Two NFL Entities Dropping Exempt Status – Details Maybe Never
The other thing that has been troubling me about this is precisely how it is accomplished. I know how to revoke an S election, but it is not clear to me how to revoke your exempt status. I was thinking some sort of dissolution. The wording of the press release seemed to imply that they are just going to file an 1120 this year instead of a 990 and that is all there is to it, but my inquiring tax mind is deeply unsatisfied.
What happens with that $300 excess of liabilities over assets? The league will need after tax dollars to pay them, if it has carryover basis in the assets from its exempt days. It is better to have loved and lost than never to have loved at all. Here though, at least at first blush, it is worse to have been exempt and dropped it than to have never been exempt at all. If the NFL had been taxable all along it might have a $300 million net operating loss to carry forward.
Is IRS Targeting Drunkards?
In my mind, if you are going to have a social club or a fraternal organization (501(c)(8)) or a trade organization (501(c)(6) that is not being run to make a profit, then run it to roughly break-even and if there is a small profit, pay some taxes. It won’t kill you. Limit the exemption process to the 501(c)(3) organizations.
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Over and over again courts have said that there is nothing sinister in so arranging one’s affairs as to keep taxes as low as possible. Everybody does so, rich or poor; and all do right, for nobody owes any public duty to pay more than the law demands: taxes are enforced exactions, not voluntary contributions. To demand more in the name of morals is mere cant.