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Big Time College Athletics: The Taxman Cometh

Posted by srr50 on May 20th, 2009 under Basketball, Football

Over the past 40 years, the concept of a student-athlete representing his college in athletics has been reshaped until their were two new categories:

Revenue sports (football & men’s baskeball)

Everything else.

The Congressional Budget Office recently looked at the big-time athletics programs at NCAA institutions and decided that the connection between those programs and their Universities is as weak as Henry James’ grip on reality.

The CBO put out a report Wednesday that at least 90 Division I programs, 60 percent to 80 percent of athletic departments’ revenue comes from activities that can be described as commercial—seven to eight times that for the rest of the schools’ activities and programs.

The CBO thinks maybe, just maybe that these collegiate athletic programs have become side businesses for schools and, if they have, then maybe the same preferential tax preferences shouldn’t apply to them as to schools in general.

The report says that Congress could alter the tax treatment of collegiate sports programs in several ways, such as limiting the deduction for contributions, limiting the use of tax-exempt bonds, or limiting the exemption from income taxation.

The Congressional Budget Office report does acknowledge that the Universities could get around some of this with a kind of shell game by shifting some of the revenue to other areas of the University budget.

But the report did come out with a couple of ideas to get some federal tax dollars out of the big-time programs.


The CBO took one look at the Coca Cola-Taco Bell-AT&T-HEB-Academy-State Farm Insurance-Time Warner Cable-Dodge Jumbotron at UT and decided that taxing corporate sponsors might be a good idea.

The CBO report suggests that the tax code could be changed to include corporate sponsorships and the revenue from merchandise sales for major universities.

The scream you just heard out of Belmont Hall was from the Collegiate Licensing Department, where UT ranks #1 in the nation in sales of team merchandise.

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37 Responses

  1. Ben C. said:

    May 20th, 2009 at 5:45 pm

    Uh-oh. Nothing is sacred, anymore.

  2. Jon said:

    May 20th, 2009 at 5:48 pm

    Does not surprise me, it was only a matter of time no matter who is in office.

  3. Ben C. said:

    May 20th, 2009 at 5:51 pm

    True.

  4. Duane Reade said:

    May 20th, 2009 at 5:54 pm

    Why does everyone pick on Henry James. The man has been called everything from a hapless transsexual to a harlot! Your just picking on him beause he’s got a designer name! Shame on you, Barking Carnival!

  5. Richard Simmons said:

    May 20th, 2009 at 5:55 pm

    I’ve been called alot worse, believe me.

  6. Newy25 said:

    May 20th, 2009 at 6:24 pm

    “Does not surprise me, it was only a matter of time no matter who is in office”

    BS. The socialist Messiah has tasked his troops to search for all taxes anywhere they can find them to help with his massive wealth distribution plan.

  7. Thisisdumb said:

    May 20th, 2009 at 7:24 pm

    Who’s seeing the “profit,” though? A lot of the “profit” goes towards funding non-revenue sports, and depending on the school, a good amount might go back to the university. Certainly a lot of it is invested in facilities and spent on certain salaries, but these revenue sports are generating a lot of beneficial funds for scholarships and non-revenue sport opportunity, aren’t they?

  8. TaylorTRoom said:

    May 21st, 2009 at 4:09 am

    Wouldn’t such a move hinder the big, popular programs (Texas, NU, TAMU, OU), and cripple the smaller and less popular programs (ISU, KSU)?

  9. HornInExile said:

    May 21st, 2009 at 4:31 am

    Another step towards the advent of minor league football.

  10. Pitchin Paul said:

    May 21st, 2009 at 4:52 am

    As James Michener said in his 1976 book “Sports in America” the purpose of universities in the US is to educate the young and entertain the masses. The fact that the IRS would like to get it’s cut of the entertainment business provided by big time football and basketball has been a long time coming. Look out.

  11. President Obama said:

    May 21st, 2009 at 5:33 am

    The entire concept of money and taxes will be gone soon. The federal government will assign goods and services when I am done.

  12. ESPN said:

    May 21st, 2009 at 5:45 am

    They should really hang this over colleges’ heads until they agree to a playoff.

  13. Conservative Christian Right Wing Replublican Straight White American Male said:

    May 21st, 2009 at 6:07 am

    Atta Boy Newy25, you tell ‘em…you and Rush keep telling it just like it is…Keep reminding us how much we miss the GOP in control! Palin in ‘12!!

  14. srr50 said:

    May 21st, 2009 at 6:16 am

    Sen. Charles Grassley R-Iowa, asked the Congressional Budget Office to make this report back in 2007.

    He wanted to see if Universities were getting economic benefits from untaxed assets while also borrowing with tax-exempt debt to improve the “commercial” aspects of their athletic departments.

  15. Liberal Non Christian Left Wing Democrat Queer Black Canadian Female said:

    May 21st, 2009 at 7:24 am

    There’s only like six of me, max.

  16. Spring Branch Horn said:

    May 21st, 2009 at 7:54 am

    No canadians allowed

  17. Conservative Christian Right Wing Replublican Straight White American Male said:

    May 21st, 2009 at 8:52 am

    Ted Haggard hates all six of you…and himself.

  18. Uncle Sam said:

    May 21st, 2009 at 9:33 am

    It don’t matter what side of the aisle my boys and girls sit we are still goin’ to get yer coins. You ain’t seen nothin yet.

  19. MIA said:

    May 21st, 2009 at 10:04 am

    Big time college Sports
    Taxes
    ????
    Profit!

  20. Kafka said:

    May 21st, 2009 at 10:20 am

    California has way more Democrats than Republicans, lots of gays, non-Whites, and women and they still overwhelmingly rejected new taxes in the election this week.

    Newy25 simply pointed out that Obama is more likely to raise taxes than a Republican (say Bush II, for example). Seems like an obviously true point, right?

  21. dasmithjones said:

    May 21st, 2009 at 10:28 am

    Of course it is obvious that this post is govt. related, however, it would be very sad to see this post blossom into a political rant. I am well aware, as most BC bloggers are, that we have the worst government in the world, excepting all others.

  22. Newy25 said:

    May 21st, 2009 at 10:58 am

    Soon enough bashing conservatives will not earn you a pass for nationalizing our entire economy.

  23. Scipio Tex said:

    May 21st, 2009 at 11:15 am

    Let me echo dasmithjones.

    Spare us the political babble. This place is a refuge from that and frankly I find discussing ideas a lot more interesting than petty party tribalism.

  24. Facebook User said:

    May 21st, 2009 at 11:43 am

    GUERILLA WARFARE!!!!!

  25. the Bobs said:

    May 21st, 2009 at 12:04 pm

    I’m betting that even if they did push through something, it would raise almost zero revenue… universities would have just too many tax-free hidey-holes to fit everything into. They’d probably show a huge gross, and a net loss.

    One question – since the gov’t imposed Title IX on these institutions, can they use all women’s/non-revenue sports as tax deductions? That alone would do away with “profits” for all but a very few…

  26. srr50 said:

    May 21st, 2009 at 1:03 pm

    dasmithjones and Scip are right, this was meant to be about how the landscape of collegiate athletics has changed over the past quarter century, and how that relates to their non-profit status.

    I probably should have expanded my original post to include the basic premise as to why this is a subject that the Congressional Budget Office would be asked to look into.

    Colleges and Universities get preferential treatment under the federal tax code because of the perceived benefits from their educational mission.

    Sports were long viewed as an intgral component of higher education, but we have seen the commercialization of that part of the University grow exponentially over the past 30 years.

    In 1981 the University of Oklahoma and the University of Georgia joined in a class action suit on behalf of the College Football Association charging that the NCAA’s football TV contracts with the networks violated the Sherman Antitruct Act by preventing each college and conference from selling their games on the open market. The court agreed and voided the NCAA’s TV contracts.

    Texas was among the first to realize that while the price might be driven down for a while (the market was flooded with games) there was potential for tremendous growth in terms of exposure and the ancillary areas of marketing and sponsorship.

    In 1983, the entire UT athletics budget — for both men and women — topped out at around $10 million.

    The athletics budget for the 2007-08 school year at UT was just under $121 million

    Now obviously the explosion of media exposure wasn’t the only reason for this exponential rise in money, but the growth in all areas of the media has been a powerful tool in this rise in revenue.

    The federal income tax exemption for Universities is limited to income earned from the pursuit of the purpose that makes them eligible for the exemption in the first place. A law enacted in the 1950’s (the Unrelated Business Income Tax — UBIT) specifically covers income produced from Universities from commercial enterprises.

    As an example, in 1986 the IRS ruled that donations to athletic departments made to obtain the right to buy game tickets or preferential seating were for a “substantial benefit” and therefore were not deductable. Congress passed legislation that permitted donors to deduct 80% of those contributions.

    There is no doubt that the large sums generated through advertising and media rights has not only driven the major schools into a hyper competitive mode, it has also caught the attention of those in the government who wonder if the athletic departments have become side businesses for their schools, rather than an extention of the education process.

    To me its just another part of the discussion as to what exactly the term “student-athlete” means today in comparision to the past.

  27. Scipio Tex said:

    May 21st, 2009 at 1:35 pm

    Wow. Great stuff, srr50. I knew very little of that (although I knew tickets were deductable – a fairly awesome scam if there ever was one). You’re a great resource.

  28. srr50 said:

    May 21st, 2009 at 2:02 pm

    Thanks Scip.

    I just find this kind of stuff facinating because my generation bridged this movement to what is essentially “semi-pro” status for major college football.

    I mean UT and college football was a <emBig Deal when I was growing up, but it was essentially a big deal regionally. There was more than enough pressure to go around for the coaches (hell Darrell retired at 52 because he was tired of the bullshit that he had to put up with). But I can’t imagine the pressure Mack Brown deals with today with the financial stakes so much higher.

  29. Shaman robes and makeup said:

    May 21st, 2009 at 3:42 pm

    I hope Sarah Palin abandons Christianity in favour of Wicca. Its a new day and a new way…ay..

  30. Pall Mall lungs said:

    May 21st, 2009 at 3:53 pm

    I find the comments like a breath of fresh air!!

  31. ponderos said:

    May 21st, 2009 at 3:55 pm

    Scipio Tex
    May 21, 2009 at 11:15 am Let me echo dasmithjones.

    Spare us the political babble. This place is a refuge from that and frankly I find discussing ideas a lot more interesting than petty party tribalism.

    Couldn’t agree more.

    btw, srr50 … as you probably know, that lawsuit eventually led to NBC becoming the Notre (Dame) Broadcasting Company. So, there’s another reason to hate us, if you need it. ;)

  32. CrazyJoeDavola66 said:

    May 21st, 2009 at 4:05 pm

    OK, now that the politics are solved, let’s talk about how Kris winning over Adam shows how totally homophobic America is!

  33. Allison said:

    May 21st, 2009 at 4:07 pm

    BC is always causing a “stir”. I think your all hilarious! Whether the humor is about sports, politics or people, its satire at its unrestricted finest. P.S. What’s typed at Barking Carnival STAYS at Barking Carnival.

  34. Ecurbmanchild said:

    May 22nd, 2009 at 5:25 am

    What is next? Rabies shots for the Easter bunny?

  35. J.R.69 said:

    May 22nd, 2009 at 7:39 am

    Re: “OK, now that the politics are solved, let’s talk about how Kris winning over Adam shows how totally homophobic America is!”

    Don’t you worry about Kris losing…..you just watch–he’ll be back on his knees in no time!

  36. J.R.69 said:

    May 22nd, 2009 at 10:31 am

    uh….I meant ADAM losing. ;-(

  37. King of Prussia said:

    May 23rd, 2009 at 10:42 am

    Ive had rabies and its no joking matter.I’m dead serious.You want hell-try rabies w/o immediate care.It can even affect your brain.

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