Big if true
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Ask them to guarantee that the donation to the āstrategic fundā will be allowed as tax deductible. Ask them if they have IRS guidance that this deduction will be allowed. The answer to both will be ānoā. Of course the ādonationā is required to get the seat license. Anyone relying on the VAF to provide them with tax advice is just not smart. And the VAF is treading on a very thin line by including these statements in their documents.
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Yeah, they always have the disclaimer ācontact your tax advisorā, but I was surprised they made such definitive statements. Either theyāre desperate or maybe some other schools have already done something similar and got away with it.
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Your post is absolutely right, but the precise language used is very important. I would be shocked if a tax attorney specializing in tax exempt entities didnāt review the brochure.
Notice that the VAF does not say what is tax deductible. It only says that 25% is not tax deductible.
āYour gift commitment will be separated into two allocations. 75% of your gift will go toward the Athletics Strategic Initiatives Fund and is not associated with benefits. The remaining 25% of your gift is directly tied to benefits and is not tax deductible. VAF does not provide tax advice, so you will need to check with your tax advisor.ā
This isnāt my area of tax, so I have no idea how some lawyer got comfortable with saying that 75% is not associated with benefits given that the regs specifically say that tickets or the right to buy tickets is a non-deductible benefit. Maybe some twisted logic that the annual contribution, not the seat license, gives a person the right to buy tickets. The seat license specifies only which seats a person could buy. I donāt believe that argument at all, this is terrible. At minimum the seat license fee gives the donor the benefit of a better seat.
They didnāt say that it is deductible at least. But I mean, this is for renewals, so anyone paying this has dealt with the tax implications for 20 years and also anyone giving a minimum of a 7k immediate cash outlay likely has at least a CPA doing their taxes or has a CPA they can ask. No one should be blindsided by the tax stuff, although Iām sure some people would be.
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Gonna move some general college student-athlete eligibility discussion here:
It used to be that some $ number of compensation was allowable for guys playing on pro teams, defined as āactual and necessary expensesā: What are āactual and necessary expensesā?
And then there were stories of guys basically buying back their amateur status by repaying teams their salaries that were above that.
I say āused to beā because I am not so sure that it is the case anymore. The NCAAās site is a little cagey about putting forward an amateurism definition, just says that student-athletes need to receive an amateurism certification before being eligible to compete. I wonder if thereās some case-by-case waiver process that exists to prevent the NCAA getting smacked down in court.
Iām sympathetic to this. I think the judge in the Fourqurean case had a nice line about maintaining a connection to academic progress as being the primary procompetitive rationale for eligibility rules: USCOURTS-wiwd-3_25-cv-00068-0.pdf
The court agrees that linking a student-athleteās college athletic career to ordinary degree progression differentiates NCAA Division I football from professional football leagues like the NFL. As defendantās economic expert explained, āa less differentiated athletic product where athletes are older and less aligned with standard collegiate progression may reduce fan interest and ultimately resources invested in student-athletes.ā
Notably, the judge did not like the other procompetitive arguments:
Defendantās argument about ensuring young athletes have an opportunity to Division I football is substantially less persuasive, however, because the NCAAās own rules already allow Division I football teams to fill roster spots with experienced, transfer players, crowding out younger athletes. Pavia, 2024 WL 5159888, at *11. So, too, is any argument for these rules promoting amateurism, which rings increasingly hollow with elite college football coachesā salaries, television ratings, and now NIL money for athletes skyrocketing. Cf. Alston, 594 U.S. at 110-11 (Kavanaugh, J., concurring).
I am pretty aligned with the judgeās thought process here, both in terms of the argument he finds persuasive and the ones he does not.
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Itās pretty risky for donors. If the IRS audits just one donor who deducts the 75% and really digs into it, the donor is likely to say that they relied on the VAF telling them that the 75% was not for benefits. At that point, the IRS is likely to ask the VAF for a list of all donors that gave to that fund under a seat licensing agreement. Then, IRS letters go out to all those donors are sent letting them know that their donation is also not deductible and here is your bill for taxes and interest. If this plan is widespread in college sports, I would imagine the IRS will figure it out pretty quickly and issue some guidance that these donations are not deductible.
I would assume that many of the seat licenses will be to businesses. In that case there is no issue because the license will be a business expense and fully deductible.
As always, this post does not contain tax advice. Please contact your tax professional.
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I completely agree. Personally, I would not take any deduction for any part of a seat license fee nor would I advise anyone else to either.
Hard to say what the IRS or Treasury might do though. I have a lot of former co-workers who are now ex-IRS and if this administration really wants to cut basically half the agency employees, the resulting audit rate may follow. But the administration appears to be no fan of āelite ivory towerā universities, so thereās some possibility of a desire to punish such schools by taking away non-profit status. However, the current government also seems to want to strip out as many regulations as possible, so will Treasury issue more? Also, the new seat licenses are effective starting in 27-28. There will presumably be a new President with different priorities, regardless of party, by the time any 2027 tax returns would be subject to and selected for audit.
All that to say, who knows. Certainly not me.
Hereās the first shot at elite universities in the tax code proposed by Ways and Means.
Endowment tax on universities. 500-750k rate stays as is, new 7%, 14% and 21% rate tiers. 21% is the corp tax rate.
Student count formula changes. Only students eligible for financial aid are counted (foreign students on visas are not counted). The endowment tax is imposed on schools with more than 500k in endowment funds per student. Lowering the student count lowers the threshold for an endowment to be taxed.
For tax exempts, name, logo and royalty income is now taxable UBIT. This has to impact the way at least 3rd party NIL payments are made. And decreases school licensing EBIT.
Also the 21% excise tax on compensation exceeding 1 mil applies to all non-profit employees, not just the top 5 highest paid (something to think about if the athletes ever become employees of the school or VAF). I assume revenue sharing payments will be structured as 1099s from the school or the VAF for now, but I could be wrong there. Employment law isnāt my area, but I can see the case for W-2 employee status based on control of the employer over the employeeās schedule and activities.
VAF isnāt a private foundation, despite the name, so the NIIT changes wouldnāt impact it.
Anyway, this all means more taxes imposed on big universities and less money for other stuff, including paying athletes.
I wonder if Tennesseeās formation of an athletics LLC is intended to have athletes own shares of the LLC while at Tennessee and receive revenue sharing payments as owners of the LLC rather than employees or contractors of the LLC.
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I think it works until you have the first guy who has the super-duper ironclad reason to be granted a waiver from that rule. Lather, rinse, repeat.
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Like for example a season ending injury that happens before the games start, which he somehow overlooked (or decided itās fine to just make kids eat that year, which IMO sucks).
As a Celtics fan ā¦ at some point NCAA just says injuries are part of sports - you get 5 years to play 4. Period. End of storyā¦
They donāt give you an extra year in high school if you get hurt. They donāt add a year onto the end of your contract in the pros if you get hurt.
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Thereās no comparison to pros because thereās unlimited eligibility (at the back end) in the pros.
Plus, in the pros, work rules that are in place are collectively bargained. Collective bargaining is illegal in college under the current statutory framework.
Now as we saw with Brzovic, some judges donāt think eligibility criteria are commerce (I didnāt read it, but thatās what others said), so are all fine. But the Fourqurean judge thought it was.
Just some like federal judges think we should have played Jay Huff more in the natty run, while the dominant trend among federal judges is to not criticize decisions that led to a natty.
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Also, to be clear, what I think is a good idea, if I were Czar, with powers to ignore laws and any opposition, is basically 5 to play 4, with narrow bases for waivers.
I know this isnāt a popular view at the moment, but you draw the waiver criteria and you stick to it. If a guy is just on the other side of the line, I mean, thatās life, and the nature of line-drawing.
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The Fourqurean judge, IIRC, was very insistent that there must be an exception process.
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Thereās still Father Time ā your āeligibilityā has an expiration date, you just donāt know when it is. So when you lose a year to injuryā¦ you donāt get it back on the back end.
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Not me, I still feel like Iām 25. (Ha friggin ha)
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I guess itās more precise to say the pro eligibility limits are ability-related whereas the NCAA ones are not.
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The pro eligibility limit is ability-related because itās the last in the sequence; thereās nothing to move on to. Every level prior to that is effectively defined by age group. You get injured in the āages 8-10ā league, you donāt come back and play in that league when youāre 11.
This is why I think NCAA should officially define their eligibility as āages 18 to 24ā. (We can debate the specific numbers, but there should be numbers.) After that, you aged out, go try your luck in a pro league.
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So the rule could be something like you can play up to 4 seasons between ages 18 to 24? I think I could be down for that.
Struggle to see who loses out really in that scenario. With 24 as the cap BYU should still be fine with all the mission kids Iād imagine. I guess the few dudes like Brandon Weeden a while back? I think thatās fine.
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