That’ll show ’em.

Remember when Congress passed that bill sticking it to schools and other non-profits paying big salaries to certain folks (like coaches and athletic directors)?  How’s that working out?

However, while many athletics departments are now facing a substantial new expense, there also are schools that employ some of college sports’ highest-paid coaches and will not have to pay, according to newly issued guidance from the Treasury Department and the Internal Revenue Service and the schools’ assertions of their federal tax-exempt status through documents posted on their websites and statements to USA TODAY Sports from school spokespeople.

The excise-tax provision was supposed to cover all non-profit organizations, imposing a 21% levy on compensation above $1 million — including bonuses — that goes to any of their five highest-paid employees in a year.

The guidance means that the provision has created three groups of schools: Those that clearly will have to pay the tax; those that can claim they won’t have to pay; and those that currently have to pay, but might have the ability change their status.

 ►Private schools and public schools carrying one type of federal tax-exempt status clearly will have to pay. For example, Duke faces a significant tab based just on men’s basketball coach Mike Krzyzewski’s pay, who has made more than $5 million for years, according to the school’s federal tax filings.

 ►Other public schools — including Texas, Texas A&M, Clemson, Oregon, Minnesota and Houston — can claim they will not have to pay because they assert that they are government units that have federal tax immunity without holding any other tax-exempt status. Whether they ultimately will take this position remains to be seen. If Texas A&M does, it would save close to $1.4 million related just to the compensation of football coach Jimbo Fisher, whose basic annual pay is $7.5 million.

 ►Public schools that have another type of federal tax-exempt status are currently subject to the excise tax, but the new guidance also says these schools may voluntarily relinquish that status, although doing so might still leave them subject to the excise tax. Alabama, Michigan, UCLA and at least a dozen other public schools in Power Five conferences are in this group, according to documents posted on the schools’ websites. Alabama football coach Nick Saban’s $8.3 million in basic compensation, plus $875,000 in bonuses, for this season means the school faces more than $1.7 million in excise tax for him alone.

Hey, that sounds fair.

“You’ve got a major competitive imbalance here,” said Roger Denny, an executive compensation attorney with the law firm Spence Fane LLP who assists USA TODAY Sports with its annual compilation and analyses of college coaches’ compensation. “You have schools from the same states and the same conferences that are going after the same recruits, and you have an artificial restraint that affects hiring decisions at the highest level of those programs. …

“And there’s a trickle-down effect to that: You have a difference of $500,000 here, $1 million there (in the cost of paying a coach and the excise tax) and that can be the difference in being able to go after the best coordinator in the game or hiring a football staff full of analysts as some schools have done, or installing a camera system in your gym to help the basketball teams with video study, or putting WiFi in your stadium.”

Aw, don’t worry.  The guy who screwed the draft up in the first place thinks he’s on the mother.

But the new Treasury/IRS guidance doesn’t take into account Congressional intent. It’s based on what the law actually says.

“The positions reflected in this notice constitute a good faith, reasonable interpretation of the statute,” the document says.

Former House Ways and Mean Committee chair Kevin Brady, R-Tex.. has circulated a draft of a bill that would make “technical and clerical corrections” to the tax-law changes, including one designed to make the excise tax applicable to all public colleges and universities.

That “former” status might be something of a road block, Congressman.  But you do you while TAMU keeps its money.


Filed under It's Just Bidness, Political Wankery

13 responses to “That’ll show ’em.

  1. Former Fan

    Issues always crop up when a bill is rushed. I wish the IRS, courts, etc. would simply rule on what was actually written and leave “intent” out of it. If I screw up a contract, intent doesn’t carry a hill of beans weight in a court room.

    If government would actually enforce the anti-trust legislation on the books, I doubt the salaries to coaches would be as high as they are now anyway. IMO, it would have been a better route to take than trying to fix it with tax law. On the other hand, the pushback from the public might have been big.


  2. Doug

    Good job, Rep. Brady. After all, that one-car funeral procession isn’t gonna fuck itself up.


  3. Mayor

    I support this. That said, I haven’t researched it (obviously) but off the top of my head I don’t think the federal government constitutionally can tax a state or a unit of a state government.


    • Derek

      Heard of the Supremacy Clause?


      • Are you implying the Mayor is wrong in his interpretation? I’m pretty sure he is right.


        • Mayor

          Municipal bonds is an example of the federal government not being able to tax another government. As I said, I haven’t researched this but my recollection is state government can’t be taxed by the feds. Georgia state government had a budget of several billion this year and I don’t think Georgia had to pay the feds anything.


  4. Russ.

    Alabama at a competitive disadvantage? This aggression will not stand, man!


  5. ChiliDawg

    “Tax reform.”



  6. JasonC

    Dayam our guv’ment doing a great job. Wish they could enable more rich MFs!


  7. 69Dawg

    I think it boils down to the entity that is doing the paying. Most of these Athlete Associations are not really part of the university. If they would be taxable except for filing for a section 501 status then they are screwed. If they are just another part of a state government then I can see the problem. This new law is not going to harm the schools as much as the taking away of the deductibilty of the Hartman Fund Donors. Now we are talking some big problems with all those “Projects”.


    • Mayor

      I think you may be right 69. It is the non-state agency college football AA that has been faking it as a non-profit That now has to pay taxes because of high salaries not the school itself.


  8. ASEF

    Congress should pass a bill mandating a 16 team football playoff every year the federal budget runs a surplus. Any year with a deficit defaults to Alabama versus Clemson.

    Problem solved.