AMPed Up

The profit margin of college athletics

Former head coach and athletic director Frank Broyles calls the Hogs before the 2011 game with Auburn in Fayetteville. (AP file photo)

In the last few decades, revenue in college athletic programs has increased dramatically, which some believe weakens arguments by the National Association of Collegiate Directors of Athletics in the 1980s that the seat-purchase tax write off was necessary for the survival of college sports.

Last year the University for Arkansas football program, according to Fox Sports calculations, had a “profit margin” of $38 million, which includes profit from the $25 million it took in from broadcast deals through the SEC and NCAA.

The website academicscholarships.com estimates the total value of athletic scholarships for 127 Razorback football players to be nearly $5.2 million. Meanwhile, the UA athletics department reported $13.9 million in gifts and donations in 2014-2015.

This season Razorback athletics is spending a record $7.93 million on the salaries of football coaches, including a guaranteed $4.1 million for head coach Bret Bielema. The team is 5-3 overall, and 1-3 in SEC play.

Back in 1987, Razorback coaches went beyond mere football X’s and O’s.  They drew up and executed tactical plays in the political realm, too, by helping Mr. Broyles lobby Mr. Pryor against the IRS’ ruling.

In a letter to Henry Woods, Mr. Pryor’s congressional aide, defensive coordinator Fred Goldsmith thanked Mr. Woods for helping arrange a trip to D.C. that included then Razorback head football coach Ken Hatfield. Mr. Goldsmith also asked Mr. Pryor to officially join as a co-sponsor of one of a recently proposed bill that supported NACDA’s positions.

Fred Goldsmith

(From Pryor senatorial papers in the University of Arkansas Libraries’ Special Collection.)

Much of the back-and-forth on this issue from 1984 through 1988 involved the percent of deduction to be allowed and the number of schools to which it would apply. The short of it: Mr. Pryor’s efforts alongside those of fellow football-friendly senators helped push through legislation that overturned the IRS’ previous ruling.

They produced the Technical and Miscellaneous Revenue Act of 1988 which “permits an 80 percent income tax deduction of contributions to or for an institution of higher education, even if the taxpayer receives, as a result of paying such an amount, the right to seating or the right to purchase seating in the institution’s athletic stadium.”

This 80 percent deduction has remained in effect with little organized opposition since then. In 2015, President Obama unsuccessfully proposed an end to the write offs.

Perhaps football coaches don’t explicitly and directly petition politicians as they did in the 1980s, but in many parts of the Midwest and South a strong culture of mutual admiration persists. This affinity helps explain why the tax policies surrounding seat donations haven’t changed even though the earning power of college football has exponentially risen, and even as once-modest seat-donation schemes have become more lucrative than some TV deals.

It seems very few Congressmen want to change the way things are. “The politics of college football were such that you never won an election by punishing your flagship university,” Mr. Gaul wrote in Billion-Dollar Ball. “Think about it,” law professor/tax expert John Colombo told Mr. Gaul. “If you’re from Texas, do you really want to piss off every University of Texas supporter? At the end of the day there is no political upside and an enormous downside to going after college football.”

About the author

Evin Demirel

Evin Demirel

Evin Demirel, a Little Rock native now living in Rogers, often writes about the intersection of local sports, culture, race and business.

3 Comments

Leave a Comment