NCAA- Supreme Court ruling

[Mr Janny]

No, you are too dense to understand these aren't typical additional employees.

You keep saying that, but that's only dependent upon a change in the current tax laws. As the laws currently stand, paying players won't affect a school's tax exempt status.

You are assuming that when the pay for play happens, someone will change the law. That's purely speculation at this point. There's very little precedent for tax exempt organizations losing that status

 

[benman82]

All it takes is one school to start paying to get an edge over other institutions and suddenly everyone is paying players. But I imagine players are going to unionize and collectively bargain long before that happens. It's going to happen, it's only a matter of how.

A union of transient workers is almost impossible to pull off. The "work force" completely turns over every 4-5 years in college sports.

 

[agrabes]

The only reason a salary cap is allowed in some professional sports leagues is because of unionized, collective bargaining, and therefore exempt from anti-trust scrutiny. At this point, the NCAA would probably love it if the players were unionized, because it would allow them to standardize some of this stuff. As it stands, one of the arguments that the SCOTUS decision appeared to reinforce, is that schools aren't allowed to work together to limit the benefits that can be offered to athletes. So things like a salary cap or NCAA rule to pay players the same amount is going to be met with litigation, and it doesn't look like the NCAA would prevail in those cases.

Yeah - fair point. It would require agreement from some type of players union to get a salary cap, otherwise it would be thrown out as unfair. In theory, I guess the Supreme Court is throwing out the current "salary cap". Much as a year ago I would have said the idea of an NCAA players union is ridiculous, at this point it seems like the only sane option if we care about competitive balance.

 

[cysmiley]

Many not for profits have operations that are outside there stated purposes, I'll use the example of a church renting parking spaces in its lot in a metro area (in fact nuns rent parking for cubs games) Doesn't change their tax status, makes their returns more complicated (unrelated business income). I go to many fundraising activities that are outside of the organizational purpose to support worthwhile organizations. I am sure they do not pay taxes on the monies they gain from those activities. The DM Civic Center makes millions on its Broadway Shows and pays actors, stage hands, ushers etc.;, while most of us go for entertainment, I am sure they do not pay taxes on those millions as it is within their mission. When I go to a fundraiser, they usually say what I can deduct vis a vis what I cannot (Food Cost which is a benefit for me). The income from sports at Universities will continue to be tax exempt, if for no other reason than it makes Alumni more willing to donate to the academic purpose of the institution.

 

[jbhtexas]

501(c)(3) status is determined by the IRS. I believe that 501(c)(3) status is most commonly lost when someone challenges the 501(c)(3) status of a non-profit, or reports a suspected violation of the 501(c)(3) requirements to the IRS for investigation, or the IRS notices questionable data on the forms that the non-profits have to file with the IRS. Another possibility would be a change of the law by Congress.

The Federal government needs revenue. Is college athletics a big enough revenue stream for Congress to go after via lawmaking? If not, someone with pretty big pocketbooks would have to lead the challenge against the current 501(c)(3) standing for college athletics, because there would undoubtedly be a long, expensive legal battle to force the IRS to revoke the status.

 

[randomfan44]

We aren't talking NIL income from 3rd parties, we are only talking about IF athletes become University W-2 employees and being paid beyond FCOA solely for their athletic services beyond the University's academic mission (thus the risk of losing tax exempt status). NIL income was never intended to be funded by Universities.

I can't imagine that many universities have any interest in sharing their revenue with athletes. That does nothing but reduce the bottom line with no way to offset the cost.

 

[randomfan44]

Why do you think that eliminates the need? You realize there are a lot of athletes that would have little to gain from NIL that would still get money if football players unionize. Besides, like I said, schools that need an edge will start paying players in addition to whatever money players get from NIL. Take KU for example. They REALLY suck at football. No one wants to play there. They decide "Hey, we can offer additional compensation to get players to come play at this sh!thole!" Next thing you know, all the other Big XII institutions start paying to keep up. This is not that hard of a concept.

Until you have to figure out where in the school's budget to get that money.

 

[cysmiley]

501(c)(3) status is determined by the IRS. I believe that 501(c)(3) status is most commonly lost when someone challenges the 501(c)(3) status of a non-profit, or reports a suspected violation of the 501(c)(3) requirements to the IRS for investigation, or the IRS notices questionable data on the forms that the non-profits have to file with the IRS. Another possibility would be a change of the law by Congress.

The Federal government needs revenue. Is college athletics a big enough revenue stream for Congress to go after via lawmaking? If not, someone with pretty big pocketbooks would have to lead the challenge against the current 501(c)(3) standing for college athletics, because there would undoubtedly be a long, expensive legal battle to force the IRS to revoke the status.

I am not an attorney, but I believe their status as a 501(C) 3 would be from the institution. The Athletic Department is a Department of the Institution, it is not a stand alone entity. The only possible shift I would see could be unrelated business income for the institution, which profits would be taxable, but I don't think that will happen as long as players are still required to be students, as then the activity would remain an educational purpose.

 

[cysmiley]

Curt probably knows alot more than I about unrelated business activities. I've sat on Boards where attorneys would get nervous as income streams were beginning to rise to a level IRS auditors might want to review your status. But those situations were when income was >25% of the total for the organization (Unrelated to the purpose). Even if you defined Athletics as Unrelated (a Huge jump in my opinion), even the Texas gignormous athletic budget falls probably less than 5% of the institutional budget, and that number is probably generous.

I am too lazy to check, but ISU Athletics I would guess to be less than 5% of the University budget.

 

[NorthCyd]

A union of transient workers is almost impossible to pull off. The "work force" completely turns over every 4-5 years in college sports.

How long do you think the average NFL player is in the union? I bet it's not much more than that. They could figure it out. None of this is near as difficult as people want to make it out to be. If there is enough money behind it, which there is in college football, people will figure it out.

 

[CascadeClone]

Is this a serious question? Enrollment is dropping at Iowa State and many other schools and an increase in prices will accelerate that. Plus, they are saving absolutely piles of cash by being tax exempt and will be unlikely to make up the difference. I don’t think your question was in good faith though.

IDK what you mean by good faith, but I honestly don't think enrollment will drop much if they lose tax exempt status and have to solely raise tuition to cover it. And it won't bankrupt ISU either.

ISU budget is appx $700M, I think that's annual expenses I saw referenced in an article. No idea what their income is, but I doubt it is more (or much more) than that, because the State still sends them cash annually. If ISU was generating lots of positive cash flow, the state surely wouldn't be sending cash.

So how much taxable profit will they show on that? $50M? $100M? Maybe none? They can depreciate a heck of a lot of stuff. Does ISU even turn a profit? But let's say it's $50-100M annual. At a combined tax rate of 25% overall, that's on the order of $1k per student annually. So no, I don't think it will be that big a deal.

That's a quick ROM, and I don't really know anything about ISU's P&L. Probably @isufbcurt can comment on it more expertly.

PS - the impact of giving/donations might be a bigger problem. You might not get as many millions donated if those donations are not tax deductions. No idea where to begin scaling that problem.

 

[CascadeClone]

A union of transient workers is almost impossible to pull off. The "work force" completely turns over every 4-5 years in college sports.

NorthCyd beat me to it, but yeah, MLB, NFL, NBA there is tons of players in and out. It's manageable.

It might be that a CBA is the only way to square the Title9 circle, while also finding a reasonable solution for the disparity between non-rev sports vs football and mbb.

 

[BMWallace]

I can't imagine that many universities have any interest in sharing their revenue with athletes. That does nothing but reduce the bottom line with no way to offset the cost.

Businesses don't get to not pay employees because it will hurt the bottom line. As Justice Kavanaugh said in his concurrence, the arrangement between NCAA member institutions and its athletes would be flatly illegal for any other business in America.

Of course the universities aren't interested in it. That was why this ruling was so detrimental to the NCAA. They were hoping that the Supreme Court would grant them "ample latitude" to establish their own rules for player compensation. Basically, they want to maintain the status quo and not share any of their earnings, all while having what amounts to protection from legal challenges to their authority.

The court shot the rightly NCAA down, and highlighted that these schools have been profiting from a uniquely unbalanced and unfair structure for decades.

 

[isufbcurt]

IDK what you mean by good faith, but I honestly don't think enrollment will drop much if they lose tax exempt status and have to solely raise tuition to cover it. And it won't bankrupt ISU either.

ISU budget is appx $700M, I think that's annual expenses I saw referenced in an article. No idea what their income is, but I doubt it is more (or much more) than that, because the State still sends them cash annually. If ISU was generating lots of positive cash flow, the state surely wouldn't be sending cash.

So how much taxable profit will they show on that? $50M? $100M? Maybe none? They can depreciate a heck of a lot of stuff. Does ISU even turn a profit? But let's say it's $50-100M annual. At a combined tax rate of 25% overall, that's on the order of $1k per student annually. So no, I don't think it will be that big a deal.

That's a quick ROM, and I don't really know anything about ISU's P&L. Probably @isufbcurt can comment on it more expertly.

PS - the impact of giving/donations might be a bigger problem. You might not get as many millions donated if those donations are not tax deductions. No idea where to begin scaling that problem.

$97 million in FY19 and $58 million in FY18

See page 14 https://www.auditor.iowa.gov/reports/file/59948/embed

 

[BMWallace]

NorthCyd beat me to it, but yeah, MLB, NFL, NBA there is tons of players in and out. It's manageable.

It might be that a CBA is the only way to square the Title9 circle, while also finding a reasonable solution for the disparity between non-rev sports vs football and mbb.

To me, a CBA is the most sensible path forward to ensure equitable sharing of revenue for the athletes. That is as long as a CBA allows individual athletes to maintain their NIL rights, and be able to market themselves.

 

[NorthCyd]

Until you have to figure out where in the school's budget to get that money.

I think between inflated coaches salaries and facility projects that cost 100s of millions of dollars they will figure it out.

Mind you I think this is all going to go the collective bargaining route and players are essentially all going to get a base wage that isn't near as much as people think it will be. Collective bargaining represents all of the players, and frankly most of the players they represent are not going to be worth all that much money. In college football brand is still king. It will be in both the unions and NCAAs interest to come to an agreement that looks out for the players while also maintaining competitive balance and won't push a lot of programs to the point that they have to drop football. Meanwhile the big stars can get more money through NIL. Maybe I am totally wrong, but that's how I see this playing out.

 

[isufbcurt]

Businesses don't get to not pay employees because it will hurt the bottom line. As Justice Kavanaugh said in his concurrence, the arrangement between NCAA member institutions and its athletes would be flatly illegal for any other business in America.

Of course the universities aren't interested in it. That was why this ruling was so detrimental to the NCAA. They were hoping that the Supreme Court would grant them "ample latitude" to establish their own rules for player compensation. Basically, they want to maintain the status quo and not share any of their earnings, all while having what amounts to protection from legal challenges to their authority.

The court shot the rightly NCAA down, and highlighted that these schools have been profiting from a uniquely unbalanced and unfair structure for decades.

The bolded is true, but NFP's regularly use volunteers to raise revenue for them.

 

[BMWallace]

The bolded is true, but NFP's regularly use volunteers to raise revenue for them.

How often are volunteers contractually tied to a specific not-for-profit? Student athletes are not volunteers. They are a labor force that is under contract, but is not given the right to negotiate either individually or collectively for fair compensation.

 

[Mr Janny]

To me, a CBA is the most sensible path forward to ensure equitable sharing of revenue for the athletes. That is as long as a CBA allows individual athletes to maintain their NIL rights, and be able to market themselves.

I think between inflated coaches salaries and facility projects that cost 100s of millions of dollars they will figure it out.

Mind you I think this is all going to go the collective bargaining route and players are essentially all going to get a base wage that isn't near as much as people think it will be. Collective bargaining represents all of the players, and frankly most of the players they represent are not going to be worth all that much money. In college football brand is still king. It will be in both the unions and NCAAs interest to come to an agreement that looks out for the players while also maintaining competitive balance and won't push a lot of programs to the point that they have to drop football. Meanwhile the big stars can get more money through NIL. Maybe I am totally wrong, but that's how I see this playing out.

I'm not sure how a CBA happens though. Certainly, it would be best for the rank and file players, and certainly more palatable to the schools, but what incentive is there for a 5 star quarterback to join a union, if it's going to limit his profitability? Why would the number 1 point guard prospect agree to join a union where everyone makes, let's say $10,000 a year, when he could be asking for $100,000?

I just don't see how it would ever be agreed on in the first place

 

[NorthCyd]

I'm not sure how a CBA happens though. Certainly, it would be best for the rank and file players, and certainly more palatable to the schools, but what incentive is there for a 5 star quarterback to join a union, if it's going to limit his profitability? Why would the number 1 point guard prospect agree to join a union where everyone makes, let's say $10,000 a year, when he could be asking for $100,000?

I just don't see how it would ever be agreed on in the first place

Depends. If the NCAA and the union come to an agreement that only union members can play in NCAA college football then thats your answer. Thats probably not legal, but they might have the pull to get congress to make it legal. There is already proposed federal legislation for college athletes to unionize.