Brian Kelly and Lincoln Riley deals raise questions about schools’ tax status
Congressional interest in the recent round of mega-contracts for college football coaches increased a notch on Friday, when the chairman of a House Ways and Means subcommittee announced he had written letters to presidents of two schools raising questions about how their athletic programs are “pursuing the educational purposes” for which schools enjoy tax-exempt status.
The letters from Representative Bill Pascrell Jr. (DN.J.) to LSU President William F. Tate IV and University of Southern California President Carol Folt come following the respective hires of Brian Kelly by these schools far from Notre Dame and Lincoln. Riley from Oklahoma.
Kelly’s arrangement with LSU is 10 years, with base compensation set at just over $ 100 million. Because USC is a private school, the terms of Riley’s agreement have not been made public. These two agreements came about shortly after Michigan State signed 10-year, $ 95 million contract to retain Mel Tucker and Penn State agreed to $ 85 million over 10 years to retain James Franklin.
Pascrell chairs the Ways and Means Subcommittee on Oversight. His letters line up with comments Senator Richard Blumenthal (D-Conn.) to USA TODAY Sports Two and a half weeks ago, he said these contracts could end up reigniting congressional interest in helping athletes get better health care coverage and other benefits. Asked how a bill could be crafted and passed in the face of continued resistance, especially from schools, Blumenthal said: “Let me put it this way: onward. … They would love antitrust protection, so maybe it’s a combination of carrots and sticks.
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In letters to the Presidents of LSU and USC, Pascrell wrote: “Without question, most of the activities undertaken by the ‘school’ advance the exempt purposes of the university. However, recent reports on compensation “for football coaches” have raised serious concerns as to whether the university is operating under its tax-exempt status. The letters not only cite the deals with Kelly and Riley, but also the buyouts paid to their predecessors, each of whom were fired this season. Former LSU coach Ed Orgeron will receive just under $ 17 million.
The college sports industry as a whole benefits greatly from the NCAA, schools, conferences, and many bowling alleys set up as non-profit organizations. This protects tax revenue and allows donations to schools, including donations of boosters to athletic programs, to be tax deductible.
In a statement accompanying his announcement of the letters, Pascrell said, in part: “These exorbitant contracts with athletic trainers from schools that enjoy federal tax-exempt status demand answers for taxpayers who help fund these institutions. . My letters today begin the work of researching these answers and our subcommittee will remain focused on this issue and other possible abuses of the tax code by schools with tax-exempt status giving contracts. exorbitant to sports trainers.
In a statement to USA TODAY Sports on Friday afternoon, USC said, “We have just received the letter and look forward to interacting with Rep. Pascrell and other members of Congress to better understand how the income-generating sports such as football directly support and fund virtually all other sports, including women’s sports and Olympic sports, as well as hundreds of sports scholarships each year.
LSU did not provide an immediate comment to the letter.
Changes to federal tax legislation passed in December 2017 included the creation of an excise tax on the wages of top-paid employees of nonprofit organizations. It imposes a 21% levy on compensation over $ 1 million – including bonuses – that goes to one of the five highest paid employees of a nonprofit in a year. It was intended to cover all nonprofits, including colleges and universities, but a gap in its drafting resulted in Treasury Department and IRS regulations that state that some public universities do not have to pay while all private schools do.
When the University of Miami, a private school, fired Manny Diaz and hired Mario Cristobal far from Oregon, taxes related only to the various buy-back payments could increase the cost of these moves to nearly $ 28 million.
Pascrell’s letters ask LSU and USC to answer a set of nearly 30 high-profile questions by Jan. 14 about their athletic programs and finances. Among them are:
►How do men’s football and basketball programs “contribute to the educational mission of the university (other than income generation)?
► “Why should the federal government subsidize university athletics programs and increase coaching salaries and other non-monetary benefits?”
They also ask how much schools have paid as part of the excise tax on the salaries of highly paid employees.