In response to the domestic violence case of Ray Rice and other NFL football players, a senator has introduced legislation to end the tax-exempt status of the National Football League as well as a number of other sports leagues.

Sen. Cory Booker, D-N.J., introduced the legislation which, if enacted, would end the tax-exempt status of 10 professional sports leagues, including the NFL, National Hockey League, Professional Golf Association and the U.S. Tennis Association.

Individual teams are taxed, but sports leagues typically file for tax-exempt status under Section 501(c)(6) of the IRS code. Some have held tax-exempt status for decades – the NFL’s tax-exempt status dates back to 1966.

Major League Baseball dropped its nonprofit status in 2007, reportedly in part because it didn’t want to make public large executive salaries. The National Basketball League never had tax-exempt status.

NFL Commissioner Roger Goodell earned a reported $44 million in 2012, according to published reports. The NFL brings in $9 billion a year.

Booker said the act could raise up to $100 million over the next 10 years, which could be used to support domestic violence prevention programs.

Booker is not the only government official trying to end the tax breaks for professional sports leagues. Sen. Tom Coburn, R-Okla., has been pushing to end the tax breaks since 2013.

Coburn wants teams with more than $10 million in annual revenue to lose their exempt status. In addition, he wants a number of leagues organized under 501(c)(6) to have their exempt status revoked.

Sen. Maria Cantwell, D-Wash., has joined the battle, saying she wants the exemption gone because of the NFL’s failure to force Washington to change its name from “Redskins.”

Code Sec. 501(c)(6) status means that these sports leagues do not pay any federal income tax. The code section refers to “business leagues, chambers of commerce, real-estate boards, boards of trade, or professional football leagues (whether or not administering a pension fund for football players), not organized for profit and no part of the net earnings of which inures to the benefit of a private shareholder or individual.”

It is tough to get lawmakers in cities that have professional sports teams to back this legislation. Because of the interplay between ticket prices, fan loyalty and voting preference, sports fans might not look too kindly on their lawmakers if they help to increase the cost of event ticket prices.

©2014 CPAmerica International

Smaller organizations that lost their exempt status for failure to file the required annual returns for three consecutive years can now retroactively reinstate the tax-exempt status.

Over the past few years, the IRS has attempted to inform organizations of their filing responsibilities and the consequence of failing to file.

Nonetheless, many organizations have failed to comply and have had their tax-exempt status automatically revoked.

Administrators and board members of an organization that has lost its tax-exempt status for failure to file the required returns should be aware of three new procedures outlined in Revenue Procedure 2014-11:

1. An organization that was eligible to file either Form 990-EZ, Short Form Return of Organization Exempt from Income Tax, or Form 990-N (e-Postcard) for each of the three consecutive years it failed to file – and that has not previously had its tax-exempt status automatically revoked – may use the following streamlined retroactive reinstatement process:

➜ Submit an application for reinstatement with the appropriate fee no later than 15 months after the later of the date of the IRS’s Revocation Letter or the date on which the IRS posted the organization’s name on the Revocation List – the list of organizations that have had their tax-exempt status revoked for failure to file returns.

➜ If approved, the organization will be deemed to have reasonable cause for its failures to file Forms 990-EZ or 990-N for three consecutive years, and it will be reinstated retroactively to the date of revocation.

➜ The IRS will not impose a penalty for failure to file the annual returns for the three consecutive tax years if the organization files properly completed and executed paper Forms 990-EZ for all such tax years. For any year that it was eligible to file a Form 990-N, the organization is not required to file a prior-year Form 990-N or Form 990-EZ for that year.

2. An organization that is not eligible to use the process described above may use the following:

➜ Submit a reinstatement application with the applicable fee no later than 15 months after the later of the date of the Revocation Letter or the date the IRS posted the organization’s name on the Revocation List.

➜ File properly completed and executed paper returns for:

◆ All tax years in the consecutive three-year period for which the organization was required to file annual returns but failed to do so, and

◆ Any other tax years after the consecutive three-year period for which required returns were due and not filed.

➜ Also include:

◆ A statement confirming that the paper returns have been filed, and

◆ A Reasonable Cause Statement, described in Section 8.01 of Rev. Proc. 2014-11, showing reasonable cause for its failure to file a required annual return or notice for at least one of the three consecutive years.

➜ If the organization’s application is approved, the IRS will not impose the penalty for the failure to file annual returns for the three consecutive tax years.

3. If it has been more than 15 months from the later of the date of the Revocation Letter or the date on which the IRS posted the organization’s name on the Revocation List:

➜ Follow the steps in the previous section, using instead the required Reasonable Cause Statement described in Section 8.02 of Rev. Proc. 2014-11, showing reasonable cause for its failure to file a required annual return or notice for all three years that it failed to file.

➜ If the organization’s application is approved, the IRS will not impose the penalty for the failure to file annual returns for the three consecutive tax years. ■

©2014 CPAmerica International