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CBO Study on Tax Preferences for College Sports

The Congressional Budget Office has released a study on the Tax Preferences for College Sports. The main findings:

Athletic departments in NCAA Division I schools derive a considerably larger share of their revenue from commercial activities than do other parts of the universities.

In the case of Division IA schools (a subset of schools in Division I that meet NCAA requirements for football programs), 60 percent to 80 percent of athletic departments’ revenue comes from activities that can be described as commercial. That proportion is seven to eight times that for the rest of the schools’ activities and programs, suggesting that their sports programs may have crossed the line from educational to commercial endeavors. Revenue from commercial activities accounts for a much smaller share of athletic department revenue (20 percent to 30 percent) for schools in the rest of Division I.

Nonetheless, removing the major tax preferences currently available to university athletic departments would be unlikely to significantly alter the nature of those programs or garner much tax revenue even if the sports programs were classified, for tax purposes, as engaging in unrelated commercial activity. As long as athletic departments remained a part of the larger nonprofit or public university, schools would have considerable opportunity to shift revenue, costs, or both between their taxed and untaxed sectors, rendering efforts to tax that unrelated income largely ineffective.

Congress has been looking in to the commercialization of intercollegiate athletics recently, which prompted the study. Sen. Charles Grassley is quoted in this story, whining about the problem and the study, presumably since it throws cold water on Congress' ambition to alter the nature of college sports by threatening to change their tax treatment. I think the CBO study (get it here) is a useful source of facts and analysis on the issue, with informative tables on revenue sources and estimated profitability of sports programs at the 164 D1 institutions. Recommended.