M E M O R A N D U M
To: Reporters and Editors
Fr: Jill Gerber for Sen. Grassley, 202/224-6522
Re: Report on college athletics
Da: Tuesday, May 19, 2009
Sen. Chuck Grassley, ranking member of the Committee on Finance, today made the following comment on a new report from the Congressional Budget Office entitled "Tax Preferences for Collegiate Sports." Grassley requested the report as part of his longstanding oversight of tax-exempt laws. The Finance Committee has jurisdiction over tax policy.
"The fact that congressional analysts had to rely on information collected by a major newspaper for source data highlights how little information is available about how these programs work. Given all the tax benefits involved, tight state budgets, and rising tuition despite the recession, it's pretty clear that Congress needs to engage and policymakers need to know more in order to act as responsible stewards of the tax policy that drives this fundraising and commercial activity. This report shows colleges receive tax benefits that aren't available to private businesses that engage in the same commercial activities. Colleges should explain how they use their commercial revenue to get the biggest bang for the buck in fulfillment of their educational mission."
Click here to view the report. The text of Grassley's request to CBO in April 2007 follows here.
For Immediate Release
Wednesday, April 4, 2007
Grassley Seeks CBO Analysis of Certain Aspects of College Athletics' Tax Exemption,
Universities' Tax-exempt Financing
WASHINGTON – Sen. Chuck Grassley, ranking member of the Committee on Finance, has asked the Congressional Budget Office to review the economic benefits received from the tax-exempt status of college athletics and the practice of colleges and universities' maintaining a large untaxed portfolio of assets while simultaneously borrowing with tax-exempt debt.
"Educational institutions represent a big part of the non-profit sector," Grassley said. "As part of reviewing non-profit practices, it will be helpful to get a better understanding of how colleges and universities use their tax-exempt status in certain areas. Congress needs to know whether educational institutions actually use their generous tax breaks to improve education, or whether the taxpayers are subsidizing other priorities."
Grassley's request comes as part of his broad look at the non-profit sector, aimed at making sure non-profit institutions provide public benefit in exchange for their tax-exempt status and are not misused for individual benefit at taxpayer expense.
The text of his letters to the Congressional Budget Office follows here.
April 3, 2007
Dr. Peter R. Orszag
Director
Congressional Budget Office
Ford House Office Building
Second and D Streets, SW, Room 402
Washington, DC 20515
Dear Dr. Orszag:
Educational institutions represent a large portion of the tax-exempt sector, and the commercialization of colleges and universities, particularly in the area of intercollegiate athletics, is an area of interest. I would like to gain a better understanding of the economic benefits received from the tax-exempt status of college athletics.
To accomplish this objective, I request the Congressional Budget Office to conduct a study of the following aspects of the tax-exempt status of college athletics:
? An analysis of what commercialization means in the context of nonprofit organizations and how it relates to the provision of social benefits that is a primary justification for nonprofit tax preferences;
? A description of how commercialization varies across the spectrum of colleges and sports;
? A discussion of the tax treatment of college athletic programs, including:
- the exemption from Federal income taxation and the operation of the unrelated business income tax;
- corporate title sponsorship payments;
- active royalty income;
- charitable deductions for booster programs, including those made for the right to purchase tickets; and
- the use of tax-exempt bonds to finance the construction and renovation of university athletic facilities.
? A discussion of the economic effects of the tax treatment of college athletics;
? A discussion of the distribution of tax benefits among the participants in college athletics including colleges, administrators, coaches, athletes, alumni, donors, and spectators;
? Guidance as to what types of additional reporting by colleges and universities to the Internal Revenue Service and the public would provide useful information with respect to the economic benefits received from the tax-exempt status of college athletics.
Sincerely,
Chuck Grassley
Ranking Member
April 3, 2007
Dr. Peter R. Orszag
Director
Congressional Budget Office
Ford House Office Building
Second and D Streets, SW, Room 402
Washington, DC 20515
Dear Dr. Orszag:
A recent CBO paper, Nonprofit Hospitals and Tax Arbitrage, highlighted the ability of non-profit hospitals to borrow through tax-exempt financing at the same time that they maintain large portfolios of assets – the earnings from which are not taxed because of the hospitals' tax-exempt status. The paper quantified the tax benefits going to the institutions, and discussed the implications of implementing a new definition of tax arbitrage to limit this practice. It also developed several measures of the effect of a change in the arbitrage definition on the tax benefits going to the institutions.
I note from page 9 of the report that this practice of maintaining a large untaxed portfolio of assets while simultaneously borrowing with tax-exempt debt extends to other nonprofit institutions, such as colleges and universities. I request that CBO undertake for colleges and universities a similar analysis to that in the December 2006 report. The report should examine the following issues:
? Changes over time in the volume of tax-exempt bond issuance;
? An examination of which institutions utilize tax-exempt bonds, and if possible, the uses of the proceeds;
? The scope of possible arbitrage profits and the possible effect of those profits in motivating borrowing;
? A comparison of the use of tax-exempt bonds across non-profit and public institutions;
? A comparison of the value of the subsidy from tax-exempt bonds to the costs of raising capital through the market;
? If possible, an examination of whether the subsidy affects the prices of services provided by the institutions;
? Guidance as to what types of additional reporting by colleges and universities to the Internal Revenue Service and the public would provide useful information with respect to the borrowing by colleges and universities of tax-exempt financing while maintaining large untaxed portfolios of assets.
Sincerely,
Chuck Grassley
Ranking member
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