In recent years, the debate over what athletes can or should receive has mostly stifled legislative attention in big-time university sports. But Rep. Bill Pascrell (D-N. J. Finding new approaches to tax professional sports was a different monetary interest for the ranking member of the House Ways and Means Subcommittee on Oversight who passed away last week at 87.
” Americans really care about these increased wages to college coaches that our federal tax code is funding,” Pascrell told Sportico in a statement late last year that was not originally reported. ” Universities’ tax-exempt position is a respected foundation of our cherished higher education system, but it is not a blank test to dole out massive training contracts with beautiful benefits,” the statement reads.

Pascrell added that if Democrats retook the House of Representatives this coming election, one of his “priorities” as head of the committee would be to “explore” income reforms that immediately addressed university training payment. Among those included imposing the unrelated business income tax ( UBIT ) on some large-scale athletic departments and ensuring that state universities covered the millionaire non-profit officials ‘ existing excise tax.
The vociferous 14-term congressman’s death left behind a long legislative legacy and his unfulfilled desire to stop college sports ‘ excesses through the House of Representatives ‘ oldest tax-writing body. A death for Pascrell is set for Tuesday in Patterson, N. J.
After signing lavish employment contracts with fresh head football coaches Brian Kelly and Lincoln Riley, Pascrell, who was then chair of the monitoring committees, sent letters of inquiry to the president of LSU and USC in December 2021, asking them to explain why their athletic departments are tax-exempt.
It’s not clear how such beneficial compensation agreements advance LSU’s total educational mission and how they benefit your students as a whole, Pascrell wrote. He demanded that colleges provide details about the millionaires ‘ sports employees ‘ compensation and whether their salaries were being subject to the excise duty under Area 4960 of the Internal Revenue Code.
Within a few months, Pascrell expanded his” school training contract probe” to contain Stanford, Rutgers, Michigan State, Miami, Duke, Villanova and Auburn. He claimed in a statement from his yearly investigation that he had” major concerns about whether these institutions are operating in a manner that is in line with, and in the direction of, their tax-exempt purpose.”
But, Pascrell’s opportunity to take the next step in addressing this issue was upended by the 2022 election, which turned strength of the House over to Republicans, who have held it since.
In the time, the IRS has set its sights on a newer entrance to the college sports earth: NIL cooperatives.

Last summer, after dozens of NIL collectives had applied for 501 ( c ) ( 3 ) status—a number of which had been approved—the IRS Office of Chief Counsel issued a memo concluding that most should n’t qualify because their substantial purpose was to serve college athletes ‘ “private interests”. Though the note was no precedent-setting, the IRS has immediately denied applications on account of the similar logic.
Social users have complained that they are being subjected to an unfair double common in comparison to the rest of the professional organization in light of this.
Russell White, president of The Collective Association trade group, opined that” this also advances the educational interest of the schools.” ” If you get better athletes, would n’t this also fall under that same thing? The difference is that athletes in our situation are also contributing to the community with this money.
Congress and the IRS have consistently supported the notion that athletics activities are” substantially related to]a university’s ] educational function” since the introduction of the unrelated business income tax in 1950.
In 1967, the IRS affirmed this assertion by deciding that a specific non-profit organization that sought to pay for players ‘ and coaches ‘ training tables was exempt from federal income tax. The IRS ruled in 1980 that this consideration even included the sale of college football broadcasting rights. Six years later, Congress approved to amend the tax code to allow deductions for donations made to college sports event attendees thanks to Baton Rouge, Louisiana’s lobbyist and LSU Tigers fan Ted Jones ‘ efforts.
A decade later, in 1991, the 10th Circuit Court of Appeals reversed a lower court’s ruling that the NCAA should have to pay$ 10, 395.14 unrelated business income tax from$ 55, 926.71 in advertisement sales for the 1982 men’s basketball tournament programs. Following the IRS’s unsuccessful petition to a federal tax court for redetermination, the NCAA sued the IRS after the service sent it a notice of deficiency.
The IRS has only made a few flimsy tugs at the reins as college sports ‘ revenues have soared into the billions in the years since. In 2008, the agency commenced a five-year project examining tax-exempt universities ‘ practices involving endowments, executive compensation and unrelated business activities. According to the project’s final report, schools frequently reported unrelated business taxable income ( UBTI), frequently because they incorrectly classified sports-related activities as exempt.
The Fiesta Bowl, Sugar Bowl, and Orange Bowl were sued by Playoff PAC, a political action committee that promoted a college football playoff, in 2010, alleging that their leaders, among other things, were entitled to receive unreasonable compensation and benefits. Playoff PAC’s crusade was joined by four congressmen, including Jason Chaffetz of Utah–a former kicker for BYU–who sent a letter to the IRS commissioner calling for” thorough examination” of the bowl organizations ‘ financial practices.
Following a scandal in which it was discovered that The Fiesta Bowl had paid tens of thousands of dollars to employees who made political contributions and lavished Junker and his family with an extravagant birthday celebration, the company later fired its CEO, John Junker.
In the ensuing years, the IRS increased its scrutiny of bowl organizations, auditing the Alamo, Gator and ( now-defunct ) Fight Hunger bowls in 2014, while largely ignoring the prime movers of college sports money —schools, conferences and the NCAA.
The 2017 Tax Act, signed into law by President Donald Trump, appeared at first to be a potential game-changer. It repealed the charitable deduction for athletic ticket purchases and imposed a 21 % tax on “excessive compensation” above$ 1 million of tax-exempt 501 ( c ) ( 3 ) organizations, including universities. However, the excise tax provision was written in such a way that it excluded state-based universities. Experts, including tax law professor Ellen Aprill, think this was a hasty drafting error.
Due to what seems to have been a mistake, Aprill said,” I hate to use the cliché of the even-playing field,” but it is unsettling to see that public universities are subject to a different set of rules than private ones.
Pascrell intended to make a change for it. It’s unclear if any other members will pick up this ball and run with it now that he’s gone.
According to John Colombo, a professor of law emeritus at the University of Illinois who sub-specializes in the relationship between the IRS and college sports,” I ca n’t spin any kind of scenario in which the IRS internally decides it is a good idea to announce tomorrow that all football athletic programs are subject to UBIT.”
The salient difference between athletic departments and NIL collectives, argues Colombo, is seven decades of precedence.
According to Philip Hackney, a law professor at Pitt who previously worked in the Office of the Chief Counsel of the IRS, the post-NIL era has given Congress reason to reevaluate its position on the charitable purpose of Power 4 football.
That being said, the history of college athletics, Congress, and tax have always been that we give those benefits to college athletics and keep expanding them, according to Hackney.
Colombo contends that the negative effects that Pascrell wanted to address have been offset by college sports have grown too big and wealthy for taxation.
” I do believe there would be one behavioral change that would result from taxing big-time college athletics: non-revenue sports programs would get cut”, said Colombo. ” Ohio State’s football team would soldier on, and Ryan Day would n’t get paid any less, but would they still have a tennis team”?
Colombo suggests that Congress will need to establish 501 ( c ) ( 3 ) status for all universities in order to use its tax-writing authority to change the way higher education remunerates football coaches.
Pass a law requiring universities to pay coaches more than$ 500, 000 in taxes or receive federal funding for education or research, according to Colombo. ” Do that, and I can assure you that none of the football coaches will be earning more than$ 500,000.
( The spelling of Russell White’s name has been updated in the 12th paragraph of this story. )