As tax season swiftly approaches, many nonprofits are working hard to ensure their operations are compliant with state and federal regulations. Those using a document management software program are likely having an easier time tracking paperwork and interpreting data. When it comes to defending its status as a not-for-profit entity, a charity must have the proper documentation and financial information readily available.

Under the microscope

Recently, the National Football League has come under fire for its status as a tax exempt nonprofit. The NFL is classified as a 501(c)(6) organization, which applies to chambers of commerce, business leagues, real estate boards, boards of trade and professional football leagues – none of which can accrue earnings that directly benefit a private shareholder or individual, according to the Internal Revenue Service website.

Associations Now reported that in 2013, Senator Tom Coburn proposed legislation called the PROP Sports Act which would have forced any sports league that made more than $10 million annually to pay taxes on its earnings. The bill did not pass the Senate and Coburn left his position shortly thereafter. Now, Representative Jason Chaffetz of Utah has stepped in to tackle the NFL again. Chaffetz is also the chairman of the House Oversight Committee.

Nonprofit Quarterly, citing information from BuzzFeed, stated that NFL Commissioner Roger Goodell’s salary was $3.5 million in 2012, with a $40 million bonus. The 32 teams that make up the NFL generate roughly $10 billion in revenue each year.

Utah’s KSL-TV, an NBC affiliate, noted that the NFL maintains only its league office, headquartered in New York, is tax exempt. If the NFL were taxed as a for-profit organization, which most Americans consider it to be, Chaffetz estimates that $100-plus million would be collected over a 10-year period as a result.

Change coming soon?

Chaffetz’s new bill would not allow any professional sports leagues to maintain 501(c)(6) or any tax-exempt status. The bill would apply to the National Hockey League and the Professional Golfers Association, along with the NFL, as all of those entities are currently tax-exempt. The National Basketball Association has never been considered a nonprofit and Major League Baseball relinquished its tax-exempt status in 2007.

Chaffetz will likely call NFL Commissioner Roger Goodell before the House to defend his position that the NFL [WM] retain its nonprofit status. It’s important to note that in no way does Chaffetz call for the demise of these large sports leagues, he simply believes they should justify their reasoning for tax exempt status and make sure it complies with the IRS definition.

Any business under scrutiny will feel more secure or capable of handling the situation if it has proper document management. An organized system that collects, interprets and saves data over time will be enormously beneficial should a charity have to report on its earnings. With tax season quickly approaching, nonprofits need to make sure they have their paperwork in order and comply with respective state and federal regulations. If pieces of this puzzle are missing, charities run the risk of losing their not-for-profit status.