Eds Update: Rep. Pascrell on College Coaching Salaries; Grand Canyon University Not a Nonprofit (for DOE purposes)

I previously noted the interest of Representative Bill Pascrell (D-NJ) in salaries paid by colleges to sports coaches, as demonstrated by the letters he sent to several of them. He has now released an official House Ways and Means Committee Subcommittee on Oversight report on this topic, including both the text of his letter and the responses of the nine addressees. In releasing the report, he stated:

Universities’ tax-exempt status is an important pillar of our higher education system, but it is not a blank check from taxpayers to dole out gargantuan coaching contracts with lavish benefits. The committee should consider reforming the excise tax on salaries over one million to apply to all colleges and universities. This would close a loophole that may enable some state universities to avoid the tax. It is also worth exploring whether profitable, multimillion dollar college athletics programs should be subject to the Unrelated Business Income Tax. We must consider whether tax-exempt educational activities and lucrative athletics programs should be treated differently. Certainly we can see that American students and American taxpayers deserve better

The report also includes as an Appendix a four and a-half page memo from the Congressional Research Service providing “Information on the Tax-Exempt Status of Colleges and Universities and Sections 4960 and 4958 of the Internal Revenue Code.” It is uncertain whether his yet-to-be-determined Republican successor as Oversight Subcommittee Chair will have any interest in this topic or the proposed reforms.

In other news, the U.S. District Court for the District of Arizona upheld the decision by the U.S. Department of Education refusing to recognize Grand Canyon University as a nonprofit. As posted previously, the Department decided the University, which had legally converted from for-profit to nonprofit status under state law and obtained tax exemption under section 501(c)(3), did not qualify as a nonprofit for purposes of Title IV funding. The basis for the decision is reported to be that the University has an agreement that continues to generate revenue for its former owner. (I have not been able to find a publicly available copy of the court’s decision; if any reader identifies one, please let me know and I will add a link to it.)

Lloyd Mayer