A Congressional Budget Office study released Tuesday raises questions about commercial activities of the nation's largest Division I-A sports programs and offers possible changes in tax law should Congress decide to examine the issue.
According to the report, I-A athletic departments get 60% to 80% of their revenue from activities that can be described as commercial.
CBO director Douglas Elmendorf, left, writes: "The high share of commercial revenue for some sports programs raises the questions of whether those programs have become side businesses for schools and, if they have, whether the same preferential tax preferences should apply to them as to schools in general."
The study says Congress could change tax code by "limiting the deduction for contributions, limiting the use of tax-exempt bonds, or limiting the exemption from income taxation."
However, loopholes would likely allow universities "to shift revenue, costs, or both between their taxed and untaxed sectors, rendering efforts to limit the tax preferences for athletic departments alone largely ineffective."
The solution? "Changing the tax treatment of income from certain sources, such as corporate sponsorship income or royalties from sales of branded merchandise, would create less opportunity for shifting revenue or costs, and it would have larger effects on the most commercial sports programs."
Thanks to Snead 101.