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dir="ltr">Federal lawmakers are again pushing to remove the tax exemption used by many professional sports leagues.
Iowa Sen. Joni Ernst’s bill would bar any pro league that makes more than $10 million annually from being 501(c)6 tax exempt. She estimates that it would save $100 million over 10 years. The NFL, for whom the tax exemption was crafted in the 1940s, gave up its exempt status in 2015. Major League Baseball dropped it in 2007. Many organizations such as the PGA Tour and the National Hockey League are still nonprofits.
“Professional sports leagues – which are raking in millions of dollars from television rights and membership dues – shouldn’t also be scoring a hole-in-one with their taxes,” Ernst said in a release.
That amount of additional revenue may not balance the budget but supporters say the principle of tax cuts for connected businesses sets a poor precedent.
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“$100 million over the course of 10 years in the grand scheme of things is not a lot of money, but the precedent is that we need to start getting rid of things like this, otherwise the debt isn't going to go down,” said Alec Fornwalt, policy analyst with the Tax Foundation. “If we keep cutting taxes and we leave things like this carved out, the debt won’t go down.”
Many organizations that used the exemption didn’t save much money. The NFL actually posted a loss in a number of years and didn’t qualify for any breaks, but others did.
“The PGA now saves millions of dollars in taxes,” Fornwalt said. “It really has to do with how these organizations have moved themselves around this status.”
Similar legislation has been proposed in the past but has never gotten much traction.
Fornwalt said it was due to the lobbying efforts, and a couple well-timed pro golfer appearances, that it was removed from the Tax Cuts and Jobs Act that passed in December.