Big Time College Sports Teams should lose their tax exempt status

 Was the focus on an opinion piece in the Washington Post, "It’s a strange ‘charity’ that pays fired football coaches $228M," calling attention to the high salaries of coaches and the outlandish costs of contract buyouts.  

In Pennsylvania, some county courts have ruled that the high salaries of nonprofit hospital presidents are such that local properties may/or not be eligible for tax exempt status, because the impact is similar to for profit hospitals ("“Eye-popping” executive salaries led these hospitals to lose their property tax benefits," Lown Institute).  But two years later, the Philadelphia Supreme Court reversed the decision ("Pennsylvania court rejects nonprofit hospital property tax exemptions," RSM).

One of the issues, is like with professional sports where private equity is increasingly buying into teams ("What is behind the growth of private equity in sports?," JPMorgan), is that the same thing is on the verge with college football and related sports.

In the past five years, private equity firms have acquired stakes in teams across all four of the major U.S. professional sports leagues (NFL, NBA, MLB and NHL), and nearly one in five teams now has some level of PE involvement. What’s driving this surge?

Sports team ownership was once the preserve of the uber-wealthy, and that is still largely the case. But as the total valuation of sports teams in the four major leagues approaches $500bn, and with the average NFL team valued around $7bn, some franchises are growing even beyond the means of the wealthiest buyers. Private capital investors taking minority stakes allow ownership and risk to be shared among a larger group of investors, bringing an infusion of cash for opportunities such as the development of stadiums and surrounding properties.

The University of California private equity investment fund wants to buy into the BIG Ten League ("Michigan is a hard no. Where does Ohio State stand on Big Ten private equity deal?" USA Today, "But some of the universities like Michigan, are opposed ("UC Investments puts $2.4 billion Big Ten deal on hold amid pushback from Michigan and USC," New York Times).  From USA Today:

As part of the proposed deal, UC Investments would earn 10% of the Big Ten’s media and sponsorship rights earnings for 15 years, after which it could sell its stake. The remaining 90% would be divided among the schools, with payouts varying based on a university’s earning potential.

... At a previously scheduled meeting of Michigan's Board of Regents in October, members Jordan Acker and Mark Bernstein criticized the idea of bringing private equity into the conference, calling the deal "reckless" and "short-sighted." Bernstein, the board's chairman, specifically compared the deal to a "payday loan."

One of those members went as far to say that Michigan would consider leaving the Big Ten when the current media rights deal expires in 2036 if the deal goes through without unanimous approval.

... USC has also expressed some concern with the deal, though it hasn't gone as far as Michigan. USC's issue seems to stem from its position outside the top tier of member institutions. The deal currently calls for a tiered distribution of funds based on a school’s market value. Ohio State, Michigan, and Penn State would be in the top tier and could receive as much as $190 million. The other schools would get anywhere from $110 million to $150 million.

But University of Utah, a decent football team but not often in the top 10, just pulled the trigger, and sold a portion of its sports operation to Otro Capital ("Utah approves partnership with private equity firm," ABC).  The expectation is that the sale will generate $500 million.

Otro Capital, based in New York, is the first for-profit company that will handle finances for Utes athletics. Decisions will still be made by athletic director Mark Harlan, but a new company called Utah Brands & Entertainment will oversee the department’s resources. Otro Capital will be a minority owner in Utah Brands & Entertainment. This will mark the first university partnership with a private equity firm in college sports.

(Rick Egan | The Salt Lake Tribune) Rice-Eccles Stadium on Saturday, Sept. 6, 2025.

Utah Brands & Entertainment will preside over tickets sales, stadium events, broadcasting, concessions, licensing, brand content and finance. However, coaches and athletes will remain with the athletics department. Fundraising will also remain with the school.

Also see "The risks and rewards of Utah’s private equity plans: Will others around college sports follow?," The Athletic.

Separately, Travis County, Utah is suing the University of Texas Club, a members-only private club that is an operation separate from the University, for property taxes ("Travis County sues UT Club over unpaid property taxes," Daily Texan).  It's reasonable as its a for profit business that happens to be located on nonprofit land.  There's really no public purpose.

Travis County filed the lawsuit on behalf of the Austin Independent School District, the city of Austin, Travis County, Travis County Health Care District and Austin Community College, which are all eligible to receive the county’s local property taxes, including taxes from the club, according to the lawsuit.

At the club’s cheapest membership level, it requires a $350 initiation fee and $125 monthly dues for non-faculty and staff members, according to the club’s website. It was recently renovated in 2024 and is the “epicenter of exquisite dining, first-class events, lively watch parties, vibrant social gatherings, and a celebration of Texas sports,” according to the website.

Increasingly, especially with massive television broadcast rights payouts, it seems that college football teams, and basketball, should be responsible for the payment of Unrelated Business Income Taxes (UBIT) as television revenues should not be considered a primary purpose of providing football as a university spectacle or opportunity for student athletes.