NCAA's tax-exempt status questioned

[lordscarlet]

WASHINGTON (AP) -- An influential member of Congress is questioning whether the NCAA, with its multimillion-dollar television contracts and million-dollar coaches, deserves its tax-exempt status.

"From the standpoint of a federal taxpayer, why should the federal government subsidize the athletic activities of educational institutions when that subsidy is being used to help pay for escalating coaches' salaries, costly chartered travel and state-of-the-art athletic facilities?" asked Rep. Bill Thomas, R-Calif., chairman of the tax-writing House Ways and Means Committee.

Thomas asked the NCAA to justify its tax-exempt status in a letter sent Tuesday to Myles Brand, president of the National Collegiate Athletic Association. He asked for a reply by the end of October.

Erik Christianson, a spokesman for the NCAA, said the organization challenged the fundamental assertions that athletics is not part of higher education or that not-for-profit status should be linked with the amount of revenue an organization generates. "We educate student-athletes; they are students first," he said.

Christianson said NCAA representatives had already met with staff from the committee and that the organization would continue to be responsive to their questions.

Thomas noted that the annual returns filed by the NCAA with the IRS states that the primary purpose of the NCAA is to "maintain intercollegiate athletics as an integral part of the educational program and the athlete as an integral part of the student body."

But he said corporate sponsorships and big television deals -- he mentioned a $545 million deal with CBS for television coverage of the NCAA men's basketball tournament -- have led many to believe that major college football and men's basketball more closely resemble professional sports.

"How does playing major college football or men's basketball in a highly commercialized, profit-seeking, entertainment environment further the educational purpose of your member institutions?" he asked.

Thomas also said that more than 35 college coaches reportedly receive salaries of at least $1 million a year.

"Paying coaches excessive compensation also makes less revenue available for other sports, causes many athletic departments to operate at a net loss, and may call into question the priorities of educational institutions," he said.

In a similar vein, he asked the NCAA to explain the educational value of public universities spending as much as $600,000 per men's basketball player during the 2004-2005 school year.

Thomas asked the NCAA to provide data on total annual revenues and expenditures for Division I-A football programs and Division I basketball programs.

Thomas in 2004 began a review of the tax-exempt sector. He has also looked into the tax-exempt status of nonprofit hospitals and credit unions.

[SI.com (http://sportsillustrated.cnn.com/2006/football/ncaa/10/04/congress.tax.ap/)]

[DaddyTorgo]

if they're going to claim they educate student athletes then they ought to have graduation % minimums for remaining tax-exempt. and if your school signs a bunch of kids who won't graduate just to win...bam...your athletics lose tax-exempt status.

this would reward TRUE student-athletes

[JonInMiddleGA]

"How does playing major college football or men's basketball in a highly commercialized, profit-seeking, entertainment environment further the educational purpose of your member institutions?" he asked.

Because without those things, the amount of interest (and therefore donations) to many schools would dwindle dramatically.

[sterlingice]

if they're going to claim they educate student athletes then they ought to have graduation % minimums for remaining tax-exempt. and if your school signs a bunch of kids who won't graduate just to win...bam...your athletics lose tax-exempt status.

this would reward TRUE student-athletes

Well, they even have some of that right now. However, all you have to do is create a "safe" major or two and you can graduate your kids as they take classes like underwater basketweaving and history of tv. If they show majors of the players, you'll notice there are bunches of players in things like "Phys Ed" or "American Studies" where you basically hide the athletes.

SI

[lordscarlet]

Because without those things, the amount of interest (and therefore donations) to many schools would dwindle dramatically.

Heaven forbid those donations go to an academic school instead.

[JonInMiddleGA]

Heaven forbid those donations go to an academic school instead.

Actually, what I was suggesting was that the donations wouldn't be made period.

As I've said several times in the past, the athletic departments of many schools are essentially a part of the marketing department. They're a tool to generate revenue both directly & indirectly, the latter by providing visibility & interest.
Don't believe that it works? Fine, just let me know when 100,000 people show up to watch students read their term papers.

[Klinglerware]

Actually, most of the schools with the largest endowments are elite universities like those in the Ivy League, MIT, etc, that don't have big time sports. There are exceptions of course, but most of these schools don't need athletics for fund-raising purposes.

Also, I've read that athletics departments at most schools don't have a significant fiscal benefit to their universities at large. Most of the revenues raised stay within the athletic department...

[JonInMiddleGA]

Actually, most of the schools with the largest endowments are elite universities like those in the Ivy League, MIT, etc, that don't have big time sports.

Granted. But those aren't the bulk of the larger schools in the country either.

Also, I've read that athletics departments at most schools don't have a significant fiscal benefit to their universities at large. Most of the revenues raised stay within the athletic department...

My argument would be that those assessments are shortsighted, because they fail to account for the marketing value of the various athletic programs. How many people here would be able to identify Athens, GA or Ann Arbor, MI or Lincoln, NE in the absence of their football programs?

[Klinglerware]

My argument would be that those assessments are shortsighted, because they fail to account for the marketing value of the various athletic programs. How many people here would be able to identify Athens, GA or Ann Arbor, MI or Lincoln, NE in the absence of their football programs?

Fair enough, but how would you measure ROI? I accept that athletics can boost name recognition, but can a real effect be measured? Anecdotally, BC is cited as the example of a school raising its profile because of athletics (Flutie)--though BC had a systematic plan in place to improve its academic standing even prior to Flutie ever setting foot on campus.

Again, you make a good point in that universities do see athletics as a marketing tool. But, if the measure of a university's success is attracting more research grant money or having improved the academic profile of admitted students, athletics would have a limited effect on these elements. Even more so, with the public universities you mention.

[JonInMiddleGA]

... or having improved the academic profile of admitted students, athletics would have a limited effect on these elements. Even more so, with the public universities you mention.

This part I would disagree with. I'll pick on UGA since I'm sitting here 10 minutes from the main campus. Competition for enrollment is at an all-time high, the academic quality of the overall student population has never been higher (at least not in my lifetime). But anybody who believes the presence & stature of the football program isn't a major influence on the desire of those students to attend the school is kidding themselves. Further, it plays a significant role on the influence that parents exert on their child's school choice.

[Klinglerware]

Competition for enrollment is at an all-time high, the academic quality of the overall student population has never been higher (at least not in my lifetime). But anybody who believes the presence & stature of the football program isn't a major influence on the desire of those students to attend the school is kidding themselves. Further, it plays a significant role on the influence that parents exert on their child's school choice.

Like I said, I wouldn't doubt that athletics would have some influence on a school's desirability in the eyes of applicants, but I still believe that the effect is limited. As you note, academic profiles are rising at many schools, but this is also happening at schools without big time athletic programs. There has been a change in the demographics affecting college admissions in the past ten years: basically, the children of the baby-boom generation, the so-called "echo-boomers", have turned college-age, and universities (especially at higher-quality schools) have not increased admissions slots to meet the increased demand. This is probably at play in the tightening of admissions standards you are seeing at a lot of schools these days.

[Grammaticus]

if they're going to claim they educate student athletes then they ought to have graduation % minimums for remaining tax-exempt. and if your school signs a bunch of kids who won't graduate just to win...bam...your athletics lose tax-exempt status.

this would reward TRUE student-athletes

Are you talking about the NCAA or the actual colleges?

[Vinatieri for Prez]

I'll give on the idea that high profile athletics means more donations. It still doesn't mean the colleges shouldn't be taxed on sports revenue of the dollars were talking about. They would still get all their donations with or without the tax. I say make them pay. Good idea.

[Mr. Wednesday]

If he's actually looking at the individual institutions as well, and not merely the NCAA as an umbrella organization, if this were to go through I wonder if it might bring down title IX along with it. Without the tax exemption, what incentive remains for the schools to classify athletics as a part of their academic mission?

[Vinatieri for Prez]

You're way too bright for this forum. Seriously.

[wade moore]

Jon - the only issue I take with your statements is I think you're really talking about.. oh... 20ish schools that truely benefit significantly from donations because of their sports programs. For the other ~100 D-I schools and for the 100+ DI-AA schools, and for the 300+ DII and DIII schools, that is not the case. Hell, for most of the schools below DI they are actually losing money on sports.

[JonInMiddleGA]

... and for the 100+ DI-AA schools, and for the 300+ DII and DIII schools, that is not the case.

Again I'll disagree. Case in point: Georgia Southern University. Now (IIRC) the second largest enrollment of any school in the state ... and one that nobody ever heard of nor gave a damn about until Erk Russell invented "Eagle Creek".

[wade moore]

Again I'll disagree. Case in point: Georgia Southern University. Now (IIRC) the second largest enrollment of any school in the state ... and one that nobody ever heard of nor gave a damn about until Erk Russell invented "Eagle Creek".

Well, I can tell you that there are 5-10 I-AA universities that directly make money off of football. Of those 5-10, I don't believe any make money off of sports as a whole - directly.

I know that doesn't address your exact point, so forgive me for taking that aside... I'd have to see what the endowments of GSU and other higher profile I-AA schools look like. However, I think again you're looking at a case where at the top level of each division, there is a max of 10-20 schools that are truely having some great benefit.

I don't know that bringing up GSU proves the point since GSU, Furman, and the University of Deleware are pretty much the two most successful programs financially in I-AA.

[JonInMiddleGA]

I don't believe any make money off of sports as a whole - directly.

Just FTR, I'm not arguing that any of them turn a profit from sports _directly_.

Like I've said (and most of what I'm really trying to say) the purpose of the athletic programs for many schools is marketing. That doesn't guarantee it will be _successful_ marketing, but that's the primary purpose, because of the handful that have managed to parlay it into making themselves bigger.

[Tekneek]

Tax-exempt doesn't sound like a subsidy to me. One would have to consider paying taxes a fundamental part of existence in order to believe the lack of them is a subsidy. The government is always looking for a way to make a few more bucks and that is all this is about, from my point of view.

[wade moore]

Just FTR, I'm not arguing that any of them turn a profit from sports _directly_.

I know that doesn't address your exact point, so forgive me for taking that aside...
I realize ;)... That's what I meant by the sentence above...


Like I've said (and most of what I'm really trying to say) the purpose of the athletic programs for many schools is marketing. That doesn't guarantee it will be _successful_ marketing, but that's the primary purpose, because of the handful that have managed to parlay it into making themselves bigger.

I actually agree with you here. I'm not 100% sure what point I was making beyond the fact that I just dont' think it's successful for more than the top few programs.

All of that being said, I'm not argueing that sports should be eliminated or anything, I think I mainly wanted to point out that what you're saying applies to a small % of the schools.

However, what I'm saying there may actually support the NCAA's argument fwiw. The argument from Congress seems to be that they are making money hand over fist so they should have to pay taxes. I'm saying that for the most part, they're not. So if they started making them pay taxes, I'm guessing that many of the schools would not because they could easily show a loss on the books.

[lordscarlet]

Tax-exempt doesn't sound like a subsidy to me. One would have to consider paying taxes a fundamental part of existence in order to believe the lack of them is a subsidy. The government is always looking for a way to make a few more bucks and that is all this is about, from my point of view.

OK, I didn't want to make a lame, uninformed reply -- I wanted to gather at the end and try to make some good references, but I have to make one to this:

Give me a break.

That's all.

[lordscarlet]

OK, so, a lot has been said (primarily by Jon and Wade :) ) and I wanted to gather up the thoughts I had, mainly from before reading these things, but hopefully it will address what has been said. I won't say much beyond quoting the actual letter from Rep. Bill Thomas.

I don't doubt that some schools have an academic benefit to having successful athletic programs. However, they do not have a financial benefit. There may be a long-term enrollment benefit. This, however, does not mesh with what gives something tax-exempt status. In particular, the NCAA claims it's tax-exempt status based on it's abaility to "maintain intercollegiate athletics as an integral part of the student body." Everything everyone has written here in defense of the NCAA is that the athletic programs support the increase in the school's academics, not in athlete's academics. Graduation rates for athletes have, for the most part, either stayed low or become increasingly lower over the past two to three decades. Let me move on to some quotes form the actual letter that I believe demonstrate the problem Congress has with the NCAA (not individual academic institution) tax-exempt status.

Directly relating to the primary argument in this forum:

Some representatives from college athletic organizations have justified the tax-exempt status of college sports based on claims that high-visibility programs help sustain a large pool of student applicants and generous financial contributions. Neither of these arguments is valid from a Federal standpoint. Federal taxpayers have no interest in increasing applicant pools at one school opposed to another. Furthermore, if financial contributions to universities increase based on athletic success, contributions to other worthy charities may decline.

a. From the standpoint of a Federal taxpayer, what benefits does the NCAA provide taxpayers in exchange for its tax exemption?

b. From the standpoint of a Federal taxpayer, why should the Federal government subsidize the athletic activities of educational institutions when that subsidy is being used to help pay for escalating coaches' salaries, costly chartered travel, and state-of-the-art athletic facilities?



To be tax-exempt, however, the activity itself must contribute to the accomplishment of the university's educational purpose (other than through the production of income). How does playing major college football or men's basketball in a highly commercialized, profit-seeking, entertainment environment further the educational purpose of your member institutions?


More regarding student athletes:


In order for a high school student to become eligible to compete in intercollegiate athletics, the NCAA requires high school athletes to take a core curriculum of academic courses and earn a minimum grade-point average while in high school. Why does the NCAA not have similar requirements for athletes during their collegiate careers?


I was going to only grab part of this, and I know I'm quoting a lot, but based on my arguments above I wanted to include the whole thing:


At Division I-A schools, only 55 percent of football players and 38 percent of basketball players graduate - compared to 64 percent of the general student body. These figures understate the gap between the graduation rates of the general student body and athletes, since many regular students fail to graduate for financial reasons, which is not an issue for athletes on full scholarships.

a. Are the NCAA's member institutions accepting athletes who would not otherwise be admitted but for their athletic prowess?

b. For twenty years, the Federal graduation rate for male basketball players has remained basically unchanged at about 40 percent. Why has the NCAA made no progress in ensuring that athletes who play on the court also graduate from the schools for which they are playing?

c. The defending Division I-A national champion in football graduated 29 percent of its players compared to 74 percent of the university's student body for the class entering in 1998. Similar large differences in graduation rates exist at other colleges and universities. Considering this
gap, how well is the NCAA accomplishing its tax-exempt purpose of maintaining "the athlete as an integral part of the student body"?


A comment I found interesting:


Should athletes who are not advancing toward a degree be eligible to participate in college sports?


Regarding how the NCAA money is spent to further their mission of "intercollegiate athletics as an integral part of the educational program and the athlete as an integral part of the student body." :


Each year, the NCAA distributes more than $100 million from its Basketball Fund to Division I institutions. These monies are distributed based on performance in the NCAA tournament; each tournament victory earns more money for the winning team's athletic conference. Rewarding athletic instead of academic performance seems to be contradictory to the NCAA's tax-exempt mission, and sends a message to member institutions and athletes that athletics is more important than academics. Why does the NCAA distribute more than $100 million each year based on athletic rather than academic performance?


And since someone mentioned Title IX:


Several Division I-A schools pay their men's basketball coaches four to five times more than their women's basketball coaches. What additional educational benefit do men's basketball coaches provide beyond that which is provided by women's basketball coaches?


OK, after that rampant posting I wanted to say a few other things. First, I never actually read the article I posted. My fiance is a tax accountant for tax-exempt organizations and received the entire letter. I was unsure if that was permissable to post here, so I just found an article referencing it. I make no claims to anything said by the author of the article, rather than from the content of the letter. :)

I think you have to realize what this is about. This is not saying the NCAA should not spend money to promote athletics. It is questioning if what the NCAA does is of benefit to the tax-payer and should thus receive a tax-exempt status. I'm sure many of you will continue to disagree with the letter/me and say that it helps. Some will even say that the government is just trying to take money (from who? The NCAA? The Networks that are paying the NCAA hundreds of millions of dollars? Come on.). But, I wanted to get these thoughts/statements from the letter out there.

The Indianapolis Star has published the full text of the letter (http://www.indystar.com/apps/pbcs.dll/article?AID=/20061004/SPORTS/61004041).

[lordscarlet]

From the fiance:


ok. the NCAA is a 501(c)(3) org. the code defines a 501(c)(3) as: "501(c)(3) Corporations, and any community chest, fund, or foundation, organized and operated exclusively for religious, charitable, scientific, testing for public safety, literary, or educational purposes, or to foster national or international amateur sports competition (but only if no part of its activities involve the provision of athletic facilities or equipment), or for the prevention of cruelty to children or animals, no part of the net earnings of which inures to the benefit of any private shareholder or individual, no substantial part of the activities of which is carrying on propaganda, or otherwise attempting, to influence legislation, (except as otherwise provided in subsection (h)), and which does not participate in, or intervene in (including the publishing or distributing of statements), any political campaign on behalf of (or in opposition to) any candidate for public office"


Just as information/fuel/support/whatever.

[Grammaticus]

This article helps show how the revenue flows and gives some additional detail

NCAA's tax-exempt status might be threatened

College sports' governing body had a half-billion dollars in revenue in one year.

·

It's easy to predict the ultimate winner of the NCAA Tournament.

The NCAA.

March Madness is just another big cha-ching!to the National Collegiate Athletic Association, a charitable foundation that brings in half a billion dollars a year, all of it tax-free.

But that tax-exempt status is not engraved in stone and someday could find itself road-kill on a Congressional highway to tax reform.

"There's nothing fundamental, one way or another, as to whether this kind of thing is exempt from tax -- it's just always been that way," said Kansas City lawyer Bruce R. Hopkins, a University of Michigan graduate who specializes in tax laws for nonprofit organizations. "Congress could overnight change that by statute."

And Congress is looking into doing just that, although no changes are imminent.

The U.S. House Ways and Means Committee confirmed to The Detroit News it has heard testimony on the topic from former U-M president James J. Duderstadt and others. And the Senate Finance Committee, which is conducting a broader approach to tax reform, told The News it will be "very interested" in what the House panel learns.

Money games

At issue is whether some revenue earned by big-time college sports are more like those of an entertainment business than an educational institution, and should be treated as "unrelated business income" -- meaning taxable. If so, universities and the NCAA would be out hundreds of millions of dollars a year.

According to the NCAA's most recent tax return, the association's revenues amounted to $500,240,721, nearly 90 percent of it from an 11-year, $6 billion contract with CBS for broadcast rights to the basketball tournament and other events. More than $300 million of that was doled back out to member conferences and schools; and a not-insignificant portion went to pay the salaries of NCAA employees.

NCAA president Myles N. Brand, for example, made $870,000, more than any public university president in the country -- Michigan president Mary Sue Coleman leads that list at $724,604; and at least eight other NCAA employees had packages worth more then $250,000 a year.

At the end of the tax year last Aug. 31, as many colleges below the top tier were shrinking their athletic programs because of budgetary and Title IX requirements, the NCAA was sitting on a pot of net assets and fund balances worth just under a quarter-billion dollars.

"That's a lot of money," said U-M athletic director Bill Martin, whose university is facing heavy capital outlays in coming years to deal with aging facilities. "Would I love them to distribute some of that to us? Of course, any guy would."

But Martin, whose background is in banking, said he takes an objective view.

"Just because they have a significant revenue stream coming in to begin with from CBS doesn't mean they have to spend it all right away," he said. "The general discussions I hear in circles I run with is that was a beautiful deal they cut that they couldn't cut any more, simply because of changed market conditions. I can see that's a ton of money they didn't have before, so they can't get it out quick enough for meaningful programs."

Loftier hopes

Actually, the NCAA hopes to grow that pot to double its current size as a "quasi-endowment" to "insure the future support of intercollegiate athletic programming and services," said James L. Isch, the NCAA's chief financial officer. The goal is $500 million for that one fund, Isch said, "so that in the future it would throw off enough income to help support programming on the national level."

The NCAA distributed nearly $313 million to member conferences, tax records show, who then passed on the money to member schools -- after taking a cut, of course. The Big Ten's latest tax records -- not very late, for the year ending June 2004 -- show each member school received roughly $10.7 million. Big Ten commissioner Jim Delany's pay package came to $571,228.

Compensation levels for NCAA employees are "absolutely reasonable," Isch said, set by a committee of four presidents from the executive board, and double-checked by an independent, private company that specializes in such comparisons. "These salaries weren't determined by throwing darts."

On the major question -- whether the NCAA's tax-exempt status, including for unrelated business income, is deserved, Isch was emphatic.

"Absolutely," he said. "The fact of the matter is, intercollegiate athletics play a very important role in our culture, as well as in higher education. Our responsibility is to help integrate intercollegiate athletics as a part of that educational responsibility. We absolutely adhere to the stated exempt purpose of our institution."

Isch and other NCAA officials said no one in Congress has contacted them for information

[Mr. Wednesday]

More regarding student athletes:
In order for a high school student to become eligible to compete in intercollegiate athletics, the NCAA requires high school athletes to take a core curriculum of academic courses and earn a minimum grade-point average while in high school. Why does the NCAA not have similar requirements for athletes during their collegiate careers?

I'm not exactly sure what you're getting after here. Athletes are required to maintain normal progress toward a degree to maintain eligilibity:

To be eligible to represent an institution in intercollegiate athletics competition, a student-athlete shall maintain progress toward a baccalaureate or equivalent degree at that institution as determined by the regulations of that institution.

There are also lengthy credit fulfillment requirements that basically amount to a minimum GPA. In combination, I think that these requirements are designed to be similar to the entry requirements. You can argue about whether some of the factory schools have a little too much latitude to define cushy degree programs for athletes.

[Tekneek]

OK, I didn't want to make a lame, uninformed reply -- I wanted to gather at the end and try to make some good references, but I have to make one to this:

Give me a break.

That's all.

You don't think this is about the government looking for money? The guy basically admitted that they (the government) see all this money going into the NCAA and they want a cut.

[JonInMiddleGA]

One thing that jumps at me (since it's closely connected to the point I was making) is this snippet
How does playing major college football or men's basketball in a highly commercialized, profit-seeking, entertainment environment further the educational purpose of your member institutions?

That's largely what I was addressing -- without those major college sports, the status of a number of institutions would be diminished.

And with that diminished status comes declining enrollment, declining revenues, declining interest in the institution overall ... which threatens the "educational purpose of your member institutions".

That's how the current system furthers the purpose.

Now, whether or not this should all be tax exempt seems to me to be a separate issue. If somebody decides they want to tackle it, they're welcome to it. But, if "furthering the purpose" is what's currently required to qualify for tax exempt status then I believe there's no doubt they qualify.

[lordscarlet]

You don't think this is about the government looking for money? The guy basically admitted that they (the government) see all this money going into the NCAA and they want a cut.

It's about the NCAA being tax-exempt when they're not performing a service to benefit taxpayers. I can see how you can sping it to what you're saying, but the fact is that the NCAA has questionable practices for a group that is tax-exempt.

[Tekneek]

It's about the NCAA being tax-exempt when they're not performing a service to benefit taxpayers. I can see how you can sping it to what you're saying, but the fact is that the NCAA has questionable practices for a group that is tax-exempt.

Which the government only cares about because they aren't getting a cut of the action. However anyone wants to spin it, it comes down to money and the government thinks there is too much money going through the NCAA to ignore.

[lordscarlet]

One thing that jumps at me (since it's closely connected to the point I was making) is this snippet


That's largely what I was addressing -- without those major college sports, the status of a number of institutions would be diminished.

And with that diminished status comes declining enrollment, declining revenues, declining interest in the institution overall ... which threatens the "educational purpose of your member institutions".

That's how the current system furthers the purpose.

Now, whether or not this should all be tax exempt seems to me to be a separate issue. If somebody decides they want to tackle it, they're welcome to it. But, if "furthering the purpose" is what's currently required to qualify for tax exempt status then I believe there's no doubt they qualify.

I am quite fond of how you ignored where this issue was addressed.

As was stated, this would be a different issue if the NCAA was attempting to further education as a whole. What is happening instead is that they are possibly promoting enrollment at schools that excel in athletics. This does not further the education of student-athletes. This is also of no concern to the United States taxpayer. Are you claiming that, were it not for the NCAA, these students that are enrolling at Georgia, GSU, etc would not be attending college? Or they would simply be attending another institution? I find it hard to believe that someone is attending a college/university as opposed to not getting a higher education at all based solely on the school's athletic performance. I can see the argument that a student attended Georgia as opposed to some other insitution because of their athetlic performance, but not that they attending a college at all because of it.

Do I care if Georgia has a better enrollment than Florida or George Mason or my local community college? No. Do I care that the youth of America are persuing a higher education? Yes. I do not believe that the NCAA promotes higher education, it promotes higher education at institutions that excel or become noteworthy in athletic competition.

[wade moore]

Do I care if Georgia has a better enrollment than Florida or George Mason or my local community college? No. Do I care that the youth of America are persuing a higher education? Yes. I do not believe that the NCAA promotes higher education, it promotes higher education at institutions that excel or become noteworthy in athletic competition.

There are a lot of athletes that would not go to college if not for athletics sponsored by the NCAA.

You can argue what the "value" of that education is, but I would argue there are 100's if not 1000's of young men and women that would not go to college without athletic scholarships.

The other, more peripheral, argument that could made is that endowments build academic scholarships which again allow young men and women to go to college that could not otherwise afford it. Or, go to a more prestigious school.

[lordscarlet]

There are a lot of athletes that would not go to college if not for athletics sponsored by the NCAA.

You can argue what the "value" of that education is, but I would argue there are 100's if not 1000's of young men and women that would not go to college without athletic scholarships.


The "value" can definitely be argued. When (I'm too lazy to look up the exact number) less than 50% of the athletes are graduating, it's pretty much worthless.


The other, more peripheral, argument that could made is that endowments build academic scholarships which again allow young men and women to go to college that could not otherwise afford it. Or, go to a more prestigious school.

That depends on the numbers. I hope the public is able to see the response from the NCAA. I have no idea what percentage of NCAA money is spent on academic scholarships. I also don't know what portion of athletic-influenced donations are put towards academic scholarships. I obviously don't know if the people making these donations would donate to some other worthy institution or cause if they did not make the donation based on the athletic program.

However, the letter specifically states that revenue generating is not in-and-of-itself a worthwhile reason to be considered a tax-exempt organization. The money being spent by the NCAA must directly advance the tax-exempt mission of the organization; encouragin people to donate money to it's member institutions does not qualify.

[lordscarlet]

I'm not exactly sure what you're getting after here. Athletes are required to maintain normal progress toward a degree to maintain eligilibity:



There are also lengthy credit fulfillment requirements that basically amount to a minimum GPA. In combination, I think that these requirements are designed to be similar to the entry requirements. You can argue about whether some of the factory schools have a little too much latitude to define cushy degree programs for athletes.


You are quoting the letter, not me. I am unaware of the requirements for athletes for Division I competition. However, clearly the measures are not effective based on the results of these requirements. I would like to address the whole issue again when the NCAA has formed it's response. I did not quote the parts that specifically refer to easy courses and easy professors. The letter asks if the NCAA keeps statistics on professors and/or courses athelets use (if they are disproportionate). There is a whole section addressing the fact that athletes (as anyone who has attended a division I school should know) take easy courses. I can look up the quote from the letter if you would like.

[wade moore]

The "value" can definitely be argued. When (I'm too lazy to look up the exact number) less than 50% of the athletes are graduating, it's pretty much worthless.

Yeah.. you're going to have to provide linkage for that, because you're wrong ;)..

There are some NCAA Division I football and basketball programs (mainly at the Big BCS schools) that are under 50% graduation rate, but to say that less than 50% of athletes are graduating is just patently false.

[lordscarlet]

Yeah.. you're going to have to provide linkage for that, because you're wrong ;)..

There are some NCAA Division I football and basketball programs (mainly at the Big BCS schools) that are under 50% graduation rate, but to say that less than 50% of athletes are graduating is just patently false.

I can not tell you the source, but in the letter they state:


9. At Division I-A schools, only 55 percent of football players and 38 percent of basketball players graduate - compared to 64 percent of the general student body. These figures understate the gap between the graduation rates of the general student body and athletes, since many regular students fail to graduate for financial reasons, which is not an issue for athletes on full scholarships.

[lordscarlet]

NCAA officials believe the formula, which they call the graduation success rate, is more accurate than federal graduation rates because the NCAA's methodology accounts for all scholarship student-athletes, including those who transfer into a school from four- and two-year colleges. Athletes who leave school early are counted against the school as having failed to graduate only if they flunk out or were on academic probation when they left.

[Washington Post (http://www.washingtonpost.com/wp-dyn/content/article/2006/09/27/AR2006092701882.html)]




Wade was IMing me statistics from the NCAA. I then sent him quotes from the letter. There was a huge discrepency, this seems to explain it. So the Michael Vicks (who left in good standing but doubtfully received an education) are not counted, as well as transfer students.

[wade moore]

I still think the national rate for student athletes is on par, if not better, than regular students. If you take all NCAA athletes, not just D-I football. Sports like Golf, Cross Country, women's basketball, etc. far outpace non-athletes.

[lordscarlet]

I still think the national rate for student athletes is on par, if not better, than regular students. If you take all NCAA athletes, not just D-I football. Sports like Golf, Cross Country, women's basketball, etc. far outpace non-athletes.

And NCAA spending on football and basketball far outpaces sports like Golf, Cross Country, Women's Basketball, etc. If you take the money spent vs. graduation rate, it wouldn't be very good. The letter claims there are some schools spending $600,000 per basktball player. I am willing to make a large wager that every sport combined outside of football and men's and women's basketball does not combine to that amount per player, and yet their performance is inferior to these other athletes.


6. According to NCAA expenditure reports, public universities spent as much as $600,000 per men's basketball player during the 2004-05 school year.
a. How does spending hundreds of thousands of dollars on each men's basketball player further the educational mission of universities?
b. How much money must be spent by athletic departments to ensure that athletes receive an educational benefit from the activity?

[wade moore]

And NCAA spending on football and basketball far outpaces sports like Golf, Cross Country, Women's Basketball, etc. If you take the money spent vs. graduation rate, it wouldn't be very good. The letter claims there are some schools spending $600,000 per basktball player. I am willing to make a large wager that every sport combined outside of football and men's and women's basketball does not combine to that amount per player, and yet their performance is inferior to these other athletes.

I didn't realize tax exempt status said that you can't spend in one area directly to influence another indirectly.

This is where it goes to Jon's point... If you have a top 25 Basketball program, you are more likely to attract athletes to your "other" sports.

Anyway, I don't know if they should be tax exempt. I think we've really gotten off of that point and that's really for legal heads to decide.

My only point is that really only a small % of schools are even "making money" at sports and that there are many young men and women that get college educations that would not without athletics - I don't see how you can argue that point.

[lordscarlet]

This is where it goes to Jon's point... If you have a top 25 Basketball program, you are more likely to attract athletes to your "other" sports.


Again, why do I care?


I didn't realize tax exempt status said that you can't spend in one area directly to influence another indirectly.

Anyway, I don't know if they should be tax exempt. I think we've really gotten off of that point and that's really for legal heads to decide.


That's what this whole post was about. :) I'm not arguing the merits of using athletics to promote admission, I'm arguing whether a group that supports the athetlics of it's member organizations should be tax-exempt.


My only point is that really only a small % of schools are even "making money" at sports and that there are many young men and women that get college educations that would not without athletics - I don't see how you can argue that point.

The first part of this is also addressed by the comittee:


7. According to NCAA data, athletic department budgets are growing several times faster than the university budgets of your member institutions. In addition, athletic department expenses are increasing at a higher rate than athletic department revenues.
a. Why are athletic department budgets increasing faster than university budgets?
b. Why are athletic departments spending money at an increasing rate?
c. How does spending even more money on Division I-A football and men's basketball further the educational mission of universities?
d. What actions can the NCAA take to control rising spending?


Having said that, yes, there are people getting an education based on their athletic abilities. Are they a large portion of the NCAA spending? No. Is the money the NCAA receives from things like network contracts applied to these athletes that are not Division I-A football and basketball programs that excel within those groups? Doubtful. I dont' have numbers to back one side or the other. It seems that they're spending a large amount of money on students that don't tend to graduate to spend a smaller amount of money on a larger number of students. It's a tough call.

[JonInMiddleGA]

I am quite fond of how you ignored where this issue was addressed.

I didn't intentionally ignore where this issue was addressed elsewhere, I was providing the answer to a specific question that you posted/quoted.

How does playing major college football or men's basketball in a highly commercialized, profit-seeking, entertainment environment further the educational purpose of your member institutions?.

I find it hard to believe that someone is attending a college/university as opposed to not getting a higher education at all based solely on the school's athletic performance.

Solely? Nah, not too many of them. But is it a factor? Absolutely.
It's an additional motivation to continue (much like getting laid and/or getting drunk). The key difference for the purposes of this conversation is that the NCAA provides oversight & structure for one of the activities.

I do not believe that the NCAA promotes higher education, it promotes higher education at institutions that excel or become noteworthy in athletic competition.

And I really don't give a damn where they promote it, they appear to qualify as long as they promote it ... which you just said you believe they do. So why does it matter? Did some jock steal your girlfriend or something?

And, albeit a tangent, I think it's interesting that you're so focused on the NCAA portion of the potential tax picture when the schools themselves are a potentially bigger pool. And if you believe they aren't equally or even more money centric than the NCAA you're kidding yourself.

[lordscarlet]

I
And I really don't give a damn where they promote it, they appear to qualify as long as they promote it ... which you just said you believe they do. So why does it matter? Did some jock steal your girlfriend or something?

And, albeit a tangent, I think it's interesting that you're so focused on the NCAA portion of the potential tax picture when the schools themselves are a potentially bigger pool. And if you believe they aren't equally or even more money centric than the NCAA you're kidding yourself.

Even if it seems like it, this is not a huge deal to me. I would never have thought of it were it not for the fact that it was brought up by Congress. However, I thought it was an interesting subject. I had never even considered the fact that the NCAA is tax-exempt. What does really get to me is the way top tier athletes are treated. I don't agree with a lot of the sanctions on their receiving money. I think schools gain far more money on an athlete than the money they receive. In the big-market economy of college sports these days I believe the compensation given to athletes should be revisited. Colleges are clearly using these athletes that they know will not graduate or not recieve a true education to further their own economic future. Shouldn't these kids get something in return? Particularly the ones that skate through academically and have no chance at a professional athletic future? For that matter, particularly the ones that carry the burden of athletic revenue on their shoulders, even if they do go to the pros. That is a subject I am far more interested in.

I am only focused on it because that is where the letter is focused. However, schools are actually spending money on academics, the NCAA is not directly doing so. It's much more clear cut for an individual institution as you can look at what they're spending on athletics and what they're spending on academics.

[JonInMiddleGA]

In the big-market economy of college sports these days I believe the compensation given to athletes should be revisited. Colleges are clearly using these athletes that they know will not graduate or not recieve a true education to further their own economic future. Shouldn't these kids get something in return?

Well I'll be doggoned, we do agree on something after all.
Who woulda thunk it?

[wade moore]

Now that we've settled that, back to the main point..

I still wonder what the real impact of removing "tax exempt" is as I'm pretty confidant they could work their books to show a loss on a regular basis, which would eliminate taxes anyways.

[lordscarlet]

Now that we've settled that, back to the main point..

I still wonder what the real impact of removing "tax exempt" is as I'm pretty confidant they could work their books to show a loss on a regular basis, which would eliminate taxes anyways.

Not sure how corporate taxes work, but I'm pretty sure that were the case no corporation would ever pay taxes.

[lordscarlet]

Well I'll be doggoned, we do agree on something after all.
Who woulda thunk it?

I think the only thing we disagree on is whether maybe the NCAA should pay taxes. :)

[wade moore]

Not sure how corporate taxes work, but I'm pretty sure that were the case no corporation would ever pay taxes.

They don't, do they? ;)

[cuervo72]

Somehow I don't think Bloomberg has donated over $200 million to Hopkins because of its lacrosse program...

[lordscarlet]

SPORTS OF THE TIMES
Big-Time College Sports May Be Due For an Audit

By SELENA ROBERTS
29 October 2006 The New York Times
Late Edition - Final 1 English Copyright 2006 The New York Times Company. All Rights Reserved.

JACKSONVILLE, Fla. -- It was a five-star slumber party. By 7:30 p.m. Friday, Florida Gator players were wandering the hallways of the Sawgrass Marriott Resort and Spa with pillows tucked under their arms.

They weren't wearing their pj's but identical blue warm-ups. They weren't painting each other's toenails, but, and this is unknown, the fellas might have indulged in an oxygen facial to polish up their game face.

As it was, the lugs were lying on the floor of a hotel ballroom for a players-only movie, stretching out after feasting on endless silver platters of man food in the ballroom next door.

It beats the dorm and Domino's. What's an expense budget when more than $1.2 million a season is dedicated to the team's travel? The University of Florida is located only 80 minutes from Alltel Stadium -- where the team held off Georgia, 21-14, in yesterday's annual border scrum -- but the Gators rode the extra mile a day before the game to relax a half-hour away in Ponte Vedra Beach, Fla.

The team effectively turned a school day into a spa day.

How does the luxurious splendor of high-end college football square with the purpose of higher education?

The Tax Man wants to know. In what amounts to a moral audit, Representative Bill Thomas, Republican of California and the chairman of the Ways and Means Committee, recently sent a letter to the money-grab artists at the nonprofit N.C.A.A., asking it to justify its tax-exempt status with some barbed questions:

With corporate sponsorships, lucrative TV deals and millionaire coaches with no academic duties, Thomas asked, ''What actions has the N.C.A.A. taken to retain a clear line of demarcation between major college sports and professional sports?''

Given that federal taxpayers have no interest in which universities generate visibility and contributions through athletic success, Thomas asked, ''Why should the federal government subsidize the athletic activities of educational institutions when that subsidy is being used to help pay for escalating coaches' salaries, costly chartered travel and state-of-the-art athletic facilities?''

With Texas, the defending Division I-A football champion, graduating 29 percent of its players compared with 74 percent of the university's student body for the class that entered in 1998, Thomas asked, ''How well is the N.C.A.A. accomplishing its tax-exempt purpose of maintaining the athlete as an integral part of the student body?''

The N.C.A.A. added an extra football game to the schedule and lengthened the basketball season, so Thomas asked, ''How do these proposals help athletes improve academic performance?''

Excellent questions. But what's the political point of frisking the N.C.A.A. for loaded pockets?

''It is not an insignificant event,'' said the economist Andrew Zimbalist, author of ''The Bottom Line: Observations and Arguments on Sports Business.'' He added, ''Although these politicians are grandstanding in my view, I'd rather have them grandstanding than be silent.''

Peacock politicians can be effective. Congress took the stage to shame Major League Baseball and scared it straight into the admission of a drug problem. And as the Ways and Means Committee probes America's nonprofit sector, it may hold the N.C.A.A. accountable to its unholy binge shopping.

''I think all of us in higher education -- the conferences, the N.C.A.A. -- we should be worried about this,'' said David Williams, a tax lawyer and vice chancellor at Vanderbilt, where administrators have successfully folded athletics back into education. ''The tax code is one of the largest pieces of social legislation. You can encourage and discourage certain behaviors.

''I believe the government is saying: 'You've been told time and time again to link athletics to higher education, and we're not seeing that. You're not able to control yourself.' ''

It's a deep spiral on a post pattern to the bank. More than 10 Division I-A universities pay their football and basketball coaches a combined $3 million a year. At Texas, Mack Brown ($2.6 million) and Rick Barnes ($1.8 million) exceed $4 million. At Florida, it's enough to pay Urban Meyer ($2.1 million) and Billy Donovan ($1.6 million), but the Gators have also been on the hook for $2.6 million in severance payments.

''The question is,'' Williams said, ''where is that money coming from?''

The sugar daddies of college sports. Boosters receive up to an 80 percent tax deduction on gifts to the program. Every check writer -- from the Oklahoma State Santa T. Boone Pickens ($165 million) to the Tennessee benefactor Peyton Manning ($1 million) -- may be in line for an atta-boy from their accountants.

Peek inside the 990 tax forms at nonprofit booster clubs and you'll discover charity's payoff. At Florida State, not only did Seminole Booster Inc. raise $42 million in direct public support, according to its 2004 tax documents, but the president of the club was paid $228,184 in salary.

Booster czars don't just hang up the signup sheets for tailgate casseroles, anymore. They oversee friends of the program who have penthouse tastes. Bull Gators -- the grand pooh-bah of Florida boosters -- can use their nonprofit devotion as a business perk by purchasing a luxury suite for $48,000 with the sweet bonus of air-conditioning at the Swamp.

What's too much? Is it Texas spending $150 million for a stadium expansion? Is it Georgia pouring nearly $7 million into an academic center to prop up struggling athletes? It is the five-star hotel football players at the University of Colorado have been known to stay in the night before a home game?

The excess only serves to loot the soul of higher education. It's enough to make Congress suspicious.

''I think Congress wants to know: Do you look more like a for-profit rather than a nonprofit?'' Williams said.

Imagine the market correction if the free money disappeared for the N.C.A.A. That's not a pompom you hear, but the sound of the N.C.A.A. shaking. It has until Nov. 13 to respond to Thomas. So far, the N.C.A.A. has only offered a statement in its weak defense, ''The N.C.A.A. disagrees with the fundamental assertion that intercollegiate athletics is not part of higher education.''

Just how is a team spa day part of higher education?


The New York Times (http://select.nytimes.com/gst/tsc.html?URI=http://select.nytimes.com/2006/10/29/sports/ncaafootball/29roberts.html&OQ=_rQ3D2&OP=143280baQ2FQ2AFcVQ2A6Q7CQ23UU6Q2ADCCAQ2AQ26CQ2AD)Q2AQ7ChUQ236Q7CQ2Ab.Q5DQ5DQ3BUU6VQ5DLLQ2AD)Q23UVcQ236Q7CQ5Cy6vL)

[Celeval]

Like I said, I wouldn't doubt that athletics would have some influence on a school's desirability in the eyes of applicants, but I still believe that the effect is limited. As you note, academic profiles are rising at many schools, but this is also happening at schools without big time athletic programs. There has been a change in the demographics affecting college admissions in the past ten years: basically, the children of the baby-boom generation, the so-called "echo-boomers", have turned college-age, and universities (especially at higher-quality schools) have not increased admissions slots to meet the increased demand. This is probably at play in the tightening of admissions standards you are seeing at a lot of schools these days.

Granted, this is pulling up an older part of the conversation, but I'm personally anecdotal evidence to this. I grew up in Connecticut, did very well in school, and was accepted to a number of quality universities, with various levels of scholarship offers to each. I chose Georgia Tech over Carnegie Mellon and a handful of others... I didn't have any ties to any of the schools before researching and applying; and one major factor in choosing a school was I wanted Division I sports, and I liked and was familiar with Tech's football and basketball programs. The first marketing information I received from Tech highlighted the National Championship / Final Four year of 1990. That was a big, big draw that Carnegie Mellon, MIT, etc. just didn't have.

[lordscarlet]

NCAA Defends Tax-Exempt Status as Congressional Scrutiny of Colleges Increases (http://chronicle.com/daily/2006/11/2006111602n.htm)

By BRAD WOLVERTON

The National Collegiate Athletic Association, in a bid to justify its federal tax exemption, said this week that although big-time college-sports expenses continued to rise rapidly, athletics programs still had a largely educational mission.

In a 25-page letter to Rep. Bill Thomas, the California Republican who is chairman of the U.S. House of Representatives Committee on Ways and Means, Myles Brand, the NCAA's president, said institutions in the association's top two divisions provided $1.5-billion a year in athletics scholarships, much of which goes to low-income students who would otherwise not be able to attend college.

Mr. Brand's letter came in response to a sharply worded letter that Mr. Thomas sent the association last month, much of which centered around spending by big-time football and men's basketball programs and whether increasing commercial interests in those sports have led them to stray from their educational purpose (The Chronicle, October 5).

While many observers assumed that Congressional interest in the finances of college sports would subside in January, after Democrats take control of the House of Representatives and Senate, that does not appear to be the case.

On Wednesday, Sen. Charles E. Grassley, the Iowa Republican and chairman of the Senate Finance Committee, along with Max S. Baucus, the Montana Democrat who will become the committee's new chairman in January, announced plans to hold a hearing on December 5 on potential tax abuses by colleges and universities. According to committee staff members, the hearing will not focus on problems with big-time sports programs, but will likely touch on them.

Lessons Learned

In his letter to the Ways and Means Committee, Mr. Brand said that the money brought in by the biggest college football and men's basketball programs -- $2.4-billion annually -- helped subsidize participation opportunities for the 380,000 athletes in all three NCAA divisions, and that football and men's basketball programs offered as much educational value as other sports.

"The lessons learned on the football field or men's basketball court are no less in value or importance to those student-athletes than the ones learned on the hockey rink or softball diamond -- nor, for that matter, than those learned in theater, dance, music, journalism, or other nonclassroom environments," Mr. Brand said.

Mr. Thomas's letter had questioned why federal taxpayers should subsidize what he described as escalating coaches' salaries, costly chartered travel, and state-of-the-art athletics facilities.

Mr. Brand said that coaches' salaries were commensurate with other highly paid faculty members and within the range of reasonable compensation for federal tax purposes. Chartered planes, he argued, often cost less than commercial travel, and typically help athletes miss fewer classes. And universities often pay for new athletics facilities with bonds or charitable contributions.

In response to Mr. Thomas's concerns about excessive spending in college sports, the NCAA said that intercollegiate athletics programs were no different than other nonprofit organizations that engage in activities designed to increase their revenues.

The NCAA asserted that, like other nonprofit groups, athletics programs should be allowed to increase their visibility by building new facilities and recruiting the best employees.

'No Crisis'

The main thrust of Mr. Thomas's inquiry -- and some of the most revealing responses from the NCAA -- deal with the finances of college sports and what institutions can do to control their spending.

While athletics spending has escalated at three times the rate of overall university budgets in recent years, the NCAA's letter said that there was "no crisis in athletics finances," as athletics operating budgets represented only about 4 percent of overall higher-education spending.

Still, the NCAA said, university presidents are looking for ways to reduce potential financial stress in their athletics departments.

Mr. Thomas's questions suggested that football and men's basketball programs were the biggest spenders, and the NCAA's responses showed that to be the case.

Over all, NCAA institutions spend approximately $7.75-billion a year on their sports programs, slightly less than the $7.8-billion they bring in.

The 117 NCAA Division I-A football teams alone spent about $1-billion during 2004-5, while the 326 Division I men's basketball programs spent about $789-million.

While football is the bigger overall spender, men's basketball teams actually paid more money per athlete. Athletics departments in the NCAA's largest division spent $158,000 in 2004-5 on each male basketball player, compared with $74,000 for each football player.

Over all, the NCAA said, athletics operating costs have risen in recent years because of tuition and housing increases, the need for additional compliance personnel, new teams, rising travel and insurance payments, and higher salaries. Many of those expenses, Mr. Brand said, are outside the control of athletics departments.

The NCAA's letter also responds to the Ways and Means Committee's concerns about potential academic corruption in college sports.

Several of Mr. Thomas's questions centered around reports of athletes taking college courses that lack academic rigor and institutions steering athletes toward professors and academic majors that are less challenging.

The NCAA said that faculty members from each college or university determined each institution's courses, standards for instruction, and degree requirements -- and that the association did not intend to intrude on those decisions.


The Letter (http://www2.ncaa.org/portal/media_and_events/press_room/2006/november/20061115_response_to_housecommitteeonwaysandmeans.pdf)