Wednesday, May 18, 2022
Blaire Mikesell (J.D. 2022, Indiana-Maurer), Note, Using the Internal Revenue Code to Limit Coaching Salaries: A Proposal to Bring Amateurism Back into College Football, 97 Ind. L.J. 393 (2022):
Since formal collegiate athletic competitions began in 1852, they have gained popularity and become a mainstay in American culture. This rise in popularity coupled with increased media coverage allowed college athletics, and particularly college football, to grow into a successful business that generates billions of dollars in revenue each year. Colleges and institutions earn this athletic revenue as tax-free income due to their tax-exempt status under the Internal Revenue Code § 501(c)(3) tax-exemption statute. The basic policy underlying this statute is as follows: colleges and universities provide an important benefit to the public by providing education, and in exchange for that provided benefit, the IRS does not tax educationally related income. Currently, income generated by college athletics is educationally related and thus is earned under the tax-exempt status of the university.
Because of the NCAA’s current amateurism requirement, colleges cannot use any of that revenue to pay student-athletes, and instead, most of the income generated by college athletics is paid to college coaches or invested in athletic facilities. This has created an “arms race” in which schools compete for athletic talent by hiring the best coaches and building the nicest athletic facilities. This “arms race” has caused coaching salaries to rise exponentially. The salaries coaches currently make are out of line with salaries paid to any other academic personnel employed by a university. This Note argues that this disparity should be regulated by the Internal Revenue Code. Congress should pass a new section of the Code that requires universities and colleges to limit head coaching salaries to an amount more in line with the salary amounts paid to other, similar university personnel if those schools want to retain their tax-exempt status.