It's a simple concept. If you operate a tax exempt agency, you follow the established rules for nonprofits. One of the newer regulations governing nonprofits is that, in the interest of transparency, consistency, and full disclosure, nonprofits must reveal the salaries of their key personnel as well as business dealings between the agency's officers, trustees, and staff.
An agency that feels it has ample reason to not reveal that information has the option of giving up its tax exempt status. That's what Major League Baseball did when they fell under unwanted scrutiny related to compensation. They had previously listed only the names and positions of their highest paid key personnel. Rather than reveal sensitive information, they formed a for-profit corporation. Now the National Football League is feeling the same heat. But instead of forfeiting their tax exempt status, they are asking to be made an exception to the rules.
What the new regulations involve
As of this year, when a nonprofit files its annual Form 990 the report includes details about the compensation of executives earning annual salaries of at least $150,000. That information is available to state regulators, the media, and anyone who wishes to see it. The purpose is to increase accountability and strengthen the public trust in these organizations.
Form 990 has not been substantially changed in 31 years, since 1979… an indication of how important the IRS considers the new regulations. IRS Commissioner Doug Shulman said, "These instructions are the final step in a tremendous effort to bring the Form 990 up to date and to reflect the diversity and complexity of the tax-exempt community. The revised form will give the IRS and the public a much better view of how exempt organizations operate. The improved transparency provided by these changes will also benefit the tax-exempt community."
The change became necessary with the enormous growth of the nonprofit world. Between 1998 and 2008, the number of nonprofits doubled to a total of 1.2 million, also doubling their gross receipts during the same period, from a starting point of $900 million.
Some attribute the growth to the fact that government is offering fewer social services, relying more on charities which are believed to be more successful in these areas. In addition the controversy over immigration has given rise to new immigrant-related charities in recent years. The result of this explosion of nonprofits has been a blurring of the lines between businesses and charities. Charities emulate the businesslike profit motive in order to raise funds, and businesses want the tax advantages that nonprofits enjoy.
That brings us back to the NFL
Many people are scratching their heads, wondering just how the NFL qualifies as a nonprofit, when it has many for-profit subsidiaries that bring in hundreds of millions of dollars in revenue. Even so, it apparently does meet the IRS guidelines as a tax exempt organization, at least for now.
Until this year, the NFL has only reported the $10 million per year salary of its commissioner, based on their claim that the commissioner is the agency's only key employee. Faced with the new requirements, the NFL has asked to be excused from following this rule, which would result in the reporting of salaries of about 25 people.
Why does the NFL believe they merit an exception? Because, their representatives explain, they don't receive public donations. They are a trade association financed by 32 member teams. According to the NFL, those members are entitled to request and receive salary information at any time. Therefore, Joe Brown the NFL's executive vice president for communications and public affairs told The New York Times, that no public purpose is served by disclosing salary details.
Some observers suggest that the NFL is worried about employees becoming disgruntled after learning how much their coworkers are earning, and about the public looking down on the league when salaries of people in the league office are revealed.
That may be a legitimate concern, but as Iowa Senator Chuck Grassley pointed out, if professional associations such as the NFL are allowed to conceal salary information while enjoying a tax exempt status, other nonprofit groups will ask for the same exception, defeating the goal of increased transparency and accountability from this vital sector of the economy.
The NFL's request has not been met with any backers in Congress.