The organization office and also Management board of directors will record returns as taxable entities because that the first time because 1942.

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The NFL will certainly no longer be a tax exempt entity beginning this year. (Getty Images)

In a memo to the league"s ownership groups on Tuesday, NFL commissioner roger Goodell announced that the organization office and Membership Council would certainly be ending their taxation exempt status and filing returns together taxable entities because that the 2015 budget year, the an initial time because 1942 lock will perform so. Right here are a couple of things come know around that change and what it means. 

1. The memo

Bloomberg"s Scott Soshnick obtained a copy that the memo Goodell sent to the league"s owners and posted that online. Here is the full text:

TO: every OwnersAll PresidentsFROM: Commissioner GoodellDATE: April 28, 2015SUBJECT: tax Exempt Status

As you know, for number of years the NFL has disputed the tax exempt standing of the organization office and also the monitoring Council, and much more than a year earlier the Finance Committee began a research of whether to relinquish the exemptions. That study has actually now concluded, and has evidenced that a change in the tax status will not change the function or operation of the league office or administration Council in any way. At the yearly Meeting in March, the full ownership granted the Finance Committee and Management Council executive, management Committee (CEC) the authority to adjust the tax condition of the organization office and the monitoring Council. I write to report come you that last week every committee exercised that authority and also voted to have the organization office and Management Council document tax returns as taxable entities for our 2015 fiscal year.

The organization office was an initial granted tax-exempt condition by the IRS in 1942, and the IRS has actually repeatedly confirmed that condition over the years. The monitoring Council has actually a comparable tax status and also organizational structure. Together you know, the effects of the tax exempt status of the league office have actually been mischaracterized repeatedly in recent years. The fact is the the service of the NFL has actually never been tax exempt. Every disagreement of income produced through television rights fees, license agreements, sponsorships, ticket sales, and also other way is deserve by the 32 clubs and also is taxable there. This will stay the case even as soon as the league office and also Management Council file returns as taxable entities, and the adjust in filing condition will do no material distinction to ours business. As a result, the Committees chose to get rid of this distraction.

Recently Congress has questioned even if it is sports league associations should, as a matter of federal taxation policy, be taxation exempt. We will educate interested members of conference of this decision by NFL ownership.

2. The valuable effect

The large note in the memo is this: "As friend know, the results of the taxes exempt status of the organization office have been mischaracterized repetitively in current years. The truth is that the business of the NFL has actually never been taxes exempt. Every dissension of income created through television rights fees, licensing agreements, sponsorships, ticket sales, and other way is earned by the 32 clubs and also is taxable there. This will continue to be the instance even once the organization office and Management Council document returns together taxable entities, and also the readjust in filing condition will make no material difference to our business. Together a result, the Committees chose to remove this distraction."

As Goodell alluded to, the NFL has actually operated as an unincorporated nonprofit 501(c)(6) because 1942, v the organization office not topic to tax since it does no make a profit. Instead, income was distributed to every of the league"s 32 teams, who were taxed on that themselves. The NFL taken into consideration itself a profession association comprised of and also financed by its 32 member teams due to this structure.

Ending the tax exempt standing will likely have actually very tiny monetary effect on the league itself, especially because the NFL is certain to make part structural alters to limit the tax liability of the league office in reaction come the change.

Here"s a keep in mind from a Reuters short article from March around this an extremely subject:

Andrew Delaney, a sporting activities law skilled with boy name & Associates, claimed if it came to be a for-profit entity, the NFL would certainly likely uncover enough write-offs to offset the to save it would certainly lose together with its tax-exempt status.

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"When MLB make the move from a non-profit, they reported that there was no real readjust in their taxation liability," the said. "If ns were running the NFL show, I"d say, "This isn"t worth it." It"s not worth the PR hit the takes."

It is telling that Goodell referred to the league"s tax exempt standing as a "distraction," which shows that the organization office was an ext concerned with the optics and also media reaction to it staying tax freed than through the actual effects of no much longer being one untaxed entity.