IRS Investigating Tax-Exempt Status of Highly Paid College Coaches
Being a college coach comes with financial perks. The average college football coach makes over a million dollars a year, something that has caught the attention of the IRS.
Many people do not realize it, but colleges have tax exempt status. This gives them a lot of leeway to bring in revenues, but there are major restrictions on how one can spend the money. The non-profit structure requires reasonable salaries and such when it comes to employees and officers.
The IRS has announced a pilot program to take a closer look at how colleges are complying with the rules regarding tax exempt entities. The area has not been looked at for a very long time, so there is a general suspicion that these institutions of higher learning are flaunting more than a few of the rules.
One area of great interest is the compensation paid to coaches. Generally, the highest paid individual in the sports department is the head football coach. Last year, the average compensation paid to them was $1.3 million dollars. At larger schools like Oklahoma and Florida, the compensation packages top the four million dollar figure. This is rather odd when it comes to a tax exempt entity where such high compensation payments are usually discouraged.
The IRS has sent out information questionnaires to over 400 schools. The audit process is being put together and one can expect an avalanche of investigations as the IRS gets rolling and schools react. The first school up in the audit process is Georgia, which must make others in the SEC nervous.
Will the audits change what coaches are paid when it comes to college sports? It is unlikely, but one can never be sure when the IRS is involved.