Congress continues to take swipes at college athletics.
As athletic departments scramble to identify new potential sources of revenue if fundraising declines thanks to a provision in the House of Representatives tax plan that would end tax deductible donations for ticket purchases (currently 80 percent of ticket donations are taxable), they're getting hit again — this time by the Senate tax plan.
Currently, non-profits are exempt from paying federal taxes on their income, which includes royalties from use of their name and logo. Under this plan, that revenue would be taxed at the corporate rate of 20 percent, which could be a huge sum of money for some schools (e.g. The News & Observer says that it would cost North Carolina around $700,000 annually).
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In the Description of Proposal in Section L, it states the following:
"Specifically, the proposal amends section 513 (regarding unrelated trades or businesses) to provide that any sale or licensing by an organization of any name or logo of the organization (including any trademark or copyright related to a name or logo) is treated as an unrelated trade or business that is regularly carried on by the organization.
"In addition, the proposal amends section 512 (regarding unrelated business taxable income) to provide that income derived from any such licensing of a name or logo of the organization is included in the organization’s gross unrelated business taxable income, notwithstanding the provisions of section 512 that otherwise exclude certain types of passive income (including royalties) from unrelated business taxable income."
If both pieces of the tax plans (deduction for ticket-related donations and royalty taxes) are included a final tax plan that passes, college athletic departments will almost assuredly see seven- or eight-figure hits to the annual revenue.