A lawmaker's skepticism regarding the Big Ten Conference's proposed $2.4 billion deal with a private investor has prompted a request for a Congressional analysis on the tax implications for the NCAA, its member schools, and the conferences in the evolving landscape of college athletics. Senator Maria Cantwell, a Democrat from Washington, reached out to the head of the Congressional Joint Committee on Taxation, highlighting the need for a comprehensive review of the tax-exempt status enjoyed by entities overseeing college sports.
In a letter sent on Monday, Cantwell expressed concerns about whether it is time to reevaluate the tax-exempt framework under which college sports currently operate. This inquiry follows her previous communication to Big Ten leaders, in which she cautioned that financial arrangements with private investors could jeopardize the schools’ tax-exempt status, along with other potential negative repercussions.
Senator Cantwell has raised several pertinent questions regarding the impact of significant changes in college sports on existing tax laws. One such inquiry pertains to whether Congress should reconsider the tax regulations governing name, image, and likeness (NIL) collectives, which work to facilitate payments to student-athletes. Cantwell noted analyses suggesting that these collectives may not meet the criteria for tax-exempt organizations.
Further, she questioned whether legislative measures should be introduced to address concerns over the rising compensation levels for college coaches and the extensive buyouts often associated with their contracts. Another critical point raised was the potential tax consequences for student-athletes, depending on their classification as employees versus independent contractors.
The urgency of this review comes at a pivotal moment for the Big Ten, which is encountering significant pushback from prominent member universities including the University of Michigan and the University of Southern California (USC) regarding the proposed media rights deal. These institutions have voiced concerns about the unequal distribution of funds from the agreement and the broader implications of partnering with a private investor.
USC Athletic Director Jennifer Cohen articulated the university's position in a recent letter to boosters, expressing appreciation for the Big Ten Conference while emphasizing the value of USC’s brand. She stated, "But we also recognize the power of the USC brand is far-reaching, deeply engaging, and incredibly valuable, and we will always fight first for what’s best for USC."
In her prior correspondence to Big Ten leaders, Cantwell clarified the potential financial ramifications of selling a portion of the conference's media rights. She indicated that media revenues received by universities are currently tax-exempt as they are deemed "substantially related to" their educational purposes. However, she warned that introducing a private, for-profit stakeholder into this equation could compromise the connection between the revenue generated and the institution’s educational mission.
This letter and ongoing discussions highlight a significant moment in the intersection of college athletics and federal tax policy, raising vital questions about the future of tax-exempt status amid the rapidly changing dynamics of college sports.
