Thursday, March 8, 2018
Richard Schmalbeck (Duke) presents Ending the Sweetheart Deal between Big-Time College Sports and the Tax System at Duke today as part of its Tax Policy Workshop Series hosted by Lawrence Zelenak:
This paper was prepared for a conference of the National Center for Philanthropy and Law, of the NYU Law School in October, 2014. The overall topic was “Tax Issues Affecting Colleges and Universities,” and I was asked to address specifically those issues relating to athletics. This paper considers two specific issues that have in common that they involve college ”revenue” sports, and are plagued by egregiously bad tax rules. In particular, they are: the failure of the IRS to regard any part of the revenue from college sports as unrelated business income, and the choice by Congress to allow taxpayers to deduct 80% of contributions that they make to colleges or their “booster clubs,” even when those contributions entitle the donors to special privileges in purchasing tickets to college athletic events. Together, these defects amount to an implicit tax subsidy of college sports that is neither healthy nor in any way justified.
The second of these defective rules was recently repealed by Congress. This is further explained in the section describing this proposal below. Except for brief updates shown in italics below, the original language of this paper has been preserved.