Paul L. Caron

Friday, September 24, 2010

Anti-BCS Group Files IRS Complaint Challenging Tax-Exempt Status of Bowl Games

BCS Logo Playoff PAC has filed this complaint with the IRS, alleging that the three organizations behind the Fiesta, Orange, and Sugar Bowls have abused their tax-exempt status by using charitable contributions to (i) pay excessive compensation to their executives, (ii) make undisclosed lobbyist contributions, (iii) intervene in political campaigns, and (iv) provide substantial private benefit to insiders. The complaint is based on this 29-page report, Public Dollars Serving Private Interests: Tax Irregularities of Bowl Championship Series Organizations. (Hat Tip: David Herzig.)

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Trust me on the Alabama results. Also, as a result of the team's success, the university increased its stadium capacity to 101,000, and every game is sold out. I'd love to see the "independent studies" that reach a different conclusion.

I sense academic envy over salaries in the athletic department.

Posted by: Woody | Sep 26, 2010 8:18:59 AM

Two quick comments:

1. I'm not sure I'd trust the University of Alabama as to how much money it's brought in as a result of its football team. I think there are independent studies of this issue that reach a different conclusion.

2. It's meaningless to talk of a "free market" when universities benefit from state aid and a federal tax exemption. If they want a free market, why not let them pay tax like everyone else?

Posted by: mike livingston | Sep 25, 2010 8:02:37 PM

Well, in defense of the traditional sports programs, a lot of money is funneled by supporters into the universities that have good programs and because of their success. I used to audit a major university in the SEC with a great football program and I have talked to people in the know about the dollars it raises; the university (and the local businesses) benefits tremendously from the money donated by alumni and boosters who are pleased with the teams and from the money spent by the fans. What surprised me is that golf and tennis, the "country club sports," also bring in a lot of alumni donations. But, what I don't support is turning amateur athletes into undeclared pros at the sacrifice of their educations.

Regarding compensation, the University of Alabama has brought in a lot more money as a result of and after paying Nick Saban $4 million a year. The athletic director made his job more secure with that deal. I suspect that some law professors may be envious about this and deem that their services are more valuable, but the marketplace says otherwise.

Posted by: Woody | Sep 24, 2010 6:47:20 PM

I don't think the issue is so much whether the BCS system is good or bad as whether the tax exemption for university sports activities is a good use of public money. The argument is always that the money is plowed back into education. From my perspective, it looks a lot more like it's plowed back into football.

Posted by: mike livingston | Sep 24, 2010 12:40:44 PM

I never have like the BCS system and how it chooses its matchups, especially that of the national championship game, and my view has nothing to do with its tax status.

The BCS bowl series and national championship game were put in simply as a big revenue source for colleges and their conferences, just like the ever growing list of other bowl games that has now gotten so large that it is going to have to include teams with losing records just to fill the slots.

But, student-athletes have to go to classes sometimes, and forcing them to play even more games in a playoff system to generate more bucks for universities isn't reasonable. The group filing the complaint isn't any more noble in that regard.

But, college presidents get judged on how much money they raise rather than how well they serve the college students. One doesn't necessarily correlate with the other. Pity.

I'd prefer to go back to having AP journalists and UPI coaches select their winners and let people argue about it. But, since money is involved, that will never happen.

Posted by: Woody | Sep 24, 2010 7:58:05 AM

This plainly has merit, and an accounting for the abuse of universities' tax exemption is long overdue. But political pressure makes it likely that football will win again.

Posted by: mike livingston | Sep 24, 2010 6:47:58 AM