In 2026, the Federation Internationale de Football Association (“FIFA”) World Cup is returning to North America, with the United States serving as the primary host.[i] Beyond the celebration of sport, the tournament will generate billions of dollars in revenue from broadcasting rights and corporate sponsorships.[ii] These income streams, however, do not fit concisely into existing frameworks of U.S. federal tax law, tax treaties, or international digital tax reforms. Instead, they raise critical questions: How should the United States source and tax global broadcast revenues? When do foreign sponsors become taxable within the U.S. borders? And should FIFA receive the kind of tax holiday it has extracted from prior host nations? The World Cup provides a unique case study in this collision between international commerce, federal taxation, and the politics of global sports.

FIFA’s financial structure depends on centralizing revenue from the television rights and worldwide sponsorships. At the 2018 World Cup in Russia, over fifty percent of FIFA’s revenue came from broadcasting agreements, with another thirty-five percent from sponsorship deals.[iii] Multinational corporations, ranging from apparel companies to beverage giants, pay for global brand exposure tied to the event.[iv] Broadcasters likewise pay extraordinary sums to secure regional and national broadcast rights.

Historically, FIFA has demanded host nations to provide extensive tax concessions, including exemptions for FIFA and its commercial partners.[v] South Africa granted such treatment in 2010, Brazil in 2014, and Russia in 2018.[vi] Such concessions are criticized for allowing host nations to forfeit public revenue in exchange for the prestige of hosting.[vii] As the 2026 World Cup approaches, the United States has not publicly committed to the exemptions, leaving open a pressing policy debate.

Under the Internal Revenue Code, the sourcing of income plays a central role in determining tax liability. Section 861(a)(4) provides that royalties from the use of intellectual property in the United States are U.S.- sourced income.[viii] Thus, payments from U.S. broadcasters such as Fox and Telemundo to FIFA are properly treated as U.S.- sourced royalties.

Sponsorship income presents greater complexity. A sponsorship arrangement may include payments for use of trademarks, advertising rights, or bundled services. Depending on its characterization, income could be treated as a royalty, advertising revenue, or compensation for services performed. These distinctions carry substantial consequences, as they determine sourcing and withholding obligations. FIFA and its sponsors may attempt to structure contracts in ways that minimize U.S. exposure, while the IRS may adopt a broader view of what constitutes U.S.- sourced income.

Absent treaty protection, nonresident corporations receiving U.S.- sourced income are subject to a thirty percent withholding tax on fixed, determinable, annual, or periodical (“FDAP”) income.[ix] Tax treaties, however, often reduce or eliminate withholding if the income is not attributable to a permanent establishment in the United States.[x] Whether a temporary broadcast center, media hub, or hospitality suite constitutes such an establishment is legally unsettled.[xi] A cautious IRS may view these arrangements as sufficient U.S. presence to justify withholding, setting up potential disputes with treaty partners.

Without careful coordination, the same revenue streams for broadcasters and sponsors may be taxed in both the United States and in the competing countries of FIFA. Although treaties are designed to mitigate double taxation, they rely on accurate income characterization.[xii] A payment deemed a royalty in one jurisdiction but business profits in another could trigger overlapping claims, leaving taxpayers uncertain and compliance costs high.

The 2026 World Cup will also test the merging digital tax framework. Global consumption increasingly occurs via streaming platforms, social media highlights, and virtual advertisements embedded in broadcasts.[xiii] The Organisation for Economic Cooperation and Development’s (“OECD”) Pillar one proposal seeks to allocate taxing rights to market jurisdictions, which are the countries where consumers reside.[xiv] This principle would support taxation by the United States for income derived from U.S. viewers, but it also empowers other jurisdictions to claim a share for their markets. While the United States has long opposed unilateral digital services taxes aimed at American technology companies, the World Cup flips the dynamic: similar principles could now allow the U.S. to tax foreign broadcasters and sponsors that target American audiences.

Federal taxation is only part of the picture. State and local governments may assert their own claims on World Cup revenue.[xv] Sales and use taxes could apply to hospitality packages, luxury boxes, and merchandising tied to the tournament.[xvi] More controversially, states may argue that sponsorship or advertising directed at their residents creates income tax nexus.[xvii] Following the Supreme Court’s decision in South Dakota v. Wayfair,  which broadened states’ ability to assert economic nexus, even limited in-state activity may suffice to establish taxing authority.[xviii] The result could be a patchwork of state-level rules complicating compliance for global sponsors and broadcasters.

The central policy question remains whether the United States should provide FIFA with the sweeping tax exemptions it has demanded elsewhere. Proponents argue that exemptions are necessary to attract and smoothly administer mega-events, and that the economic benefits of hosting outweigh the foregone revenue.[xix] Critics respond that such exemptions distort tax neutrality, violate principles of equity, and amount to a transfer of public resources to a wealthy private organization.

If the U.S. concedes to FIFA’s demands, it risks setting a precedent of privileging multinational sports organizations over domestic taxpayers. If the U.S. declines to grant such exemptions, it should anticipate potential friction with FIFA, yet its position would rest on firmer ground in terms of tax equity and national sovereignty. The decision will signal how the United States balances its role as host with its commitment to a coherent tax policy.

The 2026 World Cup highlights the inadequacy with existing tax frameworks’ ability to govern cross-border sponsorship and broadcasting income. U.S.-sourcing rules under the Internal Revenue Code, treaty provisions governing permanent establishments, and emerging OECD[xx] digital tax principles all point in different directions. Unless clarified, disputes over income characterization, treaty application, and digital sourcing could leave both the IRS and taxpayers uncertain and expose the United States to significant revenue loss.

The path forward requires three commitments. First, the United States should resist broad tax holidays for FIFA and its affiliates, ensuring that major revenues are subject to normal tax principles. Second, the IRS should provide clear guidance on income characterization for sponsorships and broadcast rights. Third, U.S. policymakers should engage constructively in international negotiations to harmonize treatment of digital sports revenues. Only then can the United States host the world’s most-watched event without undermining the integrity of its tax system.

[i] 2026 World Cup Schedule – USA, Canada, and Mexico, Roadtrips, https://www.roadtrips.com/world-cup/2026-world-cup-packages/schedule/ [https://perma.cc/73AC-C3GT] (last visited Oct. 10, 2025).

[ii] 2019–2022 Revenue Reaches Record High, Fifa, https://publications.fifa.com/en/annual-report-2022/finances/2019-2022-cycle-in-review/2019-2022-revenue/ [https://perma.cc/ERS2-ZPF3] (last visited Oct. 10, 2025).

[iii] See Martin Müller, et al., The Structural Deficit of the Olympics and The World Cup: Comparing Costs Against Revenues Over Time, 54 Sage J. 1200 ,1208 (May 31, 2022).

[iv] See generally Isaac Mizrahi, Multicultural Marketing Scores Big In the 2026 FIFA World Cup Playbook, Forbes (June 23, 2025), https://www.forbes.com/sites/isaacmizrahi/2025/06/23/multicultural-marketing-scores-big-in-the-2026-fifa-world-cup-playbook/ [https://perma.cc/6YWZ-EQ52].

[v] See US States Offer Tax Breaks and Funds For Chance to Host 2026 World Cup Matches, The Guardian (June 16, 2022), https://www.theguardian.com/football/2022/jun/16/fifa-2026-world-cup-sites-cities-funding [https://perma.cc/43XE-MV7Y].

[vi] Ian Pollock, World Cup: To Tax or Not to Tax?, Bbc News (May 11, 2010), https://www.bbc.com/news/10091277 [https://perma.cc/8RLJ-LWN4] (“In this year’s competition in South Africa, a “tax-free bubble” has been established around the tournament at Fifa’s request, relieving Fifa, its subsidiaries, and foreign football associations which are taking part, of income tax, customs duties, and VAT.”).

[vii] James McBride et al., The Economics of Hosting the Olympics Games, Council of Foreign Rels. (July 20, 2024), https://www.cfr.org/backgrounder/economics-hosting-olympic-games [https://perma.cc/E47A-RLWZ].

[viii] 26 U.S.C. § 861(a)(4) (2025).

[ix] Fixed, Determinable, Annual or Periodical (FDAP) Income, Irs, https://www.irs.gov/individuals/international-taxpayers/fixed-determinable-annual-or-periodical-fdap-income [https://perma.cc/3TAS-W3XJ] (last visited Oct. 10, 2025).

[x] Internal Revenue Serv. U.S. Tax Treaties, Publication 901 (Sep. 2024) https://www.irs.gov/pub/irs-pdf/p901.pdf [https://perma.cc/E8M6-9YMK].

[xi] See generally id.

[xii] See generally id.

[xiii] Streaming Reaches Historic TV Milestone, Eclipses Combined Broadcast and Cable Viewing for First Time, Nielsen (June 17, 2025), https://www.nielsen.com/news-center/2025/streaming-reaches-historic-tv-milestone-eclipses-combined-broadcast-and-cable-viewing-for-first-time/ [https://perma.cc/WU5V-QLJ5].

[xiv] OECD Pillar One, Tax Found., https://taxfoundation.org/taxedu/glossary/oecd-pillar-1/ [https://perma.cc/MXD5-EFLG] (last visited Oct. 10, 2025) (“Pillar One’s impact would result in some companies paying more taxes in the countries where end users for a company’s products are located or digital users are, even if the company has no permanent local establishment in that country.”).

[xv] The Guardian, supra, note v.

[xvi] Fla. Stat. § 212.04(1) (2025).

[xvii] Nexus, Merriam-Webster.com, https://www.merriam-webster.com/dictionary/nexus [https://perma.cc/NR2N-KSBZ] (last visited Oct. 10, 2025) (“Connection, link”).

[xviii] South Dakota v. Wayfair, Inc. et al., 585 U.S. 162, 174 (2018).

[xix] See generally Valustrat, Hosting Mega Sporting Events – A Boost for the Host Nation’s Economy?, Medium (Oct. 11, 2018), https://medium.com/%40valustrat/hosting-mega-sporting-events-a-boost-for-the-host-nations-economy-af0df5e95874 [https://perma.cc/36TR-CEB6]

[xx] About, Oecd, http://oecd.org/en/about.html [https://perma.cc/M2N4-PBSP] (last visited Oct. 10, 2025) (“The Organization for Economic Co-operation and Development (OECD) is an international organization that works to build better policies for better lives.”).