This story was originally posted on MyNorthwest.com
Washington Senator Maria Cantwell wrote a letter on Monday to Congress’s Joint Committee on Taxation, questioning whether college athletics should maintain tax-exempt status as the landscape undergoes major financial changes.
“Given the evolving market dynamics of college sports coupled with changes in the legal framework affecting college athletes, legitimate questions have been raised about whether it is time to rethink the tax-exempt regime under which college sports currently operates,” Cantwell wrote, according to The Spokesman-Review.
Big Ten’s $2.4B private equity deal draws scrutiny
In a separate letter last month, Cantwell wrote to leaders of the Big Ten athletic conference, warning of private equity investors as the Big Ten continues to entertain a $2.4 billion private equity deal for its 18 members.
The deal came to a halt on Monday, the same day of Cantwell’s letter, which asked for a more detailed look at how several changes impacting college sports could impact the longstanding tax-exempt standing held by those who oversee college athletics.
“This proposed deal with a private equity investor may be counter to your university’s academic goals, may require the sale of university assets to a private investor, and may affect the tax-exempt purpose of those assets,” Cantwell wrote, according to The Spokesman-Review.
A group part of the University of California’s pension fund, UC Investments, would fund Big Ten athletic departments that were financially burdened by construction and renovation costs, conference realignment, and revenue sharing with athletes.
UC Investments would receive a 10% stake in the Big Ten in exchange for its funding, with the conference’s 18 schools receiving funds through a tiered system that gives larger schools a disproportionate share.
Cantwell’s previous letter raised concerns that universities were abandoning their educational mission in favor of athletic profits, particularly questioning the tax-exempt status of these revenues.
“Your university’s media revenues currently are not taxed because they are considered ‘substantially related to’ your tax-exempt purpose,” Cantwell wrote. “However, when a private, for-profit investor holds a stake in those revenues, it raises questions whether the revenue loses its connection to your institution’s educational purpose.”
The senator plans to propose legislation that addresses several financial aspects of collegiate athletics, including coaching salaries, contract buyouts, athletes’ name, image, and likeness, and tax implications based on whether college athletes are viewed as employees or independent contractors.
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