Thursday, November 26, 2020

E. Jensen: College Athletics and UBIT


Erik Jensen (Case Western Reserve) has published College Athletics and the Tax on Unrelated Business Income: Will 'Student Athletes' Still Be Students After the NCAA Changes Its Rules? in the Journal of Taxation of Investments.  Here is the abstract:

This article considers the effects of the California Fair Pay to Play Act—permitting a student athlete at any California college, beginning in 2023, to profit from income generated by the athlete’s “name, image, or likeness”—and the NCAA’s apparent acceptance of that principle on the liability of big-time athletic colleges for the unrelated business income tax (UBIT). College athletic teams historically have not been subject to UBIT because of the pretense that the participants are student athletes. Although the Fair Pay to Play Act and the NCAA’s response might not yet require discarding that pretense, the probable next step—direct compensation by the colleges, beyond scholarships, for participation in athletics—will make characterization of many athletes as “student athletes” untenable.

Nicholas Mirkay

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I love college football and college basketball as much as the next guy. No, actually I love them more than 99.99% of the population.

But, I am realistic. College Football and Basketball are a big business that deals in billions of dollars of TV revenue and multi-million dollar contracts will coaches and administrators. It is a business, a big business, that is only glancingly related to the educational mission of the nominal parent entity.

The Athletics programs that participate in this business should pay taxes on their income.

The NFL once had a special treatment as a non profit, under Sec. 501 (c)(6) non-profit, which still provides tax-exempt status for “business leagues, chambers of commerce, real estate boards, boards of trade, and professional football leagues.”

When the old NFL and AFL merged. “Professional football leagues” was added to the code to grease the skids. In return for this favorable treatment of the merger by two Democratic lawmakers — Louisiana Senator Russell Long, chairman of the Finance Committee, and Louisiana representative Hale Boggs, House majority whip — New Orleans was awarded the NFL’s next expansion franchise.

In 2015, the NFL gave up its status so that it would not have to disclose Roger Goodell's compensation — $44 million in 2012, and $35 million in 2013.

Without the tax exemption, the NFL is under no legal obligation to release its commissioner’s salary. Major League Baseball made a similar move in 2007, when it relinquished its tax exemption – and no longer had to disclose the pay of commissioner Bud Selig, which had exceeded $18 million.

It is time for College Football and Basketball to join the NFL and MLB.

Posted by: Walter Sobchak | Dec 3, 2020 12:01:24 PM

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