A Funny Thing about Charities ... Some of Them Play Football

501(C)3

Are College Football Bowls Entitled to IRC 501(c)(3) Tax Exempt Status?

There's only a few weeks left in college football's regular season, and after that, the various bowls will invite teams to participate in post-season play. Several of the bowls are famous and esteemed, their mere mention being enough to make any die-hard football fan giddy. The Fiesta Bowl ... the Orange Bowl ... the Sugar Bowl ... the IRC 501(c)(3) Bowl. Well, maybe not the last one, but for the first three bowls, having sec. 501(c)(3) status is just as important as name recognition. This status, however, has recently come under scrutiny.

In September, Playoff PAC filed a formal complaint with the IRS, challenging the sec. 501(c)(3) tax exempt status of the Fiesta Bowl, Orange Bowl, and Sugar Bowl. These Bowls, all part of the Bowl Championship Series (BCS), claim to be public charities (think Red Cross or Meal-on-Wheels but with college football). In challenging the Bowls' tax exempt status, Playoff PAC highlighted the following:

  • The use of charitable funds to pay excessive executive salaries and provide unnecessary perks, including sweetheart loans, first-class flights, and private club dues
  • The use of charitable funds to pay undisclosed lobbying fees in violation of federal tax law's disclosure requirements
  • The use of charitable funds for political contributions
  • The frivolous use of charitable funds vs. the non-use of funds for charitable giving

In light of the accusations, can these Bowls maintain their sec. 501(c)(3) status?

The Bowls don't pass the smell test. Jordan Fabian of The Hill reports that four congressmen recently sent a letter to the IRS, asking the IRS to carefully examine Playoff PAC's complaint. The letter underscores possible violations related to "unreasonably high compensation, 'private inurement,' unpaid tax for 'excess benefit transactions,' undisclosed lobbying expenditures, political intervention, and spending on questionable items."

Lawmakers want IRS to probe college bowls' tax status

It's all on the up-and-up: Despite the figures, the Bowls, as reported by Curtis Eichelberger of Bloomberg, refute the attack upon their tax exempt status by pointing to yearly IRS audits, the use of executive compensation analysts, and continued funding of scholarships and youth sports.

College Football Playoff Backer Files Tax Complaint Against Bowls

This is nothing more than giving it the old, college try: While a nice attempt, Caleb Newquist of Going Concern thinks it's going to take more than "exorbitant salaries" and perks to make a convincing case against the Bowls.

Anti-BCS Group Sics IRS on Bowl Games Over Tax-Exempt Status

It's not just the fish; it's the pond too. Truth be told, the main goal is to force a college football playoff, and as reported by Tim Lemke of The Washington Times, President Obama, who prefers a playoff, could conceivably force a playoff system by skipping the Bowls and, instead, focusing on the NCAA's tax-exempt status.

Obama's BCS options

 

RELATED LINKS: For further insight on the application of IRC § 501(c)(3), see:

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