Cantwell Asks Key Policy Questions About the Tax-Exempt Status of College Athletics Revenue

WASHINGTON, D.C. –Today, U.S. Senator Maria Cantwell (D-WA), senior member of the Senate Finance Committee and ranking member of the Committee on Commerce, Science, and Transportation sent aletterto Thomas A. Barthold, Chief of Staff of the U.S. Congress Joint Committee on Taxation, requesting the committee’s assistance in analyzing the implications of maintaining the tax-exempt status of college athletic revenue.
“Given the evolving market dynamics of college sports coupled with changes in the legal framework affecting college athletes, legitimate questions have been raised about whether it is time to rethink the tax-exempt regime under which college sports currently operates,”Sen. Cantwell wrote.
In theletter, Sen. Cantwell also asked committee staff to determine whether Congress should consider measures"to address excessive compensation paid to coaches or other athletic department personnel who are fired (i.e. buy outs)."Just this season, combined buyouts for fired Division 1 football coaches have alreadyapproached $200 million.
Sen. Cantwell has been deeply involved in legislative efforts regarding college sports. In September, Sen. Cantwell joined Sen. Cory Booker (D-NJ) and Richard Blumenthal (D-CT) inintroducingthe Student Athlete Fairness and Enforcement (SAFE) Act to codify athletes’ rights and protections in law, expand revenue for all schools, support women’s and Olympic sports, and bring much-needed stability to the college sports system.
In late October, Sen. Cantwelljoineda virtual press conference with former college and professional athletes to defend college athletes’ rights against efforts to strip away protectionsin the 9-0 Supreme CourtAlston rulingand theGrant House vs. NCAA settlement.
Also in September, she wrote to the presidents of the Big Ten schools warning of the dangers ofselling university assets to private equity firms. That same month Sen. Cantwellreleased a reportshowing how skyrocketing media rights payments have exacerbated a massive financial gap between traditional power conferences, especially the new Power 2—the SEC and Big Ten—and everyone else. In August, shewrote to the presidents and chancellors of more than 350 Division I universities and their governing bodies, warning that the SCORE Act - currently before the House of Representatives - would further cement current inequities in college athletics and consolidate power with the SEC and Big Ten. On July 15, Sen. Cantwell and Rep. Michael Baumgartner (R, WA-05)sent a letter strongly opposing the bill.
The full text of the letter is below andHERE.
Thomas A. Barthold, Chief of Staff Joint Committee on Taxation
502 Ford House Office Building Washington, DC 20515
Dear Mr. Barthold,
I write to request the assistance of the Joint Committee on Taxation staff as I work to develop legislative proposals that address the tax implications associated with the future of college athletics.
The legal and financial landscape of college sports has changed substantially over the years and it now is a multi-billion dollar industry1whose growth and potential growth have attracted the attention of private equity and venture capital investors.2
Unlike professional sports, however, the NCAA and athletic conferences operate as tax-exempt organizations because they are under the umbrella of the tax-exempt educational institutions with whom they are affiliated.
Given the evolving market dynamics of college sports coupled with changes in the legal framework affecting college athletes, legitimate questions have been raised about whether it is time to rethink the tax-exempt regime under which college sports currently operates.3
In order to assist me and other Members of the Senate Committee on Finance, I respectfully request the Joint Committee on Taxation staff prepare background on the present law governing the taxation of colleges and universities including the application of the existing UBIT regime on the activities of these institutions.
In addition, please include a discussion of the policy considerations for Congress going forward in light of the changing financial and economic landscape of college athletics.
As part of this analysis, please include the following key issues:
It is important that the Congress be proactive in determining the tax rules that should apply as stakeholders adapt to these changing market dynamics, especially given that so much of this activity currently is tax advantaged.
Thank you for your timely consideration of this request. If you have questions, please feel free to contact Lauren Bazel (lauren_bazel@cantwell.senate,gov) on my personal staff or Shannon Smith (Shannon_smith@commerce.senate.gov) with the Senate Commerce Committee staff.
Sincerely,