overwhelming majority of the more than 1,000 people polled opposed tax breaks for the NFL, and the majority of them had no idea the NFL has nonprofit status. While more than half of the poll respondents identified themselves as football fans, 71 percent of them said they oppose tax breaks to keep an NFL team in town, 69 percent don't believe public funds should be used to build stadiums, and just 13 percent of them identified the NFL as a nonprofit. The NFL is classified under Section 501(c)(6) of the Tax Code, which exempts trade or industry associations from taxes.

“In 1966, the tax code was amended to include professional football to facilitate the merger of the NFL and the American Football League, by granting the sport antitrust and tax exemptions,” Davidson pointed out. “The IRS specifically mentions the sport in its statute.”

The NFL earns $9.5 billion in revenue, but still qualifies for tax-exempt status. In contrast, the next-wealthiest pro sports league, Major League Baseball, does not claim tax-exempt status, Davidson noted. Senator Tom Coburn, R-Okla., recently introduced legislation to strip the NFL of nonprofit status and tax any professional sports league that earns at least $10 million. But the prospects of such a bill passing Congress are not very likely, especially now that Coburn has announced plans to retire from the Senate.

Fred Slater, CPA, of the New York City tax firm MS1040 LLC, a former chair of the Relations of IRS Committee for the New York State Society of CPAs, offered some comments on the NFL’s tax status. “Nonprofits, contrary to the public’s perception, are there because they can not make money,” he wrote. “I have to give credit to the league for getting Congress to write a law that allows them to practice as such. What interests me is what politician proposed this law and what contributions were made by the league to this person. It is the purchased tax law that is wrong.  The rest of the confusing and difficult tax code is part purchased and part misguided politicians.”

“I don’t think the NFL being a nonprofit is the issue,” Slater added. “The money received by the league is basically paid to the teams so if it was a corporation it most likely would not have a lot of 'profit' as a layman sees it. The issue of public funds paying for these private stadiums is a more troubling issue. You appear to have cities being ‘forced’ or coerced into paying for or agreeing to allow muni bonds for the stadiums. What is most troublesome is the contracts that are written for this money. The cities/states write these contracts that have little security from the teams that are benefiting from them. Look at the Florida Marlins that got a new stadium and the following year sold/gave away all their talented ballplayers. If the towns are willing to risk the finances to build these stadiums, shouldn’t the teams have some financial incentives to make sure they put a better product (team) on the field? So in the end it is not about structure or taxes.  It is about the NFL and these owners working together for both sides to succeed (or at least try to succeed)."