Jeff Tenenbaum’s message in the EO Tax Journal‘s EOTJ Mailbag regarding the NFL’s decision to relinquish its federal tax-exempt status and the challenges it may face during the conversion process:
“Paul, as you know, the NFL’s announcement yesterday about its decision to voluntarily relinquish its federal tax-exempt status made big news across the country. As a nonprofit lawyer, to me, the far more interesting issue is the question of exactly how the NFL plans to go about relinquishing not only its federal (and state) exemption from corporate income tax, but also its nonprofit corporate status (which presumably it plans to do if it wants to avoid challenges from its state Attorney General on the executive compensation front), and what will happen to the assets currently residing in the nonprofit, tax-exempt corporation. While there are some available mechanisms for doing so, it is not a simple process, and the net assets — if there are any net assets (the NFL’s 2014 Form 990 suggested there are none) — cannot simply inure to the benefit of the league’s 32 clubs (teams). Granting the net assets (if any) to NFL Charities (an affiliated (c)(3) entity) is an option, but I’m not sure if that is in the cards. There is precedent here — in 2007, Major League Baseball went through a similar “conversion,” both to taxable and for-profit status, and the NFL is being advised by the same tax attorney (Jeremy Spector of Covington & Burling). From what Jeremy told me a while back, it was a very complex process they undertook to effectuate the “conversion.” While I am a huge NFL football fan, I guess I remain a nonprofit tax nerd as well! There could be worse things to be called.”