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tax exempt status

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NCAA's tax-exempt status questioned

Updated 10/5/2006 2:40 PM ET E-mail | Save | Print | Reprints & Permissions | Subscribe to stories like this  

 POLITICAL GRANDSTANDING?

"There's not a snowball's chance in hell that something like (revoking the NCAA's exempt status) would pass Congress. This is just congressmen seeing an opportunity to make a splash and get their name in the newspaper."

-- Gary Roberts, director of Tulane's sports law program  

By Steve Wieberg, USA TODAY

Congress is putting the NCAA on the defensive, asking the association  which generates more than half a billion dollars annually  to justify its tax-exempt status.

In a sharply worded letter to NCAA President Myles Brand, the chairman of the House Ways and Means Committee points to the lucrative television contract, coaches' escalating salaries and schools' "state-of-the-art" facilities, and questions college athletics' connection to higher education.

TRANSCRIPT: Read Rep. Bill Thomas' letter to NCAA President Miles Brand

"Most of the activities undertaken by educational organizations clearly further their (tax) exempt purpose," Rep. Bill Thomas, R-Calif., writes. "The exempt purpose of intercollegiate athletics, however, is less apparent, particularly in the context of major college football and men's basketball programs." He asks for a response from the NCAA by Oct. 30.

The request escalates what has been a low-key congressional review of the association's tax status in conjunction with a two-year look at not-for-profits in general. Thomas' committee has talked informally with former Michigan president James Duderstadt and Auburn sociology professor and academic fraud whistle-blower Jim Gundlach, among others.

Spokesman Erik Christianson says the NCAA disputes the "underlying assertion that having not-for-profit status is linked to the amount of revenue that an organization generates."

The NCAA's projected 2006-07 budget anticipates nearly $563 million in revenue, including $503 million from its TV contract with CBS. Some $332 million is distributed to member leagues and schools, about 60% of that through student-athlete welfare, academic-enhancement and other funds.

The remainder is paid out according to schools' success in the NCAA men's basketball tournament, another point of contention in Thomas' letter.

Gary Roberts, director of Tulane's sports law program, dismisses the inquiry as grandstanding. "There's not a snowball's chance in hell that something like (revoking the NCAA's exempt status) would pass Congress. This is just congressmen seeing an opportunity to make a splash and get their name in the newspaper," he says.

A change in the tax-exempt status of the NCAA and its member schools would send shock waves through the college sports economy, says Smith College economist Andrew Zimbalist. With a smaller tax break or none at all, boosters probably would reduce their giving. Schools, more strapped for cash than ever, would have to be stingier in paying coaches. Says Zimbalist, "College sports has grown into a standard commercial enterprise  with only a tip of the hat to the academic environment they exist in."