The NCAA, Tax Exemption and College Athletics

61 Pages Posted: 2 Feb 2009 Last revised: 8 Feb 2010

See all articles by John D. Colombo

John D. Colombo

University of Illinois College of Law

Date Written: February 19, 2009


The purpose of this article is two-fold. First, it will explain the concepts of federal tax-exemption law as they apply to the NCAA and to the universities operating Division I football and basketball programs. As the article indicates, current law makes it virtually impossible for the IRS to withdraw exemption either from the NCAA or universities operating major athletic programs. It is somewhat more plausible that the IRS could tax revenues from Division I college athletics under the UBIT, although even that course of action would have to scale considerable legal hurdles. Moreover, even if the IRS applied the UBIT to big-time athletic revenues, this course of action likely would end up largely a "paper tiger" because the evidence suggests that virtually none of these programs would have taxable net income in the tax accounting sense after applying appropriate cost accounting. Of course, the law can be changed; Congress could certainly attach particular conditions to tax exemption for the NCAA or universities conducting Division I basketball and football programs if it desired. The second part of this article, therefore, examines the tax policy issues raised by college athletics, particularly whether these programs fit within a theoretical paradigm that demands they be exempt from taxation, or whether instead big-time college athletics should be considered a sui generis exception to general tax policy. The reason this is important is that if major college football and basketball do not fit in any standard theoretical paradigm for exemption, then we should forthrightly recognize that continuing tax-favored treatment for these activities is an "exception" to general tax policy - much like a local community abating property taxes to induce a business to locate there. Such a conclusion, in turn, means that Congress could consider attaching special conditions to continuing tax exemption for the NCAA and universities engaged in big-time athletics without worrying about any damage to established tax policy or principles - in other words, this is the "hook" reformers can use to press their case. While the exact scope of these special conditions should be debated by experts in college athletics, I note in the final section of the article that there are precedents in tax law for (1) attaching conditions on the use of proceeds from an exempt activity (e.g., a requirement that big-time athletic revenues be used to subsidize other charitable outputs, such as increased athletic opportunities in non-revenue sports or for women); (2) expenditure limits such as caps on coaching salaries, and (3) expanded disclosure via a schedule to Form 990, similar to the new Schedule H for hospitals, that would require both the NCAA and universities with athletic programs to provide more information regarding their programs and the academic progress of student-athletes.

Suggested Citation

Colombo, John David, The NCAA, Tax Exemption and College Athletics (February 19, 2009). Illinois Public Law Research Paper No. 08-08, Available at SSRN: or

John David Colombo (Contact Author)

University of Illinois College of Law ( email )

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