By: Elisabeth Myrick, Contributing Editor
Lawmakers are again beginning to question whether or not gifts to college athletics programs should be tax deductible.
This debate has been part of national discussion for more than 30 years, and as collegiate athletics programs continue to grow into multi-million and even billion dollar revenue generators, it looks to be a topic that will continue to be on the forefront of lawmakers minds.
Since colleges and universities are considered educational charities, thanks to an amendment to the tax code, donations to athletics programs, even those tied to season ticket purchases are up to 80 percent tax deductible. This also includes corporations donating shoes, clothes, electronics and other goods to schools, as well as paying for the naming rights of new stadiums and arenas.
How does this impact college sports? Some say it makes collegiate sports, which are thought to be more about the game, focus instead on the bottom line. Others say monies donated to athletics programs would be better spent on funding a new science lab or hiring additional professors.
Supporters, however, defend the deductions based on the theory that college athletics contribute to the educational experience that occurs outside of the classroom. Others argue that without collegiate sports, many athletes would never have the chance to attend college. Another argument is that sports teach student-athletes life lessons about character and discipline.
The scholarships provided to student-athletes may fund an education that otherwise would only be possible through student loans or grants. Many colleges and even some corporate donors also give back to the university scholarship fund, increasing school financial aid for non-athletes.
Allowing tax breaks on donations to collegiate sports seems to positively impact the university as a whole. While it may seem like an unfounded reason to choose a college, many incoming freshmen count athletics as an important factor in selecting a school.
Critics of the tax breaks disagree entirely, saying it is impossible to understand how tax deductions for those who lease luxury boxes at college stadiums and arenas are helping less-affluent students attend college. They also argue that the tax breaks are “fueling an arms race in college sports, driving universities to debt-finance massive stadium expansion projects, exploit young student athletes, and tolerate multimillion-dollar coaches’ salaries,” according to former University of Michigan President James Duderstadt.
Key members of the Senate Finance Committee and the House Ways and Means committee have promised to continually bring this topic before Congress.
Senate Finance Committee member Sen. Charles E. Grassley has plans to broaden the scope of an existing investigation examining the tax-exempt status of college sports, which will reopen the debate about whether donors should be eligible to receive a tax deduction for contributing to collegiate athletics departments. This inquiry could result in bringing the on-going debate to the Internal Revenue Service, forcing the agency to again examine the merit of giving tax breaks to college athletics donations and how these athletics programs are defined as charity.
Nearly every time the IRS moves to begin taxing these gifts, lobbyists, attorneys, athletics directors, and even university presidents find a way to convince the government of the importance of these gifts to colleges and universities as a whole. It will take a powerful group of legislators to overcome the powerhouse collegiate athletics has become and losing the tax break on donations to athletics departments will surely change the face of collegiate sport as we know it. The question remains: will it be for the better?
