A Congressional committee report released Thursday shed new light not only on the tens of millions of additional dollars some top-level college sports programs have been absorbing to employ and pay elite coaches since a change in federal tax law five years ago, but also schools’ justifications for making those and other huge expenditures on coaches.
The document, prepared by the House Ways and Means Committee, comes from responses to letters that Oversight Subcommittee chair Bill Pascrell Jr., D-N.J., sent to nine schools between December 2021 and March 2022 asking their presidents and chancellors how their athletics programs are “furthering the educational purposes” for which the schools receive tax-exempt status.
Thursday’s report presents verbatim portions of the schools’ replies to a series of long-answer questions, as well as data from six schools in which they reported spending, or projected spending, of more than $30 million connected to the creation of a 21% excise tax on compensation above $1 million that goes to any of their five highest-paid employees in a year since the law took effect for the 2018 tax year. Much — though not all — of that total was due to the pay levels of coaches.
“With the college football regular season reaching a dramatic conclusion this weekend, all Americans should be reminded of the enormous scope of exorbitant coaching contracts by so many of these schools,” Pascrell said in a statement. “Americans should care deeply about these excessive salaries that our federal tax code is helping to fund. … The answers from the schools lay out, clearly, that universities from coast to coast are not always behaving in the best interests of their students or the American taxpayers.”
Schools’ excise-tax bills, connected – and in addition – to coaches’ pay
Villanova reported over the first three years of the tax, it paid nearly $2.65 million in excise taxes resulting from what it was paying now-former men’s basketball coach Jay Wright, who was reported with $6.1 million in total pay for the 2019 calendar year.
Rutgers reported that its expected excise tax bill for what it paid football coach Greg Schiano in 2021 will be $807,000. Michigan State reported that it had three employees whose pay made the school subject to the tax, two of whom were in the athletics department (since the tax has been in place those two are men’s basketball coach Tom Izzo and the football coach, first Mark Dantonio and then Mel Tucker); the school said its excise taxes paid were $299,451 for 2018, followed by $1,335,383 and $3,293,212 – a total of more than $4.9 million.
Duke reported having paid a total of $7.2 million since the excise tax went into effect with that amount partially attributable to pay for now former men's basketball coach Mike Krzyzewski and now former football coach David Cutcliffe.
Among the levy’s targets were any college or university with a coach or athletics director making big money. But the wording of the applicable provisions of the sprawling law that was passed amid a scramble in December 2017, didn’t carry out the intent. Guidance from the Treasury Department and the Internal Revenue Service and variances in public schools’ tax status have resulted in schools, including LSU, not being subject to the tax.
Pascrell said in a statement he wants to see that end.
“Universities’ tax-exempt status is an important pillar of our higher education system, but it is not a blank check from taxpayers to dole out gargantuan coaching contracts with lavish benefits,” he said. “The committee should consider reforming the excise tax … to apply to all colleges and universities. …
“It is also worth exploring whether profitable, multimillion dollar college athletics programs should be subject to the Unrelated Business Income Tax. We must consider whether tax-exempt educational activities and lucrative athletics programs should be treated differently.”
The first of Pascrell’s letters, to LSU and USC, came in the wake of those schools’ respective hires of Brian Kelly away from Notre Dame and Lincoln Riley from Oklahoma. Those moves were part of a series of mega-dollar coaching moves that began with Texas A&M’s fully guaranteed, 10-year, $95 million extension with Jimbo Fisher and has continued into the current football hiring cycle, which recently included Nebraska reaching an eight-year deal with Matt Rhule that is scheduled to be worth at least $78 million.
What schools said about athletics and the university mission
The new report’s excerpts of the schools’ responses to long-form questions that included: Why should the federal government subsidize the university’s athletics programs and escalating coaches’ salaries and other non-cash benefits?
Responses generally covered commonly cited details of athletics programs’ educational opportunities and other benefits for athletes and how intercollegiate sports provide schools with vehicles for engagement with current students, prospective students, alumni and donors.
Among notable specifics:
►From USC: “Research also indicates that a successful athletics program positively influences individuals across the USC ecosystem, including students, faculty, and staff, and that successful athletics and the success of a university as a whole tend to move in the same direction.”
►Also from USC: “Coaching talent is by far the best predictor of team performance, team performance directly relates to revenue production, and the University’s football program’s excess revenues are vital to funding non-revenue and lower-revenue sports.”
►From Rutgers, whose athletics financial practices and transparency have been the subject of a series of stories by NorthJersey.com, part of the USA TODAY Network: “At Rutgers, we will continue to fight to be competitive, we will not take shortcuts, and we are building a financial model that accurately captures and explains our capital investment in athletics, our financial aid practices, and the revenue streams associated with our high-profile sports.”
►From LSU, which has seen recent off-field problems in its men’s basketball and football programs: In totality, our athletics program is a part of the flagship University, and we pride ourselves on contributing to the public good in every endeavor we pursue.”
►Also from LSU, citing Pascrell’s home state: “In fact, many prospective students in the northeast United States are captivated by the colleges appearing on television, and they ultimately consider attending schools outside their region. I’ll illustrate this by pointing out LSU enrolls more than 250 students from New Jersey alone. While I’m confident they came for academic reasons, it’s likely that they first considered LSU because of its athletic prominence.”
This article originally appeared on USA TODAY: Colleges pay millions in taxes on coaching salaries, report reveals