Michael Lissack for its members with ABC in 1990. All this commercial revenue is off the tax rolls. The colleges don’t pay a penny in taxes on it. To most Americans, it’s no secret that big-time college sports are big business. But the IRS doesn’t see it that way. As a result, you help subsidize these lucrative games in sev- eral ways. College sports programs are conducted under a broad grant of tax-exemption. In essence, Congress and IRS ruled that college sports are not businesses or entertainment, but educational activities. As a result, hun- dreds of millions of dollars of income from television broadcasts, advertis- ing, royalties, licensing fees, and ticket sales are swept off the tax books each year. And into the universities’ till. Take Notre Dame. In 1990, university officials signed an unprecedented agreement with NBC to broadcast its six home football games. The five-year deal was reported to be worth $35 million, or about $1.2 million a game. Perennial football powers such as Penn State, Michigan, Miami, and Florida State routinely pick up millions of dollars from football broadcasts. Income from year-end bowl games, also tax-exempt, adds $50 million more to these schools. Critics say it would be one thing if the profits from these events were used to lower tuition or pay teachers’ salaries or were used for some other truly educational activity. But by and large, they are not. Usually, the money helps to underwrite other sports programs or to pay big salaries and bonuses for coaches. It hasn’t always been this way. Once, for-profit and nonprofit groups had very different missions and operated in very different ways. For-profit companies built markets and made money. Their managers took risks and were well paid-or fired-for their performance. The purpose of not-for-profit groups was to provide important community services that would otherwise fall to government. Charities and nonprofits relied on contributions from the public and used the money to provide free services-what most Americans think of as charity. The tax exemption was granted in recognition of these services. Today, many large nonprofits are indistinguishable from for profit com- panies. They make millions of dollars in profits. They have millions of
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