Friday, July 26, 2024

While I Wait for Women’s Single Sculls Repechages…. Exemption and the Olympics!

So … I never thought I’d see a concert lineup that included the metal band Gojira (complete with bloody severed heads in the background- BOLD!), Lady Gaga doing the can-can, and Celine Dion.   But here we are…. The 2024 Paris Summer Olympics opening ceremony.  And I’m down for it.  All of it.

I am an Olympics nerd. I have already watched Norway v. Sweden in Women’s Team Handball.  I’m disappointed I can’t find the Archery ranking rounds that happened yesterday streaming on Peacock.  I will wake up at 5 am to watch doubles badminton tomorrow.  I’m that person.

So, it seems only appropriate to do a little review of the tax-exempt status of the Olympics for the blog today, because there are no other competitions to watch on opening ceremony day and I’ve already watched all the available Rugby 7s replays (five stars – will watch again.)  So here’s a deep dive (pun intended) into the Olympics.

Section 501(c)(3) and Section 501(j)

If you are reading the Nonprofit Law Prof Blog, you probably already know that Section 501(c)(3) describes organizations that “foster national or international amateur sports competition (but only if no part of its activities involve the provision of athletic facilities or equipment)…”   If, however, you are a “qualified amateur sports organization” under Section 501(j), you are exempt from the prohibition on providing athletic equipment.

Prior to 1976, the IRS would grant exempt status to athletic organizations if they could show that they were charitable or educational.   But those were pretty narrow buckets.   The amateur sports language was added to Section 501(c)(3) in 1976, but the IRS apparently took the provision of equipment provisions seriously – From a 1987 EO CPE Text

For example, an organization which, as part of its coaching program, made videotapes of athletes for the purpose of analyzing their performance could not be granted exemption as an amateur athletic organization under IRC 501(c)(3), since the use of videotape equipment was considered the provision of equipment.

As we all know from watching Cool Runnings, bobsleds are really expensive, so this simply could not stand. Section 501(j) wasn’t added until 1982.  While the definitions of a “qualified amateur sports organization” and the general 501c3 language are close, they aren’t completely co-terminus.  But it is clearly intended to cover Olympic-type organizations.   See e.g., GCM 39459, finding as exempt the organization for USA women’s bowling even though they supplied uniforms and equipment.

Bowling is not an Olympic sport but recognized by the US Olympic Committee and eligible for the Pan Am games, which is enough.  Apparently, bowling was a demonstration sport at the 1988 Seoul Summer Olympics and has lobbied to be added, making the short list for the 2020 Tokyo Summer Olympics but missing the cut to surfing, skateboarding, and sport climbing.  BUT I DIGRESS.

Your organization needs to be organized primarily to cater to serious athletes, so hosting running events open to all levels and not at Olympic distances didn’t get exempt status – it was deemed more recreational in nature. 

US Olympic & Paralympic Committee

So the USOPC is recognized by the International Olympic Committee as the National Olympic Committee for United States.  According to its website, it’s a “federally chartered nonprofit corporation” – you might remember my Veterans’ Day post on the USO, which is the same thing.  It’s a 501c3 and a public charity under 170(b)(1)(a)(vi) - the USOPC’s most recent Form 990 is in fact available on its website. It lists itself as a corporation formed in 1950 with a legal domicile in Washington DC but an HQ in Colorado Springs, Colorado.  A really interesting supplemental note on its Schedule D – wasn’t able to find a lot on this, does anyone have any details???

INSTALLMENTS FOR THE BROADCAST MEDIA RIGHTS, FOR THE OLYMPIC AND WINTER OLYMPIC GAMES, ARE HELD BY USOPC IN TRUST. THESE PAYMENTS ARE RECORDED ON THE STATEMENT OF FINANCIAL POSITION AS ASSETS HELD ON BEHALF OF OTHERS UNTIL THE GAMES OCCUR AND CERTAIN REQUIREMENTS ARE MET, THEN THE CASH WILL BE RELEASED AND THE AMOUNT WILL BE RECORDED AS REVENUE.

As a final note on related entities, there is a US Olympic and Paralympic Foundation, which “generates philanthropic support to empower Team USA athletes to achieve sustained competitive excellence and well-being.”  It appears that the USOPC doesn’t support athletes directly; athlete support comes from the USOP Foundation.  Formed in 2013 out of Colorado, it lists itself as a 170(b)(1)(A)(vi) on its Form 990.  The Foundation reports a management agreement with the USOPC on its Part VI and Schedule R.

National Governing Bodies.

If you look on the lists of grants made by the USPOC, it includes the national governing bodies for the various sports.  The list includes, USA Artistic Swimming,  the United States Curling Association (which is so much fun – try it if you can) and the Unites States Amateur Confederation of Roller Skating (OMG can we have roller derby in the Olympics?  I mean this year, breaking is an Olympic sport, so why not?  It does make me feel bad for bowling…) They are all listed as separate Section 501c3 organizations.

Because I had to, obviously, I did check out the US Amateur Confederation of Roller Skating, which is d/b/a USA Roller Sports (way better) and headquartered in that hotbed of roller sports, Nebraska (why Nebraska?  Any roller skaters out there know?)  Its 990s are also available, although curiously they report that they are a 509(a)(2) public charity.  

Apparently, rink hockey played on skates was a demonstration sport in the Olympic Games in Barcelona in 1992.  They tried for the 2016 Rio Summer Olympics but lost out to rugby 7s (I see why though – super fun) and golf.  BUT I DIGRESS.

International Olympic Committee. 

I would be remiss if I didn’t mention them.  It is an association under Swiss law, but many international organizations get exempt status from the IRS if they are worried about US source income – so I figure I’d check on the IRS’ website.  Et Voila!!!! And here’s its Form 990.  Interestingly, the list themselves as a Section 501(c)(4) organization, formed in 1894.  I immediately wondered if there is a US Friends of the IOC, or something like that, to take US-based charitable contributions (since 170 deductions are limited to domestic gifts… and they are a 501(c)(4) anyway). 

A quick check of the IOC’s website didn’t show anything that looks like a US fundraising arm, so if anyone has an info, let me know.   I’d keep looking, but it’s getting kind of late and I need to get some sleep before doubles badminton qualifying rounds at 5 am.

Frenziedly, eww

July 26, 2024 in Current Affairs, Federal – Executive, In the News, International, Other, Sports, Television | Permalink | Comments (0)

Monday, April 1, 2024

Nonprofit NIL Collectives are All Over the Place - Literally and Figuratively...

I'm updating some of the prior reporting by my co-bloggers, Benjamin Leff and Darryll Jones, on the issue of the exempt status of nonprofit NIL collectives - see Darryl's posts here and here, and Benjamin's response here.   I'm going to shamelessly block quote Benjamin's description here:

NIL is the acronym for “name, image, and likeness.” In 2021, NCAA issued rules that permit student athletes to contract with investors to exploit the value of their NIL rights. Groups of investors, often fans of specific schools’ teams, joined together to form NIL collectives to contract with student athletes at particular schools. Most of these collectives are operated on a for-profit basis, but some are organized as nonprofits, in which supporters made tax-deductible contributions, and the nonprofit NIL collective makes NIL payments to student athletes from the contributions.

Last May, the IRS issued a Chief Counsel Memorandum that described NIL collectives that paid 80 to 100 percent of all contributions to students in the form of NIL payments. The Memorandum argues that NIL payments to student athletes creates a private benefit to student athletes that is not a “byproduct of the exempt activities,” and that this private benefit to student athletes will “in most cases, be more than incidental both qualitatively and quantitatively.” In other words, paying student athletes for their NIL rights is not itself a charitable purpose, and therefore the organization cannot qualify for tax-exempt status if the private benefit it provides to students through the NIL payments is too substantial.

With the Men's and Women's college basketball tournaments in full swing,  NIL collectives are again all over the place - literally, in the news.   A March 27 article in The New York Times has a full run down on the collectives of the men's Sweet Sixteen teams.  In it's breakdown, the Times noted that a number of these teams are nonprofit, or maybe are partially nonprofit, or maybe used to be nonprofit.   As I said in the title, they seem to be legally all over the place:

  • Illinois ICON Collective is "a nonprofit, which says it gives 90% of donations to athletes for performing charity work."
  • Alabama has "both a for-profit and nonprofit side."   The article then quotes a nonprofit board member on how it spends it funds, which the board member later walked back as      it appears to violate NCAA rules.   Oops. 
  • Clemson "used to have a large nonprofit collective" which is has now shut down.  The Times goes on to say that  the IRS' position that pay athletes isn't charity, noting that position is "a warning many collectives have seemed to ignore."
  • While it is unclear whether Purdue's collective is nonprofit, it has "lined up agreements with three Canadian charities" to work with its center, Zach Edey, who is Canadian.
  • Gonzaga and Arizona are fun:  "Gonzaga’s collective is run by the B.P.S. Foundation, a tax-exempt charity that puts donor money at the disposal of for-profit collectives, letting the for-profit entities determine how money is given out. (Arizona also has a collective run by the B.P.S. Foundation.)"

The BPS Foundation angle was new to me, so I tried to look up more information on their website, here,  which says about as close to absolutely nothing as you can while still having a Donate Now button.   Here's a great article/expose from January (quoting another Nonprofit Law Prof Blogger, Phil Hackney) on BPS Foundation, describing it as "[i]n effect... serve[ing] as a donor advised fund for college sports boosters..."  BPS is affiliated with Blueprint Sports and Entertainment, a for profit organization that receives "around" a 10% service fee from the Foundation.  According to that article, BPS Foundation's exemption is from July, 2022 - I note that the Chief Counsel Memorandum discussed above is from May, 2023. (As an aside, can we look at that commercially-related DAF ruling again... ?  I'm not sure the proposed regs cover it.  It's still bad.)

From The New York Times' brief rundown, it seems clear that colleges just don't know what to do with these things, although they seem loathe to give them up (kudos to Clemson on that, I guess).  I have to say that I'm in the Darryll Jones camp in that I can't see how most of these aren't private benefit violations (I can't define it but I know it when I see it - Justice Stewart, or something...).   Back in my practice days, anytime we had private benefit or unrelated income or lobbying approaching double digits, I'd worry about the exclusively test and start talking to clients about remedial action.   I can't think of any other precedent for allowing much over that amount in non-charitable stuff before exemption becomes an issue - there's no good reason why NIL Collectives should be any different.   

With madness, outside of March, eww

  

 

April 1, 2024 in Current Affairs, Federal – Executive, In the News, Sports | Permalink | Comments (0)

Nonprofit NIL Collectives are All Over the Place - Literally and Figuratively...

I'm updating some of the prior reporting by my co-bloggers, Benjamin Leff and Darryll Jones, on the issue of the exempt status of nonprofit NIL collectives - see Darryl's posts here and here, and Benjamin's response here.    I'm going to shamelessly block quote Benjamin's description here:

NIL is the acronym for “name, image, and likeness.” In 2021, NCAA issued rules that permit student athletes to contract with investors to exploit the value of their NIL rights. Groups of investors, often fans of specific schools’ teams, joined together to form NIL collectives to contract with student athletes at particular schools. Most of these collectives are operated on a for-profit basis, but some are organized as nonprofits, in which supporters made tax-deductible contributions, and the nonprofit NIL collective makes NIL payments to student athletes from the contributions.

Last May, the IRS issued a Chief Counsel Memorandum that described NIL collectives that paid 80 to 100 percent of all contributions to students in the form of NIL payments. The Memorandum argues that NIL payments to student athletes creates a private benefit to student athletes that is not a “byproduct of the exempt activities,” and that this private benefit to student athletes will “in most cases, be more than incidental both qualitatively and quantitatively.” In other words, paying student athletes for their NIL rights is not itself a charitable purpose, and therefore the organization cannot qualify for tax-exempt status if the private benefit it provides to students through the NIL payments is too substantial.

With th Men's and Women's college basketball tournaments in full swing,  NIL collectives are again all over the place - literally, in the news.   A March 27 article in The New York Times has a full run down on the collectives of the men's Sweet Sixteen teams.  In it's breakdown, the Times noted that a number of these teams are nonprofit, or maybe are partially nonprofit, or maybe used to be nonprofit.   As I said in the title, they seem to be legally all over the place:

  • Illinois ICON Collective is "a nonprofit, which says it gives 90% of donations to athletes for performing charity work."
  • Alabama has "both a for-profit and nonprofit side."   The article then quotes a nonprofit board member on how it spends it funds, which the board member later walked back as      it appears to violate NCAA rules.   Oops. 
  • Clemson "used to have a large nonprofit collective" which is has now shut down.  The Times goes on to say that  the IRS' position that pay athletes isn't charity, noting that position is "a warning many collectives have seemed to ignore."
  • While it is unclear whether Purdue's collective is nonprofit, it has "lined up agreements with three Canadian charities" to work with its center, Zach Edey, who is Canadian.
  • Gonzaga and Arizona are fun:  "Gonzaga’s collective is run by the B.P.S. Foundation, a tax-exempt charity that puts donor money at the disposal of for-profit collectives, letting the for-profit entities determine how money is given out. (Arizona also has a collective run by the B.P.S. Foundation.)"

The BPS Foundation angle was new to me, so I tried to look up more information on their website, here,  which says about as close to absolutely nothing as you can while still having a Donate Now button.   Here's a great article/expose from January (quoting another Nonprofit Law Prof Blogger, Phil Hackney) on BPS Foundation, describing it as "[i]n effect... serve[ing] as a donor advised fund for college sports boosters..."  BPS is affiliated with Blueprint Sports and Entertainment, a for profit organization that receives "around" a 10% service fee from the Foundation.  According to that article, BPS Foundation's exemption is from July, 2022 - I note that the Chief Counsel Memorandum discussed above is from May, 2023. (As an aside, can we look at that commercially-related DAF ruling again... ?  I'm not sure the proposed regs cover it.  It's still bad.)

From The New York Times' brief rundown, it seems clear that colleges just don't know what to do with these things, although they seem loathe to give them up (kudos to Clemson on that, I guess).  I have to say that I'm in the Darryll Jones camp in that I can't see how most of these aren't private benefit violations (I can't define it but I know it when I see it - Justice Stewart, or something...).   Back in my practice days, anytime we had private benefit or unrelated income or lobbying approaching double digits, I'd worry about the exclusively test and start talking to clients about remedial action.   I can't think of any other precedent for allowing much over that amount in non-charitable stuff before exemption becomes an issue - there's no good reason why NIL Collectives should be any different.   

With madness, outside of March, eww

  

 

April 1, 2024 in Current Affairs, Federal – Executive, In the News, Sports | Permalink | Comments (0)

Wednesday, January 17, 2024

More Thoughts on NIL Collectives

Sometimes I like to share my own perspective on issues previously covered well by my colleague bloggers. In this case, I’m following up two posts (this one and this one) by my colleague Darryll Jones on IRS guidance issued last May about the possibility of tax-exempt status for so-called NIL collectives.  I also like to take the opportunity to recommend podcasts when they are informative, and in this case there are excellent episodes of The Daily and Taxes for the Masses (discussion of tax-exemption begins at minute 12:50).

NIL is the acronym for “name, image, and likeness.” In 2021, NCAA issued rules that permit student athletes to contract with investors to exploit the value of their NIL rights. Groups of investors, often fans of specific schools’ teams, joined together to form NIL collectives to contract with student athletes at particular schools. Most of these collectives are operated on a for-profit basis, but some are organized as nonprofits, in which supporters made tax-deductible contributions, and the nonprofit NIL collective makes NIL payments to student athletes from the contributions.

Last May, the IRS issued a Chief Counsel Memorandum that described NIL collectives that paid 80 to 100 percent of all contributions to students in the form of NIL payments. The Memorandum argues that NIL payments to student athletes creates a private benefit to student athletes that is not a “byproduct of the exempt activities,” and that this private benefit to student athletes will “in most cases, be more than incidental both qualitatively and quantitatively.” In other words, paying student athletes for their NIL rights is not itself a charitable purpose, and therefore the organization cannot qualify for tax-exempt status if the private benefit it provides to students through the NIL payments is too substantial.

In my view, the weakest part of the Memorandum is that it doesn’t really explain why NIL payments to student athletes do not potentially serve the charitable purpose of advancing education or amateur sports competitions, even though athletic scholarships presumably would. Instead of distinguishing between merit-based athletic scholarships (that presumably do not create an impermissible private benefit) and NIL payments (that do), it discusses need-based scholarships, which would clearly be permissible because mitigating poverty is a well-established charitable purpose. The comparison between need-based scholarships and NIL payments is kind of a red herring, since it’s so obvious how those two kinds of payments are different from each other. But I know of no authority to support the idea that scholarships based on athletic ability rather than need fail to advance a charitable purpose because they are not need-based. Obviously, NIL payments and athletic scholarships are different from each other, and so this weakness of the Memorandum does not mean that it is wrong. It just fails to explain what is materially different between NIL payments and athletic scholarships when evaluating private benefit to student athletes.

But the fact that NIL payments do not themselves constitute a charitable purpose does not mean that NIL Collectives that pay them necessarily fail to qualify for tax-exempt status. Once a noncharitable purpose (NIL payments) is identified, the collective must determine if its noncharitable activities constitute a private benefit to the student athletes that is too substantial, either quantitatively or qualitatively. Professor Jones’s January 10 post cites a Chronicle of Philanthropy article that describes a new charitable NIL collective (“Hail! Impact”) that purports to qualify for tax-exempt status even though it makes NIL payments to student athletes. The organization’s theory is that so long as 70% of its funds are used for a proper charitable purpose, the 30% of its funds that are used for NIL fees do not create a substantial private benefit, either quantitatively or qualitatively. The article also states that the organization, “worked with the IRS and believes it is the first NIL collective to be designated a charity since the agency issued its guidance about donations.” In other words, the IRS appears to have blessed this 70/30 split as the proper way to structure an NIL collective. Given that donating money in general support of athletic programs at a tax-exempt college or university has always been treated as a tax-exempt purpose, NIL Collectives could be formed to transfer 70% of all contributions to the university in support of its athletic programs (and presumably could be spent on merit-based athletic scholarships) and the remaining 30% could be spent on NIL payments to student athletes. It remains to be seen how many NIL collectives will choose this path and how many will simply organize as profit-making ventures for their investors, taking as much profit as they can from exploiting the NIL rights of student athletes.

The podcasts I recommended take the position that charitable NIL collectives are an abuse of the Tax Code. But the fact is that under current law, there is nothing impermissible about an NIL Collective making NIL payments to athletes, as long as that activity is insubstantial in relation to its charitable activities. That’s why charities can engage in lobbying activities, for example, or enter into a joint venture with for-profit partners, or pay relatively high (but reasonable!) fees to fundraising firms, or engage in any number of other activities. As many of the Nonprofit Law Professor Blog posts point out, there are areas in which the law of private benefit probably fails to sufficiently protect the nonprofit sector. I definitely agree that a more coherent framework would be preferable to the one we have. But I’m not sure I am persuaded that I should be outraged by tax-exempt NIL collectives. If donors want to give to universities’ athletic programs and “on the side” provide NIL payments to student athletes, I’m OK with that. I think these NIL payments are less likely to undermine the educational objectives of the schools than those made by ordinary for-profit investors, and I even (perhaps naively) think they might be less exploitative of the athletes. If fans want to donate to make payments to student athletes, don’t we imagine, at least as a starting point, that they are might care more about those student athletes than investors who are simply trying to make a buck off a teenagers’ NIL value? Or do I need to go back and re-read my Milton Freidman?

--Benjamin Leff

January 17, 2024 in Current Affairs, Federal – Executive, In the News, Sports | Permalink | Comments (1)

Friday, March 10, 2023

Reporters in Action: In-Depth Investigation Into NFL Player Charities

Download (3)Jason Wolf at the Arizona Republic led a six-month investigation that led to a five-part story about nonprofits founded by NFL players who have won the coveted Walter Payton NFL Man of the Year award. The stories are behind pay walls (at both the Arizona Republic and USA Today), but at least as of today you can read the follow-up Arizona Republic story Reddit had questions about our NFL charity investigation. Here are key answers. without a subscription. Here are some highlights:

  • "The investigation found most athletes’ nonprofits largely serve as fundraising vehicles — they collect money to give to existing nonprofits like hospitals or food banks that perform programmatic activities. But some spend less than half of the donations they receive on charity, with the rest paying for overhead."
  • "NFL players often start nonprofits without having the slightest idea what they’re doing, and without considering partnering with established organizations."
  • "[N]either the NFL nor the NFLPA, which presents weekly and annual awards for community service, match their promotional efforts when it comes to educating players on the nonprofit sector."

Lloyd Mayer

March 10, 2023 in In the News, Sports | Permalink | Comments (0)

Thursday, February 10, 2022

Colgate University Announces $25 Million Gift from Alumni

Colgate University in Hamilton, New York, has announced a $25 million gift from alumni Chase Carey (’76), his wife, Wendy, and their children Steve (’12) and Tara (’13) in support of renovating the Reid Athletic Center and other initiatives.

The gift includes $1 million in support of the university’s club rugby program and $1 million for the university’s Center for Freedom and Western Civilization. The bulk of the gift -- $23 million -- will be used to renovate the university's athletic center, which was first built in 1959. Renovations will include a performance arena in a newly constructed south wing that will serve as the home for Colgate’s men’s and women’s basketball and volleyball teams with dedicated locker rooms, lounges, and film rooms. Once complete, the new 35,000 square foot arena will include additional sport office suites; locker rooms for softball, field hockey, golf, and men’s and women’s tennis; visitor locker rooms; a new football suite; and a health and performance center that integrates the university’s sports medicine, strength and conditioning, sports nutrition, and mental health and performance programs. 

In a press release issued earlier this week, Colgate stated that 

Chase Carey has made significant contributions to Colgate during the last several decades, resulting in gifts to the University of more than $35 million. Carey was an active member of the leadership group that helped construct the Class of 1965 Arena and also played an instrumental role in establishing the Trudy Fitness Center, which bears his mother’s name. He and Wendy are members of the Campaign Leadership Council.

The release quoted Mr. Carey as stating:

Athletics has always been a source of pride, energy, and school spirit that the Colgate community can share in. Our student-athletes make a commitment to pursue excellence, and as part of that process, they learn lessons about teamwork and determination that are incredibly important in life. As a world-class university with world-class student-athletes, we want to build a world-class facility that will help them reach and exceed their goals.

Congratulations to Colgate -- and to the Carey family.

Vaughn E. James, Judge Robert H. Bean Professor, Texas Tech University School of Law

 

February 10, 2022 in Current Affairs, In the News, Other, Sports | Permalink | Comments (0)

Thursday, September 30, 2021

Varsity Blues On Trial

Chuttersnap-VR2NAaqMnlA-unsplashIn keeping with yesterday's discussion of college athletics, yesterday, an article about William Singer and the Varsity Blues admission scandal came up in my Twitter feed yesterday. And, while I haven't really thought about Singer in a year or two, it's worth revisiting a little.

The news hook is that the prosecution rested its case against Gamal Abdelaziz, who is accused of paying $300,000 to get his daughter into USC as an alleged basketball player, and John Wilson, who paid a total of $1.2 million to get his three kids into USC, Stanford, and Harvard as athletes. These are the first two parents to go to trial, though 33 of the 40 parents charged have pleaded guilty.

The news from yesterday has two main takeaways. First, a forensic accountant testified that Singer personally made nearly $28 million in the scheme.

Continue reading

September 30, 2021 in Current Affairs, Sports | Permalink | Comments (0)

Wednesday, September 29, 2021

Student-Athlete? Or Employee?

Dave-adamson--nATH0CrkMU-unsplashIn a memorandum issued today, Jennifer A. Abruzzo, General Counsel for the National Labor Relations Board, reinstated the NLRB's 2017 determination that some college athletes are employees and, as such, have certain statutory rights under the National Labor Relations Act.

Not all college athletes are employees, but Abruzzo clarified that to the extent they perform services for a university and operate under the control of the university, and especially if they receive compensation, they qualify as employees. As employees, they're protected when they speak out about their conditions of employment and have the right to self-organize, whether or not the Board certifies a bargaining unit.

Moreover, the NLRB may pursue violations where a university misclassifies an employee-athlete as a "student-athlete, which, she says, risks chilling their protected speech.

The memorandum ends with this:

In sum, it is my position that the scholarship football players at issue in Northwestern University, and similarly situated Players at Academic Institutions, are employees under the Act. I fully expect that this memo will notify the public, especially Players at Academic Institutions, colleges and universities, athletic conferences, and the NCAA, that I will be taking that legal position in future investigations and litigation under the Act. In addition, it notifies them that I will also consider pursuing a misclassification violation.

Samuel D. Brunson

Photo by Dave Adamson on Unsplash

September 29, 2021 in Sports | Permalink | Comments (0)

Thursday, September 10, 2020

Boston Celtics and Celtics Shamrock Foundation Commit $25 million for Racial Justice Initiatives

Organizations making pledges and commitments for social causes continue to be in the news. The latest to jump in: the Boston Celtics and Boston Celtics Shamrock Foundation have announced that the two organizations are making a ten-year, $25 million commitment to address racial injustice and inequities in the greater Boston area.

This commitment is itself part of a larger effort announced by the National Basketball Association in August. The Celtics' initiative will be termed The Boston Celtics United for Social Justice. According to today's Philanthropy News Digest, the initiative

includes $20 million in cash and $5 million in media and in-kind assets in support of both the NBA's efforts and local programs, with a focus on six areas identified by the organization in discussions with community leaders and players: equity in education, economic opportunity and empowerment, equity in health care, criminal justice and law enforcement, breaking down barriers and building bridges between communities, and voting and civic engagement.  

The Digest continues:

Planned projects under the initiative include creating an early-education center for low-income families; providing pro bono services to minority-owned businesses; assisting juvenile offenders through workforce development and academic completion opportunities; expanding The Playbook Initiative, the team's bias-prevention curriculum; and promoting voter registration and the importance of voting.

In discussing the initiative, Celtics forward, Jaylen Brown, stated, "Our goal is to have a direct impact now. We don't need to pacify the situation with empty gestures. We need to hold ourselves, the Celtics organization, and the City of Boston accountable. Monetary commitment is a great first step, but we need to commit to this process by creating a balance of short- and long-term change. The time is now."

I fervently agree.

Vaughn E. James 

September 10, 2020 in Current Affairs, In the News, Sports | Permalink | Comments (0)

Friday, June 12, 2020

The NCAA, Antitrust, and Paying Student-Athletes for Use of Names, Images, and Likenesses

DownloadThere have been two recent major developments with respect to the NCAA and student-athletes.

First, the NCAA's Board of Governors announced that it supports "rule changes to allow student-athletes to receive compensation for third-party endorsements both related to and separate from athletics" and directed its divisions to begin developing such rules. This change in position is driven primarily by state and federal legislative efforts (see for example, this recently enacted California law)  to require the NCAA to permit such compensation. At the same time, the Board stated that any such rules must follow certain guidelines, specifically:

  • Ensuring student-athletes are treated similarly to nonathlete students unless a compelling reason exists to differentiate. 
  • Maintaining the priorities of education and the collegiate experience to provide opportunities for student-athlete success. 
  • Ensuring rules are transparent, focused and enforceable, and facilitating fair and balanced competition. 
  • Making clear the distinction between collegiate and professional opportunities. 
  • Making clear that compensation for athletics performance or participation is impermissible. 
  • Reaffirming that student-athletes are students first and not employees of the university. 
  • Enhancing principles of diversity, inclusion and gender equity. 
  • Protecting the recruiting environment and prohibiting inducements to select, remain at or transfer to a specific institution.

Second, the NCAA lost its appeal of a federal district court decision that enjoined the NCAA from enforcing its rules restricting the education-related benefits its members may offer students who play Football Bowl Subdivision football and Division 1 basketball. In In re NCAA Grant-in-Aid Cap Antitrust Litigation, the U.S. Court of Appeals for the Ninth Circuit held that the rules were unlawful restraints on trade under section 1 of the Sherman Act (15 U.S.C. section 1). This decision follows the NCAA's previous loss at the Ninth Circuit in O'Bannon v. NCAA, 802 F.3d 1049 (2015).

What exactly this developments will mean for student-athletes, college athletics, and the NCAA remains to be seen. For more coverage, see Marc Edelman at Forbes, Politico, Sports Illustrated, and The Wall Street Journal.

Lloyd Mayer

June 12, 2020 in Federal – Judicial, In the News, Sports | Permalink | Comments (0)

Monday, June 3, 2019

Soccer, Rock Climbing, and Jazz, Oh My!

I'm excited to be here! (Thanks to the Nonprofit Law Prof Blog folks for inviting me!)

Because I wasn't told any differently, I thought I'd take today to briefly introduce myself. I'll get to more substantive blogging tomorrow.

ClimbingI've been teaching at Loyola University Chicago for a decade now. In addition to here, I do some tax blogging at the Surly Subgroup and some religious/Mormon/tax blogging at By Common Consent. I'm broadly interest in tax and nonprofit issues, and am really interested in questions of the taxation of religious stuff.

My outside-of-work time largely consists of two things: shuttling kids to (and sometimes participating in) an insane number of extracurricular activities and listening to jazz. (I'd like it to involve a little more saxophone playing, but you do what you can.) And both of these things implicate tax-exempt organizations and nonprofits, and may provide me with future blogging fodder.

For instance: today after work, I'll take a bus to pick my daughter up from school. Then we'll take the train to First Ascent. I'll climb and work out while she (and my other daughter) practice with their climbing teams. (Side note: did you know that competitive rock climbing was a thing? Me either, until my kids started doing it. But it'll be in the 2020 Olympics.) Competitive rock climbing is governed by USA Climbing, a 501(c)(3) organization.

I also coach my son's soccer team, through AYSO. (My sister is still incredulous, probably rightfully, since I quit soccer when I was 8. Still, I know more than my son and his cohort, and by coaching, I get to choose when we hold practice, which is kind of critical given my family's schedule.) Like USA Climbing, AYSO is a 501(c)(3) exempt organization.

It makes sense, of course: section 501(c)(3) explicitly allows an exemption for organizations that "foster national or international amateur sports competition." I'll admit, though, that I haven't yet carefully thought through this exemption. When I've thought about it, the two organizations that first come to mind are the NCAA and the US Olympic Committee. My suspicion is that both of these organizations are substantially different, though, from USA Climbing and AYSO. I'll be interested in casually exploring the amateur athletics exemption in future posts.

On the jazz front, I've recently become aware of Giant Step Arts, a nonprofit focused on presenting and recording live jazz. I know basically nothing about Giant Step Arts, though several of the projects it has recorded have made for great listening. I plan on looking at it, its mission, and its tax-exempt status (I think, assuming the linked organization is the same as the jazz nonprofit).

Until those posts, though, thanks for having me, and I look forward to my time on this blog!

Samuel D. Brunson

June 3, 2019 in Music, Other, Sports | Permalink | Comments (3)

Thursday, July 9, 2015

Road Tripping to UPMIFA: Professors' Corner

The ABA's Real Property, Trust and Estate Section has a series called "Professors' Corner," which puts on some really great free webinars for ABA members (sorry - no CLE, but what do you want for free?) on real estate and T&E topics from both academic and practitioner view points.   This Wednesday I was in the midst of a road trip, during which I dialed in to the latest in the series on an update to UPMIFA.   (Don't worry, I pulled over to a Tim Horton's to dial in.   And get coffee.  Because road trip.)

The webinar featured Susan Gary from UOregon and Terry Knowles, the Assistant Director of Charitable Trusts in the New Hampshire Attorney General's office.    Many of you may know that Susan was the Reporter for UPMIFA with the Uniform Law Commission, and that Terry was an advisor (I believe on behalf of NASCO but I could be wrong on that.)   In any event, it was really interesting to hear both of them talk about what's happened in the nine years (has it really been nine years!!!) since UPMIFA was passed by the ULC.   

I highly recommend listening to the whole webinar (I think that it will archive soon so ABA should be able to access it) but here are three big picture take aways:

  • FIGHT!  The lawyers and accountants continue to use different definitions when dealing with endowed funds, which causes confusion all over the place.   Susan talked about how the accountants have defaulted to having their clients use historic dollar value  to define restricted assets, even thought that isn't required anywhere and actually sort of undercuts what UPMIFA is trying to do.    Often, if there is professional advice to small nonprofits, it's from the accounting folks and not the legal folks, so this problem really has cause some issues.  I was happy to hear from Susan that FASB is looking to revise this, and that it has some draft rules out for comment.
  • UNSAFE HARBORS.   As some of you may know, the original UPMIFA draft from the ULC has a provisions that says that endowment spending in excess of 7% is subject to a rebuttable presumption of unreasonableness.   Many states didn't adopt - it was interesting to hear that one of the professed rationales for not adopting the 7% rules was the concern that it would cause a safe harbor for 6.99% and under.  It was also intersting to hear Terry talk about what her office sees as overcoming that presumption - "we needed it because our budget is short" is insufficient!
  • WHAT IS THIS IPS OF WHICH YOU SPEAK?   Again, it was  interesting to hear Terry talk about what her office needs to do when evaluating spending decisions from endowments.     If an endowment is supposed to be perpetual, it really is important to take into account inflation as a factor for consideration, even if there is no magic in how you do it exactly.  It seems like the AGs are really looking for a thoughtful process and adherence to an investment policy statement. 

In any event, I do recommend the webinar to anyone interested in the endowment spending issue (which seems to be getting some attention from Congress and otherwise as of late - I've linked to Brian Galle's thought-provoking paper on endowment spending) and I really recommend the webinar if you find yourself with lots of time on I-90.

Safe summer travels, all.

EWW

July 9, 2015 in In the News, Sports, State – Legislative | Permalink | Comments (0)

Monday, February 24, 2014

Why Are The US Olympic Committee [College Sports; Nonprofit Hospitals] Tax-Exempt?

In a recent column in Forbes, Howard Gleckman asked why the US Olympic Committee is tax-exempt.  After all, he notes, "The law says tax exempt status is granted to groups that 'foster national or international amateur sports competition.' But do the hyper-marketed modern games even remotely fit the ideal of amateur sports?"  A bit later, he follows with the observation that  "By almost any standard, [the USOC] is a commercial enterprise. It exists primarily to help organize a bi-annual made-for-TV entertainment extravaganza.  Yes, it provides some support for athletes (though surprisingly little). But its real business is marketing itself and playing its part in a two-week orgy of athletic commercialization."

Welcome, Howard, to the modern world of charitable tax-exemption.  Substitute "college sports" in the quotations above and you would have an equally accurate description.  And it would hardly be inaccurate to say "By almost any standard, private nonprofit hospitals are commercial enterprises." (And at least some research universities may be heading in that direction).  So what might we do about the commercialization of the modern charity?

One thing we could do is take the "primary purpose" rule seriously and apply it with an honest recognition of the way certain organizations operate in the modern world.  A charity is supposed to engage in activities that "primarily" futher a charitable purpose.   Does anyone really believe that a typical private nonprofit hospital "primarily" pursues a charitable purpose?  I certainly don't - private nonprofit hospitals' primary mission is to provide the highest-quality health care they can for a fee.  That's an admirable mission, one I heartily support, and one that our nonprofit hospitals mostly excel at; but it is in no way, shape or form "charitable."   I could say the same thing about the Olympics or college athletics - these activities, whatever their origins, are hardly about "amateur" athletics any more.  The Olympics are a showcase for pros at their sports (men's hockey, anyone?) and big-time college athletics (Division I men's basketball and FBS football) are nothing more than minor leagues for the pros.

I don't know why it is so hard for tax policy to recognize that activities change over time, and things that may once have been charitable might not be today.  Nonprofit hospitals were unquestionably charities in the 1800's, when they were essentially homeless shelters staffed by religious volunteers.  That model no longer exists.  The Olympics were at one time truly about amateur athletics, just as college sports at the enactment of the UBIT in 1950 mostly involved real student-athletes.   No longer.  Things change, but we refuse as a policy matter to re-examine charitable exemptions in light of changed circumstances.  From time to time there have been proposals to require charities to "re-qualify" for exemption every so often (every 5 years, or 7 years or 10 years, for example).  But these proposals won't "get it right" if we don't update our views about whether certain activities are charitable or not.

So, Howard, I have an answer to your question: analytical inertia.  Our views of charitable activities seem frozen in time.  Until we get over it, commercial activities will continue to dominate certain "charities" that are not charities at all.

John Colombo

 

 

February 24, 2014 in In the News, Sports | Permalink | Comments (0) | TrackBack (0)

Tuesday, September 24, 2013

Eighth Circuit Nixes NFL Retirees' Benefits Lawsuit

Are you ready for some football?  I may not have any football to share or play, but I bring some news of the sport... 

The U.S. Court of Appeals for the Eighth Circuit on Monday threw out a class action filed by National Football League retirees who claimed they were squeezed out of a deal negotiated amid the 2011 player lockout.  The court affirmed a lower court's dismissal, finding that the retirees failed to show they could have negotiated a deal better than the $900 million in additional retiree benefits the agreement utimately yielded. 

The National Law Journal provides some details about the suit:

The plaintiffs, a group of 28 retired players led by former  Minnesota Viking Carl Eller, sued the National Football League Players  Association in 2011. The lawsuit also named players union members including New  England Patriots quarterback Tom Brady.

Filed in Minnesota district court, the class action claimed  that the union, in reaching a collective bargaining agreement with the NFL two  years ago, intentionally interfered with the retirees’ ability to negotiate with  the NFL, which led to fewer retirement benefits than they could have gotten had  they bargained separately.

In March 2011, the inability of the NFL and the union to reach  an agreement on pay caps and other issues resulted in a lockout, which was  lifted on July 25 of that year when the parties reached a 10-year  deal.

Writing for the appeals panel, Judge James Loken wrote that "the retired players had no reasonable expectation of a separate,  prospective contractual relation with the NFL that would provide them greater  player benefits than the NFL agreed to provide in the new CBA."

VEJ

 

 

September 24, 2013 in Current Affairs, In the News, Sports | Permalink | Comments (0) | TrackBack (0)

Thursday, October 18, 2012

The Tax Status of the NFL: Why Reporters Ought Not to Write About Nonprofits Until They Talk To An Expert

I spend a fair amount of my working life talking with reporters about tax exemption issues.  I do this not because I think I'll get quoted correctly (I almost never do; nuance, which is part of the stock in trade of an academic, is almost always lost in the translation), nor because I think I'll get famous from the occasional quote in a story, but rather because I hope to influence at the margin the competence of the stories that are written.  And I will say that most of the time (not nearly all), the reporters I talk to write stories that by and large "get it right."  I hope some of that is attributable to their discussions with me, but I think it is more attributable to the fact that reporters who seek out experts in the areas they are writing stories on really are trying to do a good job, and that tends to get reflected in the accuracy of what they write.

Contrast this to stories like this one in the Atlanta Journal Constitution, about the tax-exempt status of the NFL.  Most of the basic facts are correct - the NFL is, in fact, a tax-exempt entity under 501(c)(6).  But the reporter who wrote this story makes no effort to place this status in context, and therefore leaves the impression that this is a huge scandal.  I hate stories like this. 

I've talked many times with sports reporters across the country about this issue, and I invariably find that the reporter in question starts with no understanding about the differences between 501(c)(6) status and "charitable" status under 501(c)(3).  Most of them don't realize that trade associations don't benefit from the Section 170 charitable contributions deduction; to them, "exempt" means the same thing whether you are the NFL or the Red Cross.  When reporters leave this critical difference out, readers come away with the same confused impression: that the NFL enjoys the same tax benefits as the Salavation Army or the local church.  It doesn't.

Second, the reporters invariably fail to distinguish the NFL league entity from the individual teams.  The individual teams are taxpaying, for-profit enterprises (the Green Bay Packers do have a unique ownership structure, in which the corporation is owned by citizens of Green Bay, but it is organized as a for-profit corporation under Wisconsin law).  They are not owned by the league.  Again, notice that the quote used by the reporter from Tom Coburn talks about the value of the individual teams, juxtaposed against the very vague statement that "many" of the NFL's "subsidiaries and teams" are tax-paying entities.  This is classic obfuscation, in which the reader is left with the impression that the NFL is a monolithic nonprofit, classified in the same way as the Salvation Army, with teams that may themselves be exempt.

Finally, the story doesn't point out that 501(c)(6) status doesn't get you very much in the tax world.   In most states (actually, I think all), trade associations aren't considered charities, and their property would not be tax-exempt under general state property tax exemption rules.  So the quote in the story about the NFL having "$1 billion in assets" again leaves the mis-impression that somehow these assets are escaping taxation.  Even the value of the income tax exemption is questionable.  If you look at the NFL's 2011 Form 990, you will see that its expenses for the year exceeded its revenue.  While I can't conduct an audit from afar, it sure looks like virtually everything reported by the NFL as an expense would be deductible if the NFL were a taxpaying entity.  The result: even if the NFL weren't tax-exempt, it probably could easily arrange its affairs to pay no income tax.

Now that's not to say that exempt status is worthless; it must be worth something to the NFL, or else it would have abandoned that status, like Major League Baseball did years ago.  But this whole "shock and awe" tinge to the story makes me want to throw up.  In the overall policy world of exempt organizations, I just don't find the NFL's "trade association" status all that bothersome.   After all, all sorts of local, state and even national business organizations qualify under that same status (e.g., the American Bar Association; the American Medical Association, etc.).  There's plenty of stuff in the exempt organizations world to get worked up over (political expenditures by (c)(4)'s, for example); the NFL's status just doesn't hit my hot button.

JDC

October 18, 2012 in Current Affairs, Sports | Permalink | Comments (2) | TrackBack (0)

Tuesday, October 25, 2011

College Sports

Yesterday's Chronicle of Higher Educationreports that a study commissioned by the Knight Commission on Intercollegiate Athletics has determined that "[a]thelitic programs in the Football Bowl Subdivision spent on athletes at a rate that far outpaced academic spending per student during a recent five-year period."  One extreme example at the athletic conference level found that one league, the Southeastern Conference, reported academic spending of  $13,471 per student in 2009 while athletic spending per athlete was $156,833.  These results will no doubt inflame Senator Grassley and will add to the public's growing the public's growing skepticism about whether revenues from college athletic programs ought to be tax exempt because of their close connection to education.

TAK

October 25, 2011 in Current Affairs, In the News, Sports | Permalink | Comments (0) | TrackBack (0)

Monday, March 23, 2009

Say it Ain't So! MLB Players Association Files Grievance to Stop Mandatory Charitable Contributions

Baseball season starts soon.  I live in Florida -- in St. Petersburg, to be exact -- where baseball is not at all appreciated.  St. Pete, for example, has the worst baseball stadium in the whole world.  Its dark and dank with artificial turf, just awful.  Like playing baseball in an old, poorly lit basketball arena.  People in Florida don't appreciate a warm day at the ballpark like they do in places like Pittsburgh and Chicago.  Ah yes, the wafting smell of hotdogs, brats, and cotton candy in the stands.  I suppose I understand why, but there are ways to provide shade even at outdoor stadiums in Florida.  Fortunately, I will be spending some time in Pittsburgh this summer -- the team there ain't that good, but they have a terrific stadium and there are always good seats. 

But I digress.  On Friday, the major league baseball association filed a grievance alleging that major league teams are acting unfairly when they insert clauses in ballplayers' contracts requiring that the players contribute a certain percentage of their salaries to team affiliated charities.  The players' association website has information and press releases on just about all the great things ball players do, including volunteer service and pharmaceutical commericals (not really), but strangely no mention of the grievance.  I guess they prefer not to publicize this part of their community spirit.  To get an idea of what's going on, see this Newsday article.  Here is a teaser:

On Friday, a rare day without a WBC game during the tournament's 19-day run, the players association filed a grievance regarding, of all things, the inclusion of designated charity contributions in players' contracts. What the union wants from a third-party arbitrator, should the grievance get that far in the process, is money returned to the players who already have made such donations.  The Mets are one of 22 teams identified that have utilized this practice, according to the union's notice of grievance to central baseball. The others are Arizona, Atlanta, Baltimore, the Cubs, Cincinnati, Cleveland, Colorado, Detroit, Florida, Houston, the Angels and Dodgers, Milwaukee, Philadelphia, Pittsburgh, San Diego, San Francisco, Seattle, Tampa Bay, Texas and Toronto.  It's a growing trend in baseball: When free agents sign with teams, they're essentially required to donate a percentage of their salary to a charity "associated or affiliated with the Club," to use the union's wording.

I guess I am all for "freedom of giving" and don't like the idea of forced contributions.  I would side with the teams, nevertheless, if the clauses merely required players to give to a charity of their own selection.  Why should the team get to select the charity?  On the other hand, these are not really "mandatory" charitable contributions.  A player can always turn down the contract -- but who would do such a foolish thing, give up a major league baseball career over a charitable contribution dispute.  MLB is a buyer's market.  Only a few players are so rare that they cannot be replaced by someone else laboring away in the minor leagues -- and thus can demand the removal of the clause.  So maybe the charitable contribution clause is a contract of adhesion after all. 

dkj

March 23, 2009 in Sports, State – Judicial | Permalink | Comments (0) | TrackBack (0)