Big-time tax-free college football is back in full force

September 2, 2023

Top of stands College Station A&M v Texas game 2019_zabdiel-gonzalez-lwxo9B95bck-unsplash

Students settling in at the top of Kyle Field stadium in College Station in advance of a Texas A&M vs. University of Texas-Austin game. The Lone Star State rivalry looks to resume, since Texas will join A&M in the Southeastern Conference (SEC) next year. (Photo by Zabdiel Gonzalez on Unsplash)

Yes, college football technically kicked off last weekend, but today was when most fans got the games they've been waiting months to see.

Like the TCU-Colorado match-up in the yet again rejiggered Big 12 conference. That game was wild!

You know Big 12 football is back when there’s no defense ‼️ pic.twitter.com/6pNkHWaNdb

— s e t h (@futurafreesky) September 2, 2023

Big time college games and money: The Horned Frogs' and Buffaloes' free-wheeling offenses underscored the excitement of college sports, especially National Collegiate Athletic Association (NCAA) Division I football and basketball games.

Those two programs are also big money makers, helped in part by their tax-exempt status.

"The money at stake is staggering," wrote Scott Hodge, President Emeritus and Senior Policy Advisor at the Tax Foundation, in a recent post at the tax policy group's blog.

Hodge points to the post's accompanying table, which cites 2021 Internal Revenue Service tax returns showing that the "Power Five" athletic conferences — the Big 12, Big 10, Atlantic Coast Conference (ACC), Pac-12, and Southeastern Conference (SEC) — reported nearly $3.3 billion in untaxed "program service revenue."

That, writes Hodge, is a catch-all category that includes income from broadcast rights, ticket sales, bowl games, and merchandise licensing.

In addition, he notes that although the conferences are 501(c)(3) charitable organizations, just 1 percent of their overall revenues comes from donations or grants.

"Of the five conferences, only the Pac-12 reported any taxable unrelated business income," according to Hodge. Unrelated business income tax, or UBIT in the acronym heavy tax world, applies to money that is unrelated to the main mission of the organization.

Expanded tax-free curricula: So sports are part of universities' main mission? It would seem so.

And that designation, notes Hodge, means that "99 percent of the $3.3 billion in total income generated by the [athletic] conferences is from sources that would be taxable if they were considered commercial enterprises."

Hodge's Tax Foundation post The Big Business of Tax-Free College Sports has more on college athletic programs' money, the seemingly inequitable tax treatment of it, and suggestions for changes.

Since the post is this weekend's Saturday Shout Out item, I'll let you read it. After your team's game is over, of course.

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