IRS Says Donations Made to Nonprofit NIL Collectives Are Not Tax Exempt

[FrancoPizza]

Colleges with their tax exempt status is a total joke also. No way they should have billions in endowments and be labeled tax exempt. Meanwhile tuition continues to rise much faster than inflation. Total BS

What is the historical reason for tax exempt status?

 

[Brooky03]

What is the historical reason for tax exempt status?

Why are schools tax-exempt? Or why does tax-exempt anything exist?

The answer is probably the same for both; an incentive to invest is something that serves public interests.

 

[ClamOtto]

Yes, the tax exemption for nonprofits, including schools, goes back to the late 1800s, before the federal income tax even existed. The more interesting part, to me, is how nonprofits came to be taxed on "unrelated business income." In the 1950s, NYU owned Mueller's Macaroni. This made the other other macaroni companies very unhappy because of the unfair advantage from the tax exemption. A member of congress argued during the debate that if something wasn't done, all the macaroni companies in the US would come to be owned by universities. As you can imagine, that was a scary thought, so the unrelated business income tax was born.

FWIW, income from athletics is generally exempt from unrelated business income tax because it furthers the schools' educational purposes...

 

[tbonezone]

Yes, the tax exemption for nonprofits, including schools, goes back to the late 1800s, before the federal income tax even existed. The more interesting part, to me, is how nonprofits came to be taxed on "unrelated business income." In the 1950s, NYU owned Mueller's Macaroni. This made the other other macaroni companies very unhappy because of the unfair advantage from the tax exemption. A member of congress argued during the debate that if something wasn't done, all the macaroni companies in the US would come to be owned by universities. As you can imagine, that was a scary thought, so the unrelated business income tax was born.

FWIW, income from athletics is generally exempt from unrelated business income tax because it furthers the schools' educational purposes...

don't we go to college to learn to use our noodles. both of them ?

 

[cto]

Why are schools tax-exempt? Or why does tax-exempt anything exist?

The answer is probably the same for both; an incentive to invest is something that serves public interests.

Without non-profits, everything (hospitals, schools, museums, performing arts institutions, vounteer food banks, social service organizations, environmental organizations, etc) would be owned and run by the government, and you would have no freedom of choice. And your taxes would be increased to fund them. I think it is called Communism.

 

[Eric15]

Without non-profits, everything (hospitals, schools, museums, performing arts institutions, vounteer food banks, social service organizations, environmental organizations, etc) would be owned and run by the government, and you would have no freedom of choice. And your taxes would be increased to fund them. I think it is called Communism.

But isn't there a third choice there, the private sector? I 100% agree with you that non-profits serve a very important societal purpose. I just didn't follow the binary choice between government and non-profits, and that no non-profits equals communism.

In order to have communism, you would have to eliminate all private property ownership and a profit-based economy with public ownership and government control of all means of production and natural resources. Obviously that's never worked well in human history and always leads to black markets and corruption.

 

[Orangezoo]

But isn't there a third choice there, the private sector? I 100% agree with you that non-profits serve a very important societal purpose. I just didn't follow the binary choice between government and non-profits, and that no non-profits equals communism.

In order to have communism, you would have to eliminate all private property ownership and a profit-based economy with public ownership and government control of all means of production and natural resources. Obviously that's never worked well in human history and always leads to black markets and corruption.

The private sector would need to carry enough return which challenges affordability further. So whether they charge much more to do so, subsidize it and give way to charging more for other products and services or have to receive massive tax breaks( effectively creating the same scenario as a non-profit), you end up landing back where you started. The private sector already does commit a lot of philanthropic grant money as it is even though they could certainly do more. That though is at the mercy of share holders etc.

Countries with poor education, Healthcare etc are riddled with lack of funding for those services often because it's private, govt or bust. Private doesn't see the benefit and govt doesn't have the resources. Thus the non profit model services an important purpose. It's far from perfect and no doubt there is abuse- especially when it comes to religious and politically affiliated non profits.

 

[Brooky03]

But isn't there a third choice there, the private sector? I 100% agree with you that non-profits serve a very important societal purpose. I just didn't follow the binary choice between government and non-profits, and that no non-profits equals communism.

In order to have communism, you would have to eliminate all private property ownership and a profit-based economy with public ownership and government control of all means of production and natural resources. Obviously that's never worked well in human history and always leads to black markets and corruption.

Non-profits are in the private sector.

 

[Orangezoo]

Non-profits are in the private sector.

Yes and no. Housing non-profits for instance drive much of their funding from HUD money and state/municipal grants. State HFAs receive their money from govt funding in large part too. So while not a government entity they are private maybe by default at best...

 

[Brooky03]

Yes and no. Housing non-profits for instance drive much of their funding from HUD money and state/municipal grants. State HFAs receive their money from govt funding in large part too. So while not a government entity they are private maybe by default at best...

They can get some (or a lot of) government/public funding, yes. It’s not a technicality that they’re private, though.

And not all non-profits are created equal, naturally.

 

[althea]

What a shocker..

NIL Deals: The "Hot Girl Problem" in NCAA

Explore how attractiveness is influencing NIL deals in college sports. Uncover the "hot girl problem" and the NCAA's response.

thesportsdaily.com

 

[Brooky03]

What a shocker..

NIL Deals: The "Hot Girl Problem" in NCAA

Explore how attractiveness is influencing NIL deals in college sports. Uncover the "hot girl problem" and the NCAA's response.

thesportsdaily.com

Both articles presume the NCAA punished Miami because of the 'hot girl problem' without really any evidence the NCAA cares at all why the girls got their NIL deals. I seriously doubt the NCAA has a problem with, or even an opinion about, attractive athletes getting money for being attractive. It would be weird if they did.

Attractive people get better stuff. That's life.

 

[0.2 YNdeeR]

Both articles presume the NCAA punished Miami because of the 'hot girl problem' without really any evidence the NCAA cares at all why the girls got their NIL deals. I seriously doubt the NCAA has a problem with, or even an opinion about, attractive athletes getting money for being attractive. It would be weird if they did.

Attractive people get better stuff. That's life.

They do, and that might be a rare example of a student's independent IP (NIL) value (outside of the team brand).

 

[orangecuse]

Had dinner last night with an econ professor from Georgetown. We were discussing the need for legislative change relating to endowment usage. Specifically leeway to increase, allow funds to be used for students to help offset the rise in tuition cost.
Higher education is facing some serious challenges. At the core is a shift in the valuation model. Simply put many are starting to question the value of a college education given the extreme cost.

Well, the reality is, other than a few specific professions, most, undoubtedly, learn 99% of their skills, knowledge, know how, etc. from their actual hands on work experience, training, etc. A four year degree in business administration and/or the many other similar walk in the park like degrees, etc. hasn't anywhere near the amount of weight, etc. as the sheer know how, knowledge, etc. gained from being on the job.

Problem for many degree less folks, was being able to get that "foot in the door" without the degree. If the "shift" in this valuation model really produces more steam in the years ahead, this likely will open that door for many, whom, for a plethora of reasons, chose a different path.

 

[kcsu]

Well, the reality is, other than a few specific professions, most, undoubtedly, learn 99% of their skills, knowledge, know how, etc. from their actual hands on work experience, training, etc. A four year degree in business administration and/or the many other similar walk in the park like degrees, etc. hasn't anywhere near the amount of weight, etc. as the sheer know how, knowledge, etc. gained from being on the job.

Problem for many degree less folks, was being able to get that "foot in the door" without the degree. If the "shift" in this valuation model really produces more steam in the years ahead, this likely will open that door for many, whom, for a plethora of reasons, chose a different path.

Im a history, law student who has run tech companies since i was 23. My education helped but its not a background for what i ended up doing. Im sure that the majority of college graduates would say the same.

 

[CuseFaninVT]

I have made similar comments that these colleges with massive endowments have essentially become hedge funds that also run schools on the side. Of course I was told I didn’t know what I was talking about by a very influential poster. It’s an exaggeration, but it’s true.

Even when you’re right you still have no idea what you’re talking about.

 

[Orangezoo]

They can get some (or a lot of) government/public funding, yes. It’s not a technicality that they’re private, though.

And not all non-profits are created equal, naturally.

Correct and some semantics at play here.

Have worked with or for non profits for almost 20 years so very much wheelhouse. It's a technicality in the sense many serve a public good/need purpose is what I am getting at. They offer services at no cost in many cases - especially within housing, financial literacy and others. Non profits for political and religious purposes are some of the most abused out there.

 

[Orangezoo]

Well, the reality is, other than a few specific professions, most, undoubtedly, learn 99% of their skills, knowledge, know how, etc. from their actual hands on work experience, training, etc. A four year degree in business administration and/or the many other similar walk in the park like degrees, etc. hasn't anywhere near the amount of weight, etc. as the sheer know how, knowledge, etc. gained from being on the job.

Problem for many degree less folks, was being able to get that "foot in the door" without the degree. If the "shift" in this valuation model really produces more steam in the years ahead, this likely will open that door for many, whom, for a plethora of reasons, chose a different path.

Networking and foot in the door are a help. That said work ethic and values prior to graduating in HS often matter a lot too. For some college is an introduction to responsibility for others it's a formality to get the grades you need and the degree to use in your job search. So it's value can vary irrespective of it's direct relationship to the profession you ultimately land.

 

[storange]

crap, there goes that 200 grand !

 

[NYCCuse826]

Networking and foot in the door are a help. That said work ethic and values prior to graduating in HS often matter a lot too. For some college is an introduction to responsibility for others it's a formality to get the grades you need and the degree to use in your job search. So it's value can vary irrespective of it's direct relationship to the profession you ultimately land.

The networking aspect of college is very overrated if you're not an elite school or one that has significant pull in your region. Even then, you tend to see how strong your network is in times of tight labor markets among other things. I've been fortunate to get help from very influential people in the SU community and help others, I don't attribute any success I've had post grad to someone putting me in a position to win.

 

[Orangezoo]

The networking aspect of college is very overrated if you're not an elite school or one that has significant pull in your region. Even then, you tend to see how strong your network is in times of tight labor markets among other things. I've been fortunate to get help from very influential people in the SU community and help others, I don't attribute any success I've had post grad to someone putting me in a position to win.

This is your story and anecdotal. Not knocking you but with many years of experience in hiring plus my own rural background compared to the opportunities opened and networks created via college for myself, those I know and those I've hired and managed many not from elite schools.

Networking still requires effort. It's a tool that a college education affords you. If you don't make the effort to use it- it's not college or the level of the colleges prestige that failed to provide it.

Also as an example- I grew my career as did others at the beginning of the crisis- the tightest labor market since the s&l crisis. Thankful to SU for being an useful resource for that. So as I said there is value in one way or another depending on your background but you still make your own destiny.

 

[althea]

Even when you’re right you still have no idea what you’re talking about.

Aww, you’re so cute!

 

[cusefan88]

In this narrow use of NIL/tax-exempt I'm happy about this ruling. People donating money to collectives to induce recruits to their school and using it as a tax advantage is BS.

 

[Orangezoo]

In this narrow use of NIL/tax-exempt I'm happy about this ruling. People donating money to collectives to induce recruits to their school and using it as a tax advantage is BS.

I'm hoping that a players association type of setup for all athletes not just football (for purpose of video game) can get some traction so the kind of agreement pros have in terms of getting 2/3 of jersey sale revenues etc can be established as the norm.

 

[pfister1]

I am still firmly in the camp that each sport should establish a true minor league and kids should go to college for the education, not because its the ONLY path to pursue their professional sports dreams. If they have no interest in education, they shouldn't have to go because it is the only viable path to the next level. This is about the only thing that baseball does better than the others. (That stinking "pitch clock" is a joke)

Just like with athletics, if they happen to be an outstanding violinist, debater or stage performer than there might be a scholarship available to incent them to participate in that activity at a particular institution.