Are College Sports Doomed to Pay Taxes Now That They’ll Pay Players?

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The fact that the NCAA is a nonprofit entity that brought in $9 billion last year is fairly well known, and most people also know that nonprofits are, by definition, tax exempt. As college athletics continue to move toward paying their players to pay (a good move, in our view), schools’ and universities’ abilities to avoid paying taxes gets slipperier and slipperier, especially since some of these sports programs are so lucrative.

In an op-ed for The Boston Globe, former United States Senator John E. Sununu pointed out that “[w]hile educational institutions provide unquestionable value to students and society, nowhere is it written that nonprofit status conveys a license to engage in unlimited commercial activity tax-free.” His larger point was that the most massive Division I programs belong to schools that shouldn’t be allowed to bring in hundreds of millions of dollars in revenue from sports programs claiming nonprofit status, especially if and when some of those players are being paid.

College football and basketball, foremost among academic athletics, exist largely as farm systems for their professional counterparts, and you’ve probably seen the infographic about the highest paid college employees, and what most of them do (Hint: most of them are football coaches, some of them are basketball coaches, and a few are deans and college presidents).

While the NCAA has not commented on this situation explicitly, we can infer that the association is not down with this program, since it seems to want to avoid paying anyone for anything. Consider how the University of Texas athletic director, Steve Patterson, vehemently defended the idea that star players (he was asked about Vince Young and Johnny Manziel) were not responsible for bringing in a massive amount of revenue for the schools that they played for.