If College Sports Lose Tax-Exempt Status, Everything Changes
In nearly every serious policy conversation about the future of college sports — from NIL, revenue sharing, Title IX implications, and even conference realignment — there’s been one foundational topic that rarely gets mentioned aloud: tax-exempt status.
That changed this week.
According to USA Today reporting by Brent Schrotenboer, Senator Maria Cantwell (D-Wash.) sent a formal inquiry to the U.S. Congress Joint Committee on Taxation, asking them to evaluate the implications of removing tax-exempt status from the NCAA, its member schools, and affiliated athletic conferences. This isn’t just theoretical tinkering — it’s a bold suggestion that could fundamentally alter how college sports operates in the United States.
And while previous discussions about athlete rights and compensation have often operated within the existing college sports framework, this proposal strikes at the very structure of how the system is financially supported and justified.
We’ve Never Been This Close to Touching the Core
For decades, intercollegiate athletics have existed in a gray zone — part education, part entertainment, part business. The NCAA and its member schools have enjoyed tax-exempt status based on their affiliation with nonprofit educational missions. That has made sense historically: college sports were originally conceived as extracurricular activities tied to student development.
But let’s be honest — it’s been a long time since big-time college sports resembled student activities.
Coaches earning $10 million salaries, nine-figure media rights deals, private equity sniffing around realignment opportunities, and nearly $200 million in coach buyouts this season alone, these are not the behaviors of a traditional nonprofit. They’re the moves of a multibillion-dollar enterprise benefiting from the privileges of a tax-exempt ecosystem.
And now, lawmakers like Sen. Cantwell are asking the question that has been sitting just under the surface: Should they still get those privileges?
Why This Is a Ticking Time Bomb
If you’re an Independent Educational Consultant, an admissions officer, or just someone who follows the transformation of higher education, this proposal should make you pause. Removing tax-exempt status from athletic departments or governing bodies like the NCAA would be more than just a political statement — it would fundamentally alter the financial and legal framework of collegiate sports.
Athletic departments would be forced to:
Pay taxes on revenue from ticket sales, sponsorships, and broadcast rights
Report their activities differently under IRS regulations
Possibly restructure how they integrate with their university umbrella
And beyond that, we’d likely see pressure to change how institutions account for coaching salaries, facility expenditures, and booster contributions — all of which could fall under much more intense scrutiny if they’re no longer shielded by nonprofit status.
That means less financial wiggle room for sports programs and less institutional justification for building $100 million locker rooms. It also means universities would have to think harder about how athletic departments fit into their core educational mission, because without that connection, the whole system might start looking like a professional minor league in a cap and gown.
Is This the Trigger for Real Change?
Let’s be clear: this doesn’t mean anything is guaranteed to change tomorrow. Cantwell’s letter simply requests an analysis, which is a starting point for potential legislation. But this is the first time in recent memory a sitting U.S. senator has publicly proposed re-evaluating the nonprofit status of college sports — and not just in a rhetorical sense, but in the form of policy exploration.
It’s a major escalation of scrutiny. Previous federal efforts (like the 2017 excise tax on excessive nonprofit executive compensation) barely scratched the surface. That tax, which was supposed to limit excessive salaries in the nonprofit world, hasn’t worked. Top coaches still rake in tens of millions, and athletic directors’ pay is climbing, too.
This suggests lawmakers are starting to see the big picture: that piecemeal rules aren’t enough to control the financial boom happening in college athletics. If the system continues to benefit from tax exemptions, while simultaneously operating as a full-scale entertainment business, there will be increased pressure — from taxpayers and policymakers alike — to justify why.
And frankly, that pressure is long overdue.
What Would Actually Happen?
If tax-exempt status were removed, it wouldn’t just hit coaching salaries or media rights deals — it would touch every part of the athletic ecosystem, including:
How schools account for scholarship support
The tax implications of donor-funded collectives
Title IX enforcement under a reclassified financial model
University oversight of athletic department operations
It could also accelerate moves toward a professionalized model of college sports — one where revenue sharing, athlete unionization, and independent oversight become not just likely, but necessary.
And maybe that’s what some stakeholders actually want. Because once you cross that line — once you say this is a business, not an educational adjunct — you free yourself from having to pretend otherwise.
But let’s not kid ourselves. Changing the tax status of college sports would break a dam, not turn a faucet. It wouldn’t just adjust margins. It would redefine who gets to operate, who pays what, and which programs survive.
Final Thoughts: Don’t Ignore the Quiet Questions
Most people who work in and around college athletics understand that something has to give. The money, the lawsuits, the policy debates — they all point to a system under incredible strain. But until now, the biggest questions about structure, purpose, and accountability were too politically risky to name.
Not anymore.
Senator Cantwell just asked the question that could reset the entire model. Whether her inquiry turns into action remains to be seen, but it signals that the gloves are coming off. And if the tax code changes, the game as we know it won’t just evolve — it’ll be reborn under a whole new set of rules.
If you advise students and families about college opportunities, this is something to keep a close eye on. Because if the core model of college athletics is restructured, everything from recruiting timelines to scholarship availability to institutional priorities could look very different.
Source Referenced:
USA Today: “Senator questions fired college coaches’ buyouts, NCAA’s tax-exempt status” (Oct. 2025)
