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Taxwriter Questions Big Salaries of Two College Coaches

Posted on Dec. 20, 2021

A House taxwriter is asking whether hefty paychecks to college football coaches are consistent with tax code provisions on tax-exempt status.

The “exorbitant compensation” that the University of Southern California and Louisiana State University reportedly will pay their current and former football coaches has raised “significant concerns” about whether the universities are operating consistently with their exempt status, House Ways and Means Oversight Subcommittee Chair Bill Pascrell Jr., D-N.J., said December 17 in separate letters to each school.

USC reportedly will pay its new coach more than $110 million in compensation, Pascrell said. The coach reportedly will also receive a $6 million home and unlimited use of a private jet for him and his family, the lawmaker noted.

USC’s former coach, whom the university fired in September, will be paid $10 million, Pascrell added.

“It is unclear how such lucrative compensation contracts further USC’s overall educational mission and benefit your student body as a whole,” Pascrell told USC President Carol L. Folt. “These contracts also present a stark contrast to the benefits received by the university’s student-athletes, whose grants-in-aid each semester pale in comparison to their coaches’ compensation.”

LSU’s new head football coach reportedly will receive more than $100 million in basic compensation during the next 10 years, and LSU will pay its former coach $17 million, Pascrell noted in his letter to LSU President William F. Tate IV.

Questions

Pascrell asked both schools how many of their employees are paid more than $1 million and how many of those work in the athletics department, the identity of each university’s highest-paid employee and the amount of that employee’s compensation, and whether the universities have paid the excess compensation excise tax under section 4960 and the amounts of any section 4960 payments. He also asked what compensation currently is paid to former coaches under “so-called ‘buyouts’ of their contracts.”

Pascrell also inquired about the factors and criteria used by the schools to determine the size and scope of compensation packages of their head football coaches and head men’s basketball coaches, who at the universities approves the packages, and who at the universities negotiates with the potential head coaches and their staffs.  

The lawmaker also wants to know how the schools’ football and men’s basketball programs contribute to the universities’ educational missions, aside from producing income, and why the federal government should subsidize the universities’ athletics programs and escalating coaches’ salaries and other noncash benefits.

Pascrell also asked questions about students, revenue and expenses of the athletics departments, governance of the athletics departments, and facilities.

Pascrell asked for answers by January 14, 2022.

“We have just received the letter, and we look forward to interacting with Rep. Pascrell and other members of Congress to provide greater understanding of the way revenue-generating sports like football directly support and fund virtually all other sports — including women’s sports and Olympic sports — as well as hundreds of athletic scholarships each year,” USC said in a statement to Tax Notes.

“We fully intend to respond to Rep. Pascrell’s questions and will outline our position at that time,” LSU said in a statement.

In recent years, other lawmakers have expressed concerns about colleges and universities fulfilling their tax-exempt purposes.

In 2020 then-Senate Finance Committee Chair Chuck Grassley, R-Iowa, raised concerns about academic freedom at some colleges and universities. Any undermining of free speech on college campuses “strikes at the heart of why U.S. universities are generally exempt from tax,” he wrote in letters to the presidents of DukeHarvard, and Villanova universities and Sarah Lawrence College.

In August House Education and Labor Committee Chair Robert C. “Bobby” Scott, D-Va., asked the IRS to reconsider its decision to grant exempt status to two universities that the committee thought might be violating the terms of their exemptions by serving for-profit businesses.

Previously, Scott urged the IRS and the Department of Education to work together more closely to ensure that for-profit colleges that convert to nonprofit status don’t receive tax exemptions when organization insiders improperly benefit from the conversions.

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