Ole Miss Persuades Tax Court Judge to Slash Tax Bill in Half, a Tax Victory for Athletic Programs
Ole Miss successfully convinced a tax court judge to reduce the university’s tax liability by 50 percent with respect to revenue the school brought in by sending its coaches to Nike and Coca-Cola sponsored functions.
In August 2015, the IRS notified the university that the income received for these appearances were taxable under IRC sections 511-513, because it constituted “unrelated business income” for exempt organizations. Ole Miss responded by filing a petition with the tax court disputing its tax liability in late 2015, arguing the university coaches’ appearances at such functions were conditions of its sponsorship and were directly related to the school’s tax-exempt purposes, which should have insulated it from tax liability.
As a result of Ole Miss’s victory, coach appearances that bring in sponsor payments are shielded from unrelated business income tax liability under the tax code, by virtue of such appearances relating to the school’s tax-exempt function of promoting athletic programs.