Tuesday, December 29, 2009

Another Take on College Athletics and Tax Exemption

I've read a lot of articles and blog postings by reporters and talking-heads on the issues of tax-exemption and the UBIT as they relate to college athletics (probably over 1000), but this article in the Austin Texas American-Statesman done by Eric Dexheimer is by far the best in terms of its depth and consideration of the issues (and I'm not saying that just because he quotes me at several points, though it probably doesn't hurt any).  Eric's thoughtful insight on this, which even I hadn't focused on before, is that big-time college football coaches aren't just coaches - they are among the highest paid nonprofit executives in the country.  An interesting viewpoint, though it ultimately seems to lead us back to the same place, which is whether big-time college athletics is in fact a charitable enterprise at all, and if not, then what (if anything) should we do about it?

My views on this are pretty clear - no, big-time college sports is not a charitable activity.  It's just a big commercial business.  Much like nonprofit hospitals have morphed from homeless shelters to multi-billion-dollar business enterprises, amateur college athletics, at least at the NCAA Division I/Football Bowl Subdivision (formerly Division I-A) level, has morphed from the Greek ideal of competition as part of a liberal education to well-oiled entertainment machines and minor leagues for the pros.

As for the what to do about it part, I've suggested that if Congress is really interested in doing something about the arms race in big-time college sports, the way to attack this is by focusing on the underlying tax exemption and donation deductibility of the university as a whole.  We can't get anywhere by subjecting athletic programs to the UBIT; that's a paper tiger that won't bother sponsoring universities in the least, nor get the kinds of financial and educational disclosure reformers want.  Instead, any serious regulatory efforts through the tax laws simply must focus on the exempt status and deductible contributions for the underlying entity as a whole.  Tell a university that if it doesn't shape up, its athletic programs will be subject to the UBIT, and all you're likely to get is a snigger.  Tell them that the university as a whole will lose its overall tax exempt status and/or its ability to get tax deductible donations unless it follows specific guidelines regarding athletic expenditures and disclosure, and you'll get someone's serious attention.

You can read a draft of my forthcoming article on this subject here (download from SSRN) or get a shorthand version from my comments to the Knight Commission on Intercollegiate Athletics here.


JDC

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Comments

It seems that Congress should require the big-time "revenue-generating" athletic departments to share revenue with those college programs that do not benefit from bowl contracts and TV exposure. If the NFL can share TV revenue, then it is reasonable to expect non-profit educational institutions that benefit from tax-dedcutible donations to do the same.

Posted by: Scott Galloway | Feb 7, 2010 6:53:46 PM

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