An Internal Revenue Code (“IRC”) 501(c)(6) organization is a tax exempt organization that normally is a chamber of commerce, economic development corporation, real estate board, trade board, professional football league, and other types of business leagues. They are characterized by a common business interest that the organization typically promotes. Organizations under this category are exempt from most federal income taxes. Donations to an IRC 501(c)(6) organization are not deductible as charitable contributions, but the contributions may be deductible as a trade or business expense. IRC 501(c)(6) organizations are primarily supported by membership dues and strive toward the betterment of business conditions of a particular trade or community. To qualify as an IRC 501(c)(6) organization, all of the non-profits earnings must be reinvested into the organization and may not benefit any individual member or shareholder. An IRC 501(c)(6) organization must consist of members sharing a common business interest. The members may be individuals or companies, even if these companies operate on a for-profit basis. IRC 501(c)(6) organizations may perform activities dedicated to improving the conditions of their industry including lobbying and promotion.
The legislative quirk dates back to the 1966 merger between the National Football League (NFL) and the American Football League. “Professional football leagues” were added to the code that year to ensure that the merger could go forward “without fear of an anti-trust challenge under either the Clayton Antitrust Act or the Federal Trade Commissions Act,” and to ensure that “a professional football league’s exemption would not be jeopardized because it administered a players’ pension fund,” according to the Internal Revenue Service (“IRS”).
While the NFL’s 32 teams are for-profit businesses and pay taxes, the NFL office has operated as a tax-exempt industry association in various forms since the 1940s. Under the IRC, the NFL office is considered the marketing arm of the member teams, creating rules and regulations, negotiating marketing sponsorships, television and cable deals, and performing other centralized business functions for its member teams. As a tax-exempt organization, the NFL has had to release its Form 990 returns. The National Hockey League and the Professional Golfers Association Tour are also tax exempt. Major League Baseball forfeited its tax exemption in 2008, and the National Basketball Association and NASCAR are also not tax exempt and file as for-profit companies.
House Oversight and Government Reform Committee Chairman Jason Chaffetz (R-UT) sent a letter to NFL Commissioner Roger Goodell (“Goodell”) in March of 2015 to inform him that the Committee is reviewing the NFL’s tax-exempt status, as well as those of ten other sports leagues and associations. Chaffetz then requested additional information on the NFL’s status. Earlier in the year, Chaffetz spoke about the possibility of bringing Goodell before the Oversight panel.
In April of 2015 the NFL announced that it was going to end its tax-exempt status after 73 years. Commissioner Goodell sent to all league owners and presidents the following memo:
TO: All Owners
FROM: Commissioner Goodell
DATE: April 28, 2015
SUBJECT: Tax Exempt Status
As you know, for several years the NFL has discussed the tax exempt status of the league office and the Management Council, and more than a year ago the Finance Committee began a study of whether to relinquish the exemptions. That study has now concluded, and has confirmed that a change in the tax status will not alter the function or operation of the league office or Management Council in any way. At the Annual Meeting in March, the full ownership granted the Finance Committee and Management Council Executive Committee (CEC) the authority to change the tax status of the league office and the Management Council. I write to report to you that last week each committee exercised that authority and voted to have the league office and Management Council file tax returns as taxable entities for our 2015 fiscal year.
The league office was first granted tax-exempt status by the IRS in 1942, and the IRS has repeatedly confirmed that status over the years. The Management Council has a similar tax status and organizational structure. As you know, the effects of the tax exempt status of the league office have been mischaracterized repeatedly in recent years. The fact is that the business of the NFL has never been tax exempt. Every dollar of income generated through television rights fees, licensing agreements, sponsorships, ticket sales, and other means is earned by the 32 clubs and is taxable there. This will remain the case even when the league office and Management Council file returns as taxable entities, and the change in filing status will make no material difference to our business. As a result, the Committees decided to eliminate this distraction.
Recently Congress has questioned whether sports league associations should, as a matter of federal tax policy, be tax exempt. We will notify interested members of Congress of this decision by NFL ownership.
In 2013, Senator Tom Coburn (R-OK) introduced legislation that would prohibit the NFL and other professional sports organizations with over $10 million in revenue from filing as non-profits. The legislation entitled “Properly Reducing Overexemptions for Sports Act,” often referred to as the PRO Sports Act, aimed to close a loophole in the tax code that allows the NFL and other sports organizations to avoid paying federal taxes.
Basically, the value of the tax exemption was hardly worth the public scrutiny and the political and public relations headaches and criticisms that it created. 
Chaffetz and Ranking Member Rep. Elijah Cummings (D-Md.) said in a statement they are “extremely pleased” with the league’s decision:
Congress has tried to tackle this issue before, but we made it one of our Committee’s priorities this year. It is rewarding to see such an important and positive step toward restoring basic fairness. We hope other professional sports organizations in similar situations will follow the positive example set by the NFL, and we look forward to rightfully returning millions of dollars to the federal treasury as a result. We thank Commissioner Goodell and the NFL for their leadership.
Robert McNair, the owner of the Houston Texans and the chairman of the league’s finance committee, said in a statement: “The owners have decided to eliminate the distraction associated with misunderstanding of the league office’s status, so the league office will in the future file returns as a taxable entity.”
U.S. Sen. Richard Blumenthal (D-Conn.) wrote in a press release:
The NFL’s sacrifice of its tax exempt status seems more like a PR stunt than a real gain. The tax-exempt status produces a pittance compared to its Congressionally-granted antitrust exemption –- enabling billions in broadcast revenue. The NFL is exempted from laws that govern every other industry and business entity, not to mention huge benefits in state and local subsidies and sweetheart stadium deals. Sacrificing this tax exemption to avoid a distraction – according to Commissioner Goodell –- should not distract from the real issue: the NFL’s public trust concerning domestic violence, drug use, concussions and other health issues.
For years, former Senator Tom Coburn, a Republican from Oklahoma, criticized the league’s status, contending that it deprived the United States Treasury of millions of dollars in taxes. The chorus of critics rose in 2014 when the league office’s filings with the IRS showed that Goodell received $44.2 million in the 2012 fiscal year. Goodell was paid $35 million in 2013.
The NFL still holds a firm grasp on what could be argued are more powerful government benefits: Stadium subsidies and a powerful antitrust exemption born out of the Sports Broadcasting Act of 1961, which provides the NFL with the broad power to negotiate enormous TV deals on behalf of teams as a single entity.
Philip Hackney, a law professor at Louisiana State University who previously worked as an attorney for the IRS on issues related to tax-exempt organizations, said:
The NFL benefits from giving up its tax exempt status by getting rid of a political headache. As a tax exempt organization, annually the NFL had to disclose Roger Goodell’s salary on the IRS Form 990. When people see his salary and they hear that the organization is a nonprofit tax exempt organization they are surprised and maybe even outraged regarding that fact. Although Goodell must pay tax on that income, it is very hard to explain the NFL’s tax exempt status to the ordinary citizen. They associate the NFL with a lot of money, and assume that such an entity should be paying tax. Obviously some congressmen have been able to get some political mileage out of this issue over a number of years. Giving up the status allows the NFL to move beyond this public relations problem.
Realistically, there was not a lot of tax savings to the NFL by maintaining its tax exempt status … The NFL may some years have losses and others have gains. A couple of years ago I believe its Form 990 indicated it might have a profit of maybe $9 million. That means it might have a tax payment of around $3.6 million in that year. For an organization that took in maybe $10 billion in that year, this is not a large amount. From looking at recent returns it does not look like the NFL itself would have a particularly large tax obligation. I suspect it chose to maintain its tax exempt status for some time for matters ancillary to tax.
I reviewed the 2012 IRS Form 990 (Return of Organization Exempt from Income Tax) tax return of the National Football League. The tax return explains the organization’s mission as a “[t]rade organization promoting interests of its 32 member clubs.” The tax return was for the calendar year of April 1, 2012 and ending March 31, 2013. The return reported an operating profit of more than $9 million and $326 million in program service revenue. Compensation for key executives included Roger Goodell, Commissioner ($44,183,000, which included a $40,364,000 bonus), Steve Bornstein, Executive Vice President of Media ($26,144,000, which included a $23,467,000 bonus, and Jeff Pash, Executive Vice President and General Counsel ($7,862,0000, which included a $4,844,000 bonus). The NFL also reported $1,276,000 in lobbying expenses, plus another $7,139,000 in fees to Covington & Burling, the powerhouse Washington law firm and 9,030,000 to Paul, Weiss, Rifkind, Wharton & Garrison, a New York law firm. A footnote to the section on legal liabilities states that the organization since 2009 does an annual review to “determine whether a tax position of the League Office is more likely than not to be sustained” and that based on the review conducted for this report, the year ending March 31, 2013, the NFL believes its high position will continue as is.
It is unclear how much in taxes the N.F.L.’s league office avoided through its tax-exempt status. While the N.F.L. as a whole generates more than $10 billion in revenue annually, the league office ran a $13.5 million deficit in the 2013 fiscal year, which ended in March 2014. In the 2012 fiscal year, the league office showed a profit of $9 million, but it ran a deficit of $77.6 million the year before. The league also posted a loss of $52 million in 2010, and a loss of $42 million in 2009.
The change in status will not have a tremendous effect on the NFL, nor will it alter its functions or operations. The NFL will no longer be required to disclose compensation figures, especially the compensation package for Commissioner Goodell, and the NFL will pay taxes on undistributed revenues. But in most instances, deductible expenses will offset income.
 26 U.S.C. § 501(c)