Super Bowl committee raising millions, with little transparency

The Super Bowl 50 Host Committee — the organization charged with raising money to produce events around the Bay Area leading up to and including February’s big game — has already raised $50 million from leading Bay Area corporations.

It also has pledged $12 million to more than 100 Bay Area nonprofits, a major step toward its goal of being “the most philanthropic Super Bowl ever.”

But because the NFL requires its host committees to be structured as nonprofit organizations — claiming the same tax-exempt status that the National Football League enjoyed for decades — it doesn’t have to reveal its contributors or how much each donor gave.

That opacity is raising concerns in an era of “dark money,” where politicians use the tax code to hide contributions. Watchdog groups, which also question why wealthy professional sports leagues get to classify themselves as nonprofits, say any entity that’s raising and spending millions — with little transparency — needs to be monitored closely.

“They’re filling public roles in very private ways,” said Philip Hackney, a professor of law at Louisiana State University who has researched and written extensively on 501(c)(6) organizations, so named for the section of the tax code. Given how host committees often involve the wealthiest and most powerful people in a region and have major contracts at stake, “it has the potential for graft.”

“I’m not saying it does here, but it’s good for the public to know what they’re doing, how they’re spending their money. People in San Francisco want to know what is happening, just like they would want to know what the city council is doing,” Hackney said.

Tax designation

The host committee is registered with the Internal Revenue Service as a 501(c)(6) nonprofit organization, a tax designation typically used by chambers of commerce or business leagues. The NFL believes that, much like a chamber, these host committees are designed to promote the entire region where the Super Bowl is played.

The host committee’s philanthropic arm, the 50 Fund, is registered separately as a 501(c)(3), which is a more common nonprofit model, typically used by charitable organizations and churches. However, the law doesn’t require these donors to be publicly revealed, either, and the organization has to reveal only the top three recipients of its largesse.

Registering as a 501(c)(6) enables a host committee to operate much like the “dark money” organizations that fund political campaigns but don’t have to publicly reveal the names of their donors. The host committee can advocate for political causes, much like a chamber of commerce or a business league, which enjoy the same tax status.

These types of nonprofits are far less common and behave differently from 501(c)(3) charitable organizations — institutions like charities or churches or private foundations — which are banned from participating in political activity. According to federal tax laws, a 501(c)(6) entity is intended to be an organization of people with a common business interest who act to support their mutual interest. They are allowed to generate revenue, but they are not allowed to have any of their net earnings benefit an individual.

Funneling dark money

Citizens for Responsibility and Ethics in Washington, a watchdog organization, has long worried that 501(c)(6) organizations are increasingly becoming a way for wealthy individuals or interests to funnel anonymous or dark money to other tax-exempt organizations that don’t have to reveal their donors. Spending on federal campaigns by 501(c)(6) organizations has increased from $27.3 million during the 2008 election cycle to $46.6 million in 2010 to $55.3 million in 2012, the organization said.

NFL spokesman Brian McCarthy defended using that tax designation because “host committees that raise funds from local businesses to attract major events that in turn promote and enhance the public welfare of the community are entitled to apply for that status.”

McCarthy said host committee donors are listed on its website. But those are the donors that the host committee chooses to list, not ones it is required to disclose by law.

“We value transparency. Everyone who has given even a dime to the host committee is listed publicly,” host committee spokesman Nate Ballard said. “In the interest of transparency, we’ve revealed the name of every corporate sponsor, even though our tax status does not require us to.”

While the host committee’s advisory committee includes a lineup of A-list business, political and community leaders, host committee supporters say it does not intend to make political donations or be active politically.

“The intent of this is just for the fundraising and implementation of Super Bowl 50. Period,” Ballard said.

Blue-ribbon panel

Those on the advisory panel include Chronicle columnist and former San Francisco Mayor Willie Brown, author and major Democratic political donor Robert Mailer Anderson, Google Vice President David Drummond, HP Enterprise executive John Hinshaw, French Laundry restaurateur Thomas Keller, Yahoo CEO Marissa Mayer, brokerage company founder Charles Schwab and former Secretary of State Condoleezza Rice.

The host committee provided The Chronicle a list of the organizations it says have contributed so far. It did not promise to publish all of the donors to its charitable arm, the 50 Fund, who asked to remain anonymous.

Included among the companies that have contributed more than $2 million apiece in cash or in-kind contributions are Apple, BCG, Chevron, Dignity Health (whose president and CEO Lloyd Dean sits on the host committee’s advisory board), Google, Intel, Intuit, Kaiser Permanente, Old Navy, Optum, SF Travel, SAP, Seagate, ValueAct Capital and Yahoo.

Several media companies — including The Chronicle, the Bay Area News Group (which publishes the San Jose Mercury News and the Oakland Tribune), NBC Bay Area, ABC, Entercom, Cumulus and KPIX — are among those the committee said have contributed from $500,000 to $900,000 in “a mix of cash and services.”

Amounts confidential

Among those giving $250,000 to $500,000 in “mostly services,” according to the host committee, are Uber and advertising, marketing and publicity firms including Edelman, Goodby Silverstein and MKTG.

The host committee declined to release how much each entity contributed because “it’s in our contract with each sponsor to keep specific amounts confidential — this is standard in sports sponsorship deals,” Ballard said.

The host committee anticipates that roughly 80 percent of the money it raises will go toward the production costs associated with the game (a new field, staffing, a free entertainment area for fans at Justin Herman Plaza, leasing facilities for a media center, producing entertainment events, etc.). The rest will go to charity. The recipients will be publicly disclosed in tax documents.

Donating to a 501(c)(6) can offer benefits to the donor, too, say tax experts. Many donors — particularly in a political context — prefer to remain anonymous so they or their business do not get criticized for their partisan political leanings.

Financially, donors can typically take a business deduction for contributions if they donate through their business.

However, the amount of each individual sponsor’s contribution is not disclosed on the IRS form. Neither is the donor’s name. The amount received by a 501(c)(6) organization is generally listed as an aggregate amount.

For more than a century there have been questions about what organizations should be granted this type of nonprofit status. In 1919, the IRS said it should be an “association of persons” with a “common business interest, whose purpose is to promote the common business interest.”

The Republican-led Congress has recently taken a harder look at organizations that claim 501(c)(6) status, particularly the National Football League, which has league-wide revenues of nearly $10 billion.

While each of the league’s 32 teams operates as a private company — all of their ticket, television and other revenue streams are taxable — the league’s central office has claimed some kind of nonprofit status since 1942.

In the 2013 fiscal year, tax documents show the league office claimed a $13.5 million deficit, but it showed a profit of $9 million the previous year. NFL Commissioner Roger Goodell earned $35 million in salary and bonuses in the league’s fiscal year that ended in March 2014.

NFL gave up tax status

In 1966, a few months before the first Super Bowl was played, the IRS gave “professional football leagues” permission to claim the 501(c)(6) nonprofit tax designation, and soon thereafter other pro sports leagues were allowed to do the same. Major League Baseball gave up its nonprofit status in 2007 after changes in the law required the disclosure of the salaries of its top executives. The National Basketball Association has never claimed this tax status. The National Hockey League still does, as does the Professional Golfers Association.

The IRS has expressed discomfort with continuing to allow pro sports leagues — bolstered by increasingly massive TV contracts — to maintain this privilege. In 1979, an IRS memorandum said it didn’t believe that professional sports leagues should continue to get the exemption. But, given the popularity of pro sports, few politicians were willing to take them on.

In 2015, Rep. Jason Chaffetz, R-Utah, chair of the House Oversight and Government Reform Committee, introduced legislation that would have eliminated the exemption for professional sports leagues with more than $10 million in revenue. The legislation would bring in $109 million in new tax revenue over the next 10 years, according to a 2013 estimate by the Joint Committee on Taxation.

Weeks after Chaffetz introduced his proposal, the NFL voluntarily gave up its tax-exempt status.

But supporters of San Francisco’s Super Bowl host committee say there is a difference between decades-old pro sports leagues and their operation. It intends to close up shop after its bills are paid.

Who is giving to the Super Bowl 50 Host Committee

As a group with a 501(c)(6) tax status, the Super Bowl 50 Host Committee is not required to publicly list donors. The committee identified the following corporations and entities it says have contributed to it so far.

“Founding Legacy Partners”

Donors that have given a minimum of $2 million in cash and in-kind services:

“Signature/Destination Partners”

Contributed $500,000 to $900,000 in a mix of cash and services:

“Provider Partners”

Contributed $100,000 to $500,000 mainly in services: