Good Question: What Does It Take To Be A Nonprofit?
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MINNEAPOLIS (WCCO) – When you think of nonprofits, homeless shelters or food shelves might come to mind. But during the Super Bowl, many of you wondered why the NFL is considered a nonprofit, too.
You emailed us wondering: What does it take to be a nonprofit?
“A nonprofit is an organization that exists to accomplish a mission that’s community oriented,” said Jay Kiewdrowski. He teaches nonprofit management at the Humphrey Schools of Public Affairs. “They’re not in existence to make money, they’re not owned by shareholders, there are no shareholders.”
Any contribution made to a nonprofit is tax deductible. These organizations are generally tax-exempt and can include charities, churches, schools, and more.
“We provide clinics, support groups, summer camps and fund research,” said Jack Pipkin with the Muscular Dystrophy Association.
According to the Minnesota Secretary of State, there are more than 31,000 registered nonprofits in Minnesota. The Minnesota Council of Nonprofits says 3,600 of those nonprofits have one employee or more and make up about 11 percent of all Minnesota workers. The largest nonprofits are hospital systems and universities, which make up 38 percent of the state’s nonprofit employees.
The original idea to behind creating nonprofit status is to help the public good.
“These organizations provide people with services and assistance that are unmet by government and for-profit sectors,” said Michaela Charleston of the Minnesota Council of Nonprofits.
The IRS recognizes more than 20 types of nonprofits. The most common is a 501c3 organization, which include religious groups, education and charity organizations. But other organizations can be tax-exempt as well. Among them are civic leagues, labor and agricultural groups, social clubs, credit unions, chambers of commerce, cemetery companies and business leagues.
One of those business leagues that’s been questioned by Sen. Tom Coburn (R- Oklahoma) is the National Football League office. He recently introduced legislation to change tax code to prohibit professional sports organizations from the same tax-exempt status that’s given to other trade associations.
In an editorial with U.S. News and Reports, he suggested ending that tax status for the NFL, NHL and PGA offices would save $109 million.
“Every dollar we spend on tax earmarks is a dollar that comes out of the pockets of fans,” he said. “That means less freedom for you and a better financial statement for the NFL.”
But, Jeremy Spector, an attorney for National Football League, says the tax exempt status doesn’t apply to the entire $10 billion NFL organization, but only to the relatively small NFL league office.
“We’re not talking about the NFL that fans think of every Sunday,” said Spector, adding the NFL league office does not receive income from game tickets, television contracts and the like.
That office, which brings in about $250 million a year and is funded by fees from all 32 NFL teams, writes the rules of the game, schedules games, negotiates collective bargaining agreements and hires referees and more. Last year, its commissioner was paid almost $30 million, an amount Spector says is commensurate with salaries of other large entertainment organizations.
“Because all of the teams are for-profit companies and taxable companies, every single dollar of revenue generated by the NFL is subject to tax,” said Spector. “Nobody is saying the NFL is a charity.”
According to the IRS rules for tax exempt business leagues: “To be exempt, a business league’s activities must be devoted to improving business conditions of one or more lines of business as distinguished from performing particular services for individual persons.”