Super Bowl XLIX and (What Else?) Taxes

Super-Bowl-XLIX-PrimaryIt’s my understanding that, if I wanted to capitalize on this weekend’s Super Bowl game and optimize my search engines, I’d do a post about what time the game starts. That, though, doesn’t strike me as an interesting question. (Also, there’s no reason to ask me, when Google will tell you without your having to click a link.)

But the game does raise a couple interesting non-start-time questions, and I thought I’d address two of them here. 

I heard the NFL is a tax-exempt organization. Is there any way that could be true?

The NFL has annual revenue of about $9.2 billion. In 2013, it paid Commissioner Roger Goodell a little more than $44 million.[fn1]

Oh sorry, that didn’t answer your question. Short answer: yes.

How can an organization with $9.2 billion in annual revenue, one that promotes sports (rather than art or music or dance or religion, or any other traditional charitable enterprise), be exempt from taxes? Section 501(c)(6) of the Internal Revenue Code provides an exemption for a number of different types of umbrella groups, including “professional football leagues (whether or not administering a pension fund for football players).”

And so, the NFL is exempt.

Of course, it’s not exactly what we think of when we thing tax-exempt: if you were to donate to the NFL, you wouldn’t be able to deduct your donation. That said, the NFL doesn’t pay any taxes on its revenue (though the various teams are taxable and do pay taxes on their revenue.

If I Win My Office Pool, Do I Have to Pay Taxes On It?

Yes. Gambling winnings are taxable income to you, and bets made on the Superbowl (whether in Vegas or on your sofa) constitute gambling.

And, in fact, there’s real money at stake: the Amercian Gaming Association expects Americans to make $3.8 billion of illegal Super Bowl bets this year.

Of course, not everybody who has money riding on the game will win. If the winners are taxed on their winning, do the losers get to deduct their losses?

Maybe. Or better, some losers will be able to deduct some portion of their losses. But some large percentage of the losses will not be deductible.

Why not? Section 165(d) only allows gambling loss deductions to the extent of gambling wins. That is, if you lose $100 betting on the Seahawks, but, over the course of the year, you win $150 in other gambling, you can fully deduct your gambling losses. But if you lose $100 betting on the Patriots, and you only win $80 in other gambling for the rest of the year, you’ll only be able to deduct $80 of your loss.

So enjoy the game, good luck, and, if you lose, you still have 11 months to get some gambling gains that you can offset with your loss!

[fn1] As a tax-exempt organization, the NFL has to file an annual Form 990, a financial disclosure that is available to the public. And that’s why we know how much Goodell makes.

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