Many people will benefit from the Republican tax bill that passed the House and Senate this week. Not among that many, however, are major college athletics programs.
The bill includes a provision that puts an additional tax on the most highest-paid employees at nonprofit organizations, reports USA Today.
For many colleges, that includes the football and men’s basketball head coaches.
How does this work?
Nonprofits, including colleges, will have to pay a 21 percent excise tax on annual salaries above $1 million, if those salaries belong to any of the organization’s five most highest-paid employees.
As an example, take Alabama’s head football coach Nick Saban. His base annual salary is $7.125 million for 2018. This tax means the university will have to pay an additional $1.2 million in taxes on that salary.
What is the impact?
According to USA Today, 90 head or assistant football coaches make more than $1 million per year, and based on 2017 salaries, 65 public schools would have paid a combined $30 million in tax just for their football coaches.
With many college budgets already tight, that money has to come from somewhere.
“That figure will have to either be passed on to ticket-holders and donors, or taken out of the budgets of sports that are not … being targeted by the federal government,” Iowa State Athletic Director Jamie Pollard said.
Schools also could see a decrease in donations, due to the elimination of tax deductions that donors have received in the past for donations that give them the right to purchase premium tickets.
Is this necessarily a bad thing?
Some have argued for a long time that the salaries for college sports coaches are out of control, and should be regulated. This tax could make schools think twice before offering a massive contract to a new coach.
"That’s not tax reform – that’s trying to discourage seven-figure payments to college sports figures and pick up a little revenue,” said Duke law professor Richard Schmalbeck.