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NFL drops tax exempt status, gains good PR

The tax-exempt status of the National Football League has long rankled many.

Its 501(c)(6) designation, which the league has enjoyed since 1966 (though it has been labeled a non-profit since 1942), has not meant that the league does not pay taxes. Teams and players have always been taxed, but the league office, which includes Roger Goodell and other high-paid executives, has not.

For years, the fact that anyone could consider the NFL a nonprofit has been a cause for criticism and complaint in the press. The web site Sports on Earth called the league and the corporate guests that it fetes at each Super Bowl “America’s miserly guests.” Lynda Woolard, an activist who created a Change.org petition last year for the league to lose its status, told USA Today that someone needed to tell the NFL, “You’re being a bad actor.”

And in government, former Oklahoma senator Tom Coburn long ran a crusade to strip the league of its designation. He published an annual “Waste Book” in which he determined that the exemptions of pro sports leagues cost U.S. taxpayers an estimated $91 million a year, though others said that the figure was exaggerated; Citizens for Tax Justice retorted that the NFL’s exemption, at least, saved the league only $10 million each year—negligible for an organization that had a reported $10 billion in revenue in 2013.

That year, Coburn introduced an amendment to the Marketplace Fairness Act that would have forced all pro sports leagues, not just the NFL, to be fully taxed. (Businessweek called it Coburn’s “lonely mission.”) It didn’t happen; the PGA Tour and NHL are still tax-exempt today. Major League Baseball did away with its tax exemption in 2007.

But MLB was never so vehemently criticized as the NFL has been—nor have the PGA or NHL faced such scrutiny. And most of that scrutiny was sparked by the public awareness of commissioner Roger Goodell’s salary—and it heated up last year, during the NFL’s nightmare season.

Now Tom Coburn has gotten his way, but in a manner that makes the league the PR winner by making the move voluntarily. The motive of the decision is clear in the language Goodell used in his memo to the owners of the NFL’s 32 teams: he called the tax exemption a “distraction.” In other words: bad optics. As Goodell has struggled to steer the league through the public pressure of multiple domestic violence charges against its athletes, Goodell needs all the good PR he can get. And this move will help with that.

The twist? Goodell’s salary will no longer be public. As a result of giving up the nonprofit designation, the NFL will no longer have to publicly disclose how much it pays its top dog. That figure for last year, the period ending in March 2014, was $35 million in salary and bonuses. The year before, it was $44.2 million. And the year before that, Goodell earned $29.5 million. The league will have to release one more report that will disclose what Goodell made for the period ending in March 2015—that is, during the 2014 season, NFL’s very bad year.

When there has been bad press around Goodell’s pay, team owners have rushed to explain the hefty sum by praising his success as commissioner. Moving forward, you can expect Goodell’s salary to keep going up—but you won’t get to know what it is.

Connecticut senator Richard Blumenthal went so far as to release a statement on Tuesday in which he said that the league’s decision to give up its exemption, “seems more like a PR stunt than a real gain.” Indeed, the NFL loses very little, financially, by dropping the special designation, and gains a slew of what it hopes will be good headlines for a long overdue decision. Make no mistake: this is an organization that needs every good headline it can get right now.

The news of its new status comes on the heels of another bit of good optics for the league: last week, Goodell issued Dallas cowboys player Greg Hardy, who was convicted of assaulting an old girlfriend, a 10-game suspension without pay. The move was praised (ESPNw columnist Jane McManus wrote that Goodell, “got it right”) and looks like one step toward erasing the stench of last season.

Dropping its tax-exempt status, after so much outcry, is a similar step. It is an effort to “protect the shield.”