I’m going to tell you something many people don’t know about college sports:
The first is that everything about big time college sports is driven by money — and lots of it. The second is that the way they make so much money is by maintaining the illusion of amateurism.
The NCAA makes an exorbitant amount of money off the nearly free labor provided by collegiate athletes. This is nothing new and if you do not understand that money controls every decision made in college sports, you must take a closer look at its dynamics.
Something else that’s hardly new, but absolutely absurd, is that the association that “governs” in excess of 1,200 colleges, universities, athletic conferences, and sports organizations, while supervising 360,000 student athletes and 88 championship events in three divisions, pays no taxes on the revenue they take in. Nothing — not even one penny.
So, how does this work?
The NCAA qualifies for a tax exemption under an amendment that Congress passed in 1976 that gives charitable organizations, such as religious or educational institutions, a hall pass on ponying up money to Big Brother. The funding of competition in national or international amateur sports serves as a charitable purpose under the United States’ tax code.
To qualify for this tax exemption, the NCAA imposes a principle of “amateurism” which states that student athletes are only amateurs. It also states that by partaking in college sports, the student must be primarily driven by his or her willingness for participation in that sport — instead of being primarily motivated by money, free clothes, or sexual favors from expensive Miami escorts on highfalutin yachts. Since the NCAA, and the colleges associated with it, purport to enforce this principle of amateurism, the Internal Revenue Code classifies the NCAA as tax-exempt.
But wait, if there is a clear and defined charitable purpose, then who is considered to be in the charitable class? If you haven’t guessed, they are the student athletes who are being cheated out of all the money they could otherwise be making.
In 2010, NCAA licensing deals alone amounted to over four billion dollars. Now imagine how much the NCAA would have had to pay star players at big name programs such as USC football or University of Kentucky basketball at market share. They would be dishing out hundreds of thousands of dollars, if not millions in special cases.
But Eric, you ask, what about the scholarships the athletes receive?
Scholarship money amounts to pennies on the dollar when looking at the bigger financial picture. The money a big name QB or basketball player could be making would pay not only for an education but also much, much more.
Time Magazine recently published a Drexel University study that calculated that University of Texas defensive end, Jackson Jeffcoat, was worth $546,832 dollars more than he received off scholarships had he received the same cut of revenue that an NFL player would. Russ Smith, point guard for Louisville basketball, was worth an extra (get ready) $1,614,733. Imagine yourself walking into the athletic department and watching a coach cut you that check.
But all this seems like an excessive amount of money for a college athlete, right? Not when you put it into context.
The top 25 richest football teams’ total revenue in 2011-2012 was $1.4 billion, and for the top 25 basketball teams, $440 million.
But still, the NCAA claims that the billions of dollars in revenue, as well as other profits, are aimed at funding scholarships of student athletes and that these scholarships should be sufficient. Of course, there is no definitive rule on how much money the NCAA must partition out towards student athlete scholarships, hence the small sums that players receive.
A change in the tax-exempt status of the NCAA and all its affiliate schools would significantly change the dynamics of the collegiate sports economy. You would see a significant rise in NCAA contracts with TV networks and commercial ventures. Boosters may stop giving as much money as they now do, but at least the players would be getting paid more than pennies on the dollar.
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