Rep. Jason Chaffetz seeks to take away tax exemption from pro sports leagues like NFL

Published: Friday, Jan. 31 2014 12:15 p.m. MST

House Oversight and Government Reform Committee member Rep. Jason Chaffetz, R-Utah, arrives at the committee's offices on Capitol Hill in Washington, Tuesday, June 4, 2013.

Cliff Owen, Associated Press

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WASHINGTON, D.C. — A Utah congressman is seeking to take away the tax exemption of professional sports leagues such as the NFL.

Rep. Jason Chaffetz, R-Utah, earlier this week introduced HR3965, the Properly Reducing Overexemptions for Sports Act, which would eliminate the 501(c)(6) tax exemption for professional sports organizations with annual revenues of more than $10 million.

Identical legislation was introduced in the Senate by Sen. Tom Coburn, R-Okla.

Under the bill, organizations such as the National Football League and the National Hockey League 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,” Chaffetz said.

The bill 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 HR3965 will become part of a comprehensive tax reform bill that would lower rates and broaden the base,” Chaffetz said. ”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 nonprofit status for major professional sports leagues would increase federal revenues by $109 million over 10 years.

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