Taxes and charities have been intertwined in the U.S. for 100 years, ever since Congress introduced a charitable contribution deduction to the War Income Tax Revenue Act of 1917. The specific rules have changed over time, but for the past century Americans basically have been able to get a tax break for donating to charities, from their local churches to groups like the American Cancer Society to, more recently, the National Collegiate Athletic Association.
Yes, that's right—the billion-dollar entity that oversees college sports is actually classified as a tax-exempt organization under Section 501(c)(3) of the U.S. Tax Code, a category generally reserved for religious and charitable nonprofits but also corporations that "foster national or international amateur sports competition."
And Americans give charities a lot of donations: nearly half a trillion dollars in 2015, or about two percent of the GDP. All that tax-deductible cash comes with some restrictions, including a line in the tax code known as the Johnson Amendment, which prohibits charitable organizations from directly or indirectly participating in any political campaign activity.
While the Johnson Amendment was not particularly controversial in the 20th century, more recently it has come under fire from conservative lawmakers and the religious right. Shortly after his inauguration, President Donald Trump told an audience of religious leaders at the National Prayer Breakfast that he would "get rid of and totally destroy the Johnson Amendment." If Trump and Congressional Republicans follow through on that promise, the NCAA would also be free to remain tax-exempt while funneling cash directly to political campaigns and individual candidates, giving the organization an additional and powerful method of influencing lawmakers.
Why does that matter? Because those same lawmakers have the power to help or hurt the NCAA's agenda on a range of issues, from due process for athletes to a federal antitrust exemption that would eliminate ongoing legal challenges to its current ban on compensating players beyond the costs of their scholarships.
The NCAA already spends money on political lobbying. The organization's most recent publicly available financial disclosures show that it spent $580,000 on congressional lobbying in 2014, including $330,000 to D.C. power broker Brownstein Hyatt Farber Schreck, LLP. And this is legal, more or less.
"Charities can engage in an 'insubstantial' amount of lobbying," said University of Illinois law professor John D. Colombo, who authored the seminal Illinois Law Review article on the NCAA's tax exemption. "But since no one knows how to measure what is 'insubstantial,' in practice charities have considerable leeway to engage in lobbying."
What the NCAA and other 501(c)(3) groups can't do is give money to or attempt to influence candidates and campaigns directly. Not without risking their tax-exempt status.
Remove the Johnson Amendment's language from the tax code, and that would change. The NCAA would no longer be prohibited from donating to the campaign coffers of a politician like Rep. Virginia Foxx (R-NC), who in February called on National Labor Relations Board general counsel Richard Griffin to resign after Griffin issued a memo stating that football players at Division I FBS schools are employees under federal law and can seek protection against unfair labor practices.
Nor would the NCAA be barred from directly supporting electoral opponents of lawmakers such as Rep. Bobby Rush (D-IL), who in 2011 called the organization "one of the most vicious, most ruthless organizations ever created by mankind" and compared it to Al Capone and the Mafia.
"If the law is changed, I absolutely think the NCAA will engage in more political activity," said Dr. Thomas A. Baker III, a professor of sports management and policy at the University of Georgia. "I have no doubt the NCAA will start trying to influence individual campaigns."
When taxes are for other, less charitable organizations. Photo by Kyle Terada-USA TODAY Sports
Oddly enough, the NCAA has a group of loud preachers to thank for this potential political empowerment.
The Johnson Amendment gets its name from Lyndon B. Johnson, who proposed a tweak to the tax code language as a U.S. Senator in 1954. While recently the amendment has become a target of conservative Republicans, back then it passed through a Republican Congress before Republican President Dwight D. Eisenhower signed it into law.
According to the IRS, the Johnson Amendment prohibits all 501(c)(3) organizations "from directly or indirectly participating in, or intervening in, any political campaign on behalf of (or in opposition to) any candidate for elective public office. Contributions to political campaign funds or public statements of position (verbal or written) made on behalf of the organization in favor of or in opposition to any candidate for public office clearly violate the prohibition against political campaign activity."
Though Johnson appears to have been motivated largely by the opportunity to silence two specific far-right nonprofits that accused him of being a Communist, the general idea behind the rule—ensuring that tax-deductible money doesn't fund political campaigns—was at the time considered uncontroversial. Not anymore.
In 2008, a right-leaning Christian group called Alliance Defending Freedom launched a campaign to repeal the Johnson Amendment. Since then, the amendment has become a rallying point for religious conservatives who believe it unfairly restricts their freedom of speech, even though the IRS rarely investigates churches or other religious organizations for violating it.
A number of conservative churches have participated in Pulpit Freedom Sunday, in which leaders give highly political sermons and send recordings of them to the IRS as a polite Christian middle finger to the government. One contributor to the right-wing website Breitbart has dubbed the amendment the "Christian Gag Rule."
Without the Johnson Amendment, churches would be able to more directly participate in electioneering. So would the NCAA. What issues might prompt the organization to open its checkbook?
Without the Johnson Amendment, the NCAA would be free to donate to political campaigns and make endorsements. Photo by Bob Donnan-USA TODAY Sports
In the past, Congress has criticized the NCAA's refusal to provide due process in its disciplinary hearings. Federal lawmakers also have grumbled about removing the NCAA's tax-exempt status, which keeps the IRS away from the organization's roughly $1 billion in annual revenue, including $776.6 million from television rights fees.
"The NCAA's primary purpose as stated on its Federal Tax Return (Form 990) is 'to maintain intercollegiate athletics as an integral part of the educational program and the athlete as an integral part of the student body,'" said professional athlete tax advisor Christopher Cicalese. "While there are various exemptions from federal tax under Internal Revenue Code Section 501(c)(3), the NCAA's primary purpose can be interpreted to fall in line with the exemption for educational purposes or for fostering amateur sports."
Campaign contributions have a way of muting congressional carping. They also might help the NCAA receive a coveted antitrust exemption, which would allow the organization to maintain college sports amateurism and the financial control that comes with it, regardless of contrary federal court decisions.
The NCAA took a major hit in the O'Bannon case when the Ninth Circuit Court of Appeals ruled in 2015 that the association's amateurism rules are not immune from antitrust scrutiny. (The United States Supreme Court denied the NCAA's subsequent appeal.) Two subsequent antitrust lawsuits, Alston and Jenkins, seek to overturn amateurism in college sports completely.
"What worries me is how the NCAA will prioritize its political influence," Baker said. "If it puts athletics over education, then that gives me concern. Are you going to prioritize amateurism through possibly an antitrust exemption from Congress, or are you going to fight against budget cuts to research funding to your member institutions?"
Much like the rest of Trump's presidency, the consequences of his promise to "destroy" the Johnson Amendment are hard to predict, if he endeavors to follow through on it at all. If he does, however, the NCAA has several hundred million dollars in its reserves. Free to fund individual candidates and campaign for specific issues, why wouldn't it spend whatever it takes on Capitol Hill to protect its power and neutralize threats to its bottom line?
If Trump and Congress unleash 501(c)(3) nonprofits to wield their substantial, tax-exempt wealth in politics, they inadvertently could usher in a new era of college sports pay-to-play—except with the money going to politicians, and not athletes.
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