Should College Football’s Biggest Bowl Games Be Allowed To Call Themselves Charities?

This is the final part of a three-part series about college football’s bowl system, the Bowl Championship Series. Read Part 1 and Part 2.

Alabama trounced LSU 21-0 in last night’s Bowl Championship Series National Championship game, earning the school’s 14th national championship. But while the game settled questions regarding who receives college football’s top prize, many other questions about the BCS remain unresolved.

The BCS, a consortium of the 11 Football Bowl Subdivision conferences and the University of Notre Dame, manages college football’s five biggest bowl games — the Rose, Fiesta, Orange, and Sugar bowls and the BCS National Championship. Because those bowls are set up as tax-exempt, nonprofit charities, they pay little, if any, taxes on huge profits, even as they receive millions in taxpayer subsidies from state and local governments.

Amid recent scandals and reports involving the Fiesta and Sugar bowls, critics have raised questions about why the games are classified as charities and whether they should continue to be classified that way in the future.

The question of whether bowl games should or should not be classified as nonprofit charities is ultimately up to the IRS. But recently, public scrutiny toward the BCS has intensified. The Department of Justice is investigating whether the BCS violated federal antitrust laws, and after scandals involving potentially illegal political donations from Sugar and Fiesta Bowl employees to officials in Arizona and Louisiana, anti-BCS group PlayoffPAC asked the IRS to investigate multiple bowls. That bowl CEOs are making, on average, more than $500,000 a year and spending money on lavish trips for executives, donors, and other affiliates has raised even more questions and prompted an internal investigation at the Fiesta Bowl.

Bowl games claim that they are nonprofit charities by touting the fact that they generate hundreds of millions of dollars in economic benefits for state and local economies, help universities, and provide aid to charities in the communities that host the games. But separate investigations into such claims have found that the bowls provide much less aid than they claim, particularly to public universities and local charities. An HBO Real Sports investigation, for instance, found that while bowls claim to give “tens of millions” to charity, they actually gave just $4 million in 2009 — despite generating $261 million in revenue.

BCS officials did not respond to requests for comment on the bowls’ nonprofit statuses. But Dan Wetzel, author of Death To The BCS, laughed off the notion that the BCS games were comparable to smaller, more traditional charities. ”They classify themselves as charities, and say they give a certain percentage to local charities,” Wetzel told ThinkProgress. “But the idea that this is the homeless shelter down the street is ridiculous. It’s not.” Of the bowls’ classifying as nonprofit charities, Wetzel said, “It’s a sleight of hand.”

Meanwhile, the games are generating huge profits and giving CEOs huge salaries. The Sugar Bowl, which hosted its own bowl and the BCS title game in New Orleans this week, made $11.6 million in tax-free profits in 2007, the last time it hosted both games. And the schools that participate, most of which are taxpayer-financed public universities, continue to lose money at alarming rates just to play in the games.

Calls for changes to the BCS from fans, newspaper columnists, and even President Obama have thus far gone unheeded, though there are signs that changes in structure could come when the organization’s current contract with the six major athletic conferences ends in 2014. But when it comes to using their nonprofit status to avoid paying taxes, the bowls may have too sweet a deal to change unless the IRS forces it upon them.

“Just like most things in America, there’s a problem, and somebody is profiting off of it,” Wetzel said. “It’s a massive boondoggle.”