In his last nationally televised interview before election day, President-Elect Barack Obama came out in support of an eight-team college football playoff. The pundits were quick to note that the President has little power to change the way the NCAA chooses its champions.
Boy, were they wrong.
Forcing the NCAA to institute a Division I Bowl Subdivision Playoff would actually be a trivial matter for the President. How?
The tax system.
The IRS makes administrative decisions related to tax policy, and, as an administrative agency, the buck ultimately stops with the President as far as administrative policy is concerned.
Just how involved the President should be with the internal decisions of a government agency has been controversial, but should President Obama choose to get his hands dirty, he would certainly be able to do so. The heads of the agencies ultimately answer to the President.
The most obvious pressure that the IRS could put on the schools is through a reinterpretation of the scholarship rules.
Currently, athletic scholarships are not considered taxable income to the players, despite the fact that, by the letter of the law, the tax code seems to suggest that they should be.
The basic rules for whether scholarships are includible in taxable income are found in Section 117 of the Tax Code. However, the operation of these rules is ultimately dictated by the regulations issued by the IRS. Under these regulations, specifically Section 1.117-6(d)(2), the ultimate test is “whether or not the services that are being performed are primarily for benefit of the grantor.”
The services performed by college football players definitely seem to qualify. Big-time college football rakes in millions for the schools, and while some players may go on to play pro ball, the vast majority don’t.
Sure, there are other benefits to the players. Playing for a big-name school often means name recognition, which can translate into a post-graduation job. Also, college football players often get the benefit of being plugged into a large alumni network, which often can be a huge benefit in their careers.
Obviously, there are intangible benefits as well. Players learn values like teamwork, leadership, and discipline, to only name a few.
Nevertheless, stacking those benefits against the billions of dollars generated for the schools makes it hard to suggest that the schools’ primary purpose is to teach the players leadership.
And yet, college football players’ scholarships are not considered taxable income. Why?
Because the IRS would have to be politically suicidal to suggest that they were.
There are a whole lot of college football fans in Congress, and Congress represents millions more. Even in this era of congressional inaction, it would take mere days for Congress to rewrite the Tax Code to specifically exempt college football if the IRS were to decide that athletic scholarships are taxable income.
Then would come the congressional hearings. In these hearings, which would be covered live not just on C-SPAN but likely on ESPN as well, the agency heads would be asked repeatedly why they hate America, and whether the President knew that he had appointed unpatriotic, football-hating communists to lead the IRS.
The President would have no choice but to kick those agency heads to the curb.
Unless, of course, the agency heads could respond, “We considered the question carefully, and given that the NCAA has stubbornly refused to act in the best interest of the players by instituting a college-football playoff, we were forced to conclude that college football is an institution primarily geared towards enriching the schools and the bowls. As such, the services provided by the student-athletes are clearly primarily for the benefit of the schools, and thus the athletic scholarships are taxable income.”
We’d have a playoff the very next season.
Why? Because all of a sudden all those student-athletes would be forced to pay tax on all that free tuition. Room and board. Meals. Equipment. It adds up quickly, and once it becomes taxable, at least some of the best athletes would be cut out of the system.
More importantly, though, the college presidents would suddenly find themselves answering questions about why they’re not acting in the best interest of the athletes.
“If the schools can save students millions of dollars in taxes simply by going to a playoff,” the newspapers would ask, “why aren’t they doing so?”
It wouldn’t take long before the college football presidents were forced to change the system.
Far-fetched? Maybe. President Obama will face hundreds of more pressing problems when he takes office, and he would likely be unwilling to spend political capital in a showdown with Congress over college football.
Still, a playoff system is clearly The Change We Need.