In reply to: The guys who go to the NFL take a step down in posted by Raoul
I think we often get distracted by the big business of sports at the Power 5 schools. Even there, its usually only 2 sometimes 3 sports at even those schools. We often forget that the overwhelming majority of student-athletes in the US are actually student-athletes. I would rather if there are taxation laws to target the big business aspect, it actually targets them and not the 95% of other sports at other schools that often lose money but enhance the student experience for the athletes that participate in them.
Most of these sports programs at lower level schools rely on fundraising just to keep the sport sustainable. At some institutions, coaches are required to fundraise to help cover the deficit the sport decides. I used to play in an annual softball tournament that a friend of a friend ran to help fund the D-3 basketball team he coached. Taxing all sports donations would put a substantial dent in their ability to do so.
I was actually surprised to learn that TV revenue is NOT currently considered UBIT (See linked article from the Tax Foundation). In 2021 , if you combined Power 5 schools and the NCAA, there was approx. $4.4B in untaxed revenue. Apparently the reasoning is that is considered "reproduction of an activity critical to the school's mission." That's weak sauce in my opinion.
The problem with schools and donations is not there's too many of them, its that they go to too few schools. I'd say about 90% donation gift money goes to the top 10% of schools that....quite frankly...don't need them. A school like Harvard can sneeze and get multi-million dollar donations to help their cold. The schools that truly need them, don't get them because its just not as impressive to your friends if you gave $100M to Wilkes University than if you gave it to Stanford.
I struggle with only including the TV revenue because that would not impact donations. I always think about the fact the coaching jobs are endowed. That is great for the Univerity but is an edowment for the ND football coach really what we want our tax code to encourage?
Items like apparel and souvenir sales are already considered UBI. You can consider all revenue directly related to sports as UBI for all I care.
And yes, I'm totally fine with endowing coaches salaries. This indirectly benefits students as well. If a coach's salary is not paid through endowed funds, it is paid through operating funds...which for most schools is tuition. I'd rather have as much tuition dollars as possible going towards programming.
Also, we're again focusing on the top 1% without considering the impact on the 99%. While ND having an endowed coaches position a luxury, at another school, it could be the difference between cutting or keeping a sport.
Consider also that if a football coaches salary is fully or partially paid for through endowed funds, that expense would not be allowed to reduce your UBIT base. Therefore, by doing it through UBIT, you are indirectly taxing the donation. However, by taxing the donation directly, you are punishing all the schools that lose money on sports just to get at the 1%.
If your argument is that schools shouldn't have any donor funded extracurricular activities, its a whole other discussion.
by funding many other things, the idea of student athletes is getting further and further away. And the juxtaposition of the financial troubles of so many schools in terms of basic academics to the significant money flowing into sports is jarring. UConn pays Hurley $3.5M (and he's a bargain!) and yet UConn has to cut $70M from its 2024-2025 budget in academics. Something is not working here. (And I say this as someone who views many universities as bloated as heck).
Maybe the schools should own an interest in a pro sports franchise (contributing their brand names and history as intellectual capital) and offer free education to players - assuming they want it or maybe after their done with sports career - and use that money to fund the real mission of the university (appropriately right-sized relative to today's cost structure). Almost like a sub-IPO of a for profit entity by a non-profit. Give alums preferred access to buying in on the IPO with a lock-up! Maybe the school also gets an annual license fee for use of brands, etc.