Not happy

I’ve taken it as a given that the NCAA and its member schools lobby Congress for an antitrust exemption and will necessarily ratchet up the effort if the efforts of Kessler and others result in an unfavorable court ruling regarding amateurism.  While my opinion on that hasn’t changed, I’m starting to question how successful that effort will be.  It’s one thing to assume that Congress favors the wealthy and powerful; it’s another to ignore what seem to be several trends that make the NCAA’s cause a harder sell than it used to be(h/t)

Television revenues and corporate sponsorship are not taxed

In the words of Mike McIntire who writes extensively on the subject for The New York Times, “…college sports remain largely tax exempt, the beneficiary of a public subsidy that is increasingly difficult to defend.” This will only be more “difficult to defend” in the future.

Scholarships not being taxed

College sports scholarships are easily worth six figures and more thanks to the “extraordinary benefits.” These are not taxed, which could be around $40,000.00 if the IRS and state authorities came in heavy. Expect that to happen if players are paid or allowed to profit from images or sponsorships. With the average college student in the United States graduating nearly $40,000.00 in debt with much of that going to fees to support athletics, it is not difficult to imagine support for scholarship athletes to be taxed, especially if they start receiving salaries.

There are still plenty of tax breaks for ticket purchases, facilities construction, and related areas. These are always targets in tax reforms. It was that was last year and it will be in the future.

Salaries for administrators in non-profits

As little support there would be for athletic scholarships to not be taxed, there is even less for administrators at non-profits such as colleges and conferences having seven and eight-figure compensation packages. In a country that has seen massive change at the national level in elections in 2006, 2008, 2010, 2014, and 2016, do not expect much support to protect massive pay for higher-ups at non-profits.

Student loans to pay for athletic fees

At power five schools, more than $2 million in student fees goes to the athletics department, well over $100 million annually. The average college student graduates nearly $40,000.00 in debt. Obviously, much of that money borrowed that is subsidized by the American taxpayer goes to support college sports. Since attendance at colleges sporting events is falling, its tough to argue that every student is a fan. But all pay these fees at the schools that charge for it, and the average one graduates nearly $40,000.00 in debt.

For all the faux hand wringing over student-athletes suddenly faced with tax consequences over their compensation, it’s worth remembering that there are much bigger pots of money out there that can generate public outrage.  Throw in current public concerns about the cost of college and it gets harder to see how schools can waltz into a Congressional hearing and expect tons of sympathy from legislators who will have plenty of targets over which to grandstand.  That, in turn, begs the question of what sort of price the schools and the NCAA are willing to pay for the exemption.  That’s not to say it won’t be a price that ultimately won’t be paid.  You get the feeling it’ll be more expensive than Jim Delany and his buddies probably thought it would be at one time, though.

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19 Comments

Filed under Political Wankery, The NCAA

19 responses to “Not happy

  1. 81Dog

    Scholarships are a more than 6 figure tax free benefit? Hmmm.

    No sympathy for the admins or the ridiculous amount of money spent on palatial facilities. All the tax free revenue has to go someplace. Let the TV money be taxable. TV sports aren’t exactly an English class, and I’m sure all the good citizens running colleges want their rich athletic departments to pay their fair share. At some point, they’ve made enough money.

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    • The one thing that article made me wonder about was taxing scholarships. Everybody speculates on what happens if student-athletes start getting paid, but what happens if Congress were to decide to tax athletic scholarships now?

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      • Hogbody Spradlin

        Taxing scholarships is a very slippery slope. If athletic scholarships, why not academic scholarships, and so on? Mind you that doesn’t mean they’ll think it through, but . . .

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      • TimberRidgeDawg

        Increase the value of the scholarship to include payment of taxes? Otherwise, the student athlete or parent is going to get a big bill in April for money they probably don’t have. That Stanford or Vandy full ride gets a lot more expensive. Out of state tuition vs instate at public universities comes into play.

        Might as well figure on adding staff to assist student athletes in filing and probably some tax attorneys to sort the mess out.

        A lot of these kids come from low income families. It will open up a whole can of worms for them.

        If you tax athletic scholarships, does that roll over on academic scholarships? A free ride is a free ride, right? Only difference is that there is the potentially taxable obscene amount of money pouring into athletic departments. Do you tax Hope Scholarship recipients under the new guidelines?

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        • IMHO, if you tax Hope/Zell recipients, you have to tax every government benefit from Social Security to welfare.

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          • Dawg1

            Social Security is taxable over certain incomes, Unemployment benefits are taxable, etc. I am afraid that ship is well out to sea!

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            • Dawg1

              P.S. A student loan a relative had was taxed as the firm that lent it went bankrupt and it was “forgiven”. Very close to a scholarship being taxed ultimately.

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      • 81Dog

        There is a lot of low hanging fruit/revenue that can be taxed before what would seem to be an unpopular decision (at the moment) to tax athletic scholarships, despite what the article suggests is currently a tax free benefit with a large value. This is where the decisions of the last 40 years or so could haunt college presidents and Ads, it seems to me: you treat your fan base like you’re running a business, and maximizing revenue? You soak up TV money like you’re the NFL, which is a business? You ding students for athletic fees that keep going up as the cost of college climbs faster than inflation? Alrighty then, you run it like a profit making entity, let’s tax you like one.

        Voters, and legislators, probably have sympathy for college athletes. But college presidents and ADs? Maybe not so much. Hard to imagine much sympathy for them if suddenly they get asked to pay their fair share of the take to Uncle Sam.

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      • Something I have wondered about for a bit of time. The ramifications of taxing scholarships? I hate to use the term, but a slippery slope indeed. It warms my heart to know though, that between the NCAA and Congress, the decision will be rational and well thought out. In case one needs a meter, that is high on the sarcasm scale.

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  2. paul

    I don’t think I knew television revenue and corporate sponsorships are not taxed. Congress could start taxing those two without pissing off anybody but the athletic departments. Seems like a no brainer. Schools like to claim scholarships are worth FAR more than they actually cost an institution. Most of the costs they claim as benefits are sunk costs for the schools. It costs them VERY little to keep an athlete on scholarship. At places like Georgia the revenue producing sports create a cash geyser. It literally can’t be spent fast enough. Schools are businesses. They wouldn’t offer scholarships if they weren’t making money off of them.

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  3. The other Doug

    Here are the cost of attendance numbers from UGA’s financial aid office:
    in state: $26,688
    out of state: $45,762

    Think about how the Hope Scholarship fits in here too. Big pot of tax revenue waiting to be tapped.

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  4. Russ

    As a parent with a child looking at colleges, it will piss me off royally if I have to pay “athletic fees” at a school that’s raking in millions in TV revenue, and paying coaches millions. Luckily, the schools under currently consideration won’t have that problem, but still it’s wrong.

    I agree with paul, tax the TV revenue and I’d throw in the athletic “foundations” out there as well.

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  5. The other Doug

    There was something in Trump’s original tax plan that changed how Grad Students would be taxed. My understanding was that their tuition wavers would be taxed. Somewhere in the negotiations this was dropped, but obviously the people in Washington know about scholarships being an untaxed benefit.

    Here is a Q&A with a Grad Student at the time: https://www.colorado.edu/today/2017/11/29/campus-qa-what-tax-reform-would-mean-graduate-students

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  6. DawgPhan

    Still amazed that college football landed squarely in the crosshairs of republican tax policy.

    Didnt UGA just pay $2million in new taxes on salaries?

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  7. As others have posted, I did not know what was taxed and what was not. Good lord, talk about cash cows. Some damn good lobbyists.
    As an aside, when I went off to further schooling in WA State, I was given in state tuition as part of my funding(teaching fellowship). And to boot, to show how old I am, tuition was 88 bucks per quarter.
    Do out of state athletes get the same break on scholarships?

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