Zzzz… wha’?

How bout this.

In fact, an analysis of Forms 990 for approximately 100,000 organizations filing the annual report to the IRS in 2014 published recently by the Wall Street Journal found 2,700 nonprofit officials were paid more than $1 million. Although most were administrators at hospitals and universities, there were also many football coaches and executives at endowments like the Harvard Management Company. Nonprofit organizations respond that they are trying to attract the best candidates and are merely adopting compensation practices similar to those in the private sector.

Get it? See what happened? TAKE TO THE STREETS. FLOOD YOUR REPRESENTATIVE’S OFFICE WITH EMAILS. THIS IS A SERIOUS MISCARRIAGE OF JUSTICE.

 

Do I need to spell it out for you? Do you see what’s happening here?

You want to spend your kid’s tuition money on sky-rocketing multimillion dollar salaries for coaches and on twenty million dollar a year compensation for university money managers, and here comes the IRS to tell you that these aren’t appropriate non-profit expenditures! They even have the gall to say that giving all that money to coaches and money managers diverts tax-exempt money from students and shit! Whatever that means.

So they’re putting a crushing new tax on excess non-profit compensation, which means universities are likely to pull back on these amounts and you will have to pay the managers and coaches less.

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I know. So far this is all numbers and abstractions. Here is an actual story, from the University of Kentucky, of how it will be.

“The excise tax that was levied in the new tax bill is big,” [UK athletic director Mitch] Barnhart said. “That will have an impact on every athletic department.”

A change in the tax code requires non-profit entities to pay a 21 percent excise tax on payments to its five highest-paid employees that are making more than $1 million a year.

For every dollar over the $1 million mark, UK must pay the 21 percent tax, which for UK Athletics includes the salaries of men’s basketball coach John Calipari, football coach Mark Stoops and women’s basketball coach Matthew Mitchell.

According to figures reported to the Chronicle of Higher Education in 2017, Calipari was the highest-paid person on campus that year at $7.24 million, followed by Stoops at $3.9 million and Mitchell at $1.28 million.

The university also will be paying the excise tax on the salaries of Phillip Tibbs ($1,195,600), a physician, and Michael Karpf ($1,123,179), who ran the medical center until recently, UK spokesman Jay Blanton told the Herald-Leader.

With the new salary bump and potential bonuses outlined in the new amendment to Barnhart’s contract, the UK athletics director might top the $1 million mark in the near future. His base salary will be $1,025,000 starting in 2020, per the amendment.

This year’s figures were a part of the $147.7 million dollar 2019 budget approved by the university’s Board of Trustees recently, simply noted as “escalating operating expenses.”

How will these escalating expenses be paid? The same way other expenses are.

“How we make up for it on the other side is really difficult,” Barnhart said. “We have to work at that.”

I know you can do it, guys! A grassroots campaign of outraged professors, students, and parents will take to the streets and have that punitive 21% rolled back before you can say Nick Saban.

*****************

Again, here’s the challenge, stated simply:

Every organization that pays a salary of more than $1 million per year to any of its top five earning employees will face a stiff new 21 percent excise tax. That means any nonprofit-designated charity, college, and hospital that routinely asks us for donations, or charges expensive tuition or medical bills will have to justify paying those high salaries against a hefty new tax.

Get out there and do what has to be done: justify.

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Know your enemies.

In [a recent] email to me, [tax law professor John] Colombo wrote, “Big time college sports is already a cesspool of money, and the federal government doesn’t need to be subsidizing 50-yard-line seats or skyboxes at the University of Alabama or Notre Dame, or Michigan or anywhere else.”

Amazingly, both the House and the Senate now appear to agree with Colombo. A spokesman for Kevin Brady, the chairman of the House Ways and Means Committee — and a Texan — told the Austin American-Statesman that the deduction is “the epitome of a special-interest loophole” and that it was forcing taxpayers to “subsidize front-row seats and luxury boxes for wealthy boosters.”

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7 Responses to “‘In applying this excise tax to nonprofit executives, the Ways and Means Committee Majority Tax Staff also raised the idea in its summary that highly paid nonprofit executives actually divert resources from exempt purposes. It states that exemption from federal income tax is a significant benefit for tax-exempt organizations, making the case for discouraging excess compensation paid out to such organizations’ executives perhaps even stronger than it is for publicly traded companies.’”

  1. charlie Says:

    I read the article. It doesn’t explain what is meant by “on the other side.” What I know of the Athletic Department admins, the other side means cutting academics in order to pay for this nonsense. That should be no surprise. University of Oregon, otherwise known as U of Owe, has its Associate Athletic Director under investigation for bribes regarding awarding the city of Eugene the Olympic trials. That didn’t stop UOwe from demolishing part of the track stadium to build some monstrosity that won’t be used more than a few times a year. All that, despite the fact that the WSJ ranks U of Owe dead last academically of all schools that comprise the PAC 12. At some point, one has to ask who would be stupid enough to attend unis such UKUOwe?

  2. MikeM Says:

    “Every organization that pays a salary of more than $1 million per year to any of its top five earning employers will face a stiff new 21 percent excise tax.”

    Pretty sure they meant employees, not employers.

    But my question is, why stop at five? What not ALL employees earning more than $1 million per year? And why limit it to salary? Why not total compensation?

    And for that matter, why limit it to direct employees? Why not also personal service corporations and LLC’s, both of which are common arrangements for medical school faculty and hospital administrators in particular.

    And how about annuities, life insurance and funding contributions to designated foundations (non-profit, of course)when those are built into the contract? Shouldn’t we have a provision that requires all post-employment financial obligations must be taxed AS IF received during the employment period? Close that loophole as well.

    And let’s not get too worked up about the hardship involved. After all, the excise tax is on the EXCESS over $1 million per year. The first $1 million is unaffected.

  3. Margaret Soltan Says:

    Mike: Didn’t notice the “employers” mistake – thanks.

  4. David Foster Says:

    I wonder how this works when large buy-outs / severance payments are involved.

  5. Margaret Soltan Says:

    David: I have to figure those amounts will be subject to the same punitive tax.

  6. David Foster Says:

    So, instead of getting paid an $8 million payout all at once, they get $1 million per year for 9 years….voila, no excise tax!

    Unless there is a provision in the tax code to do a present-value calculation for the stream of future payout, and basing the tax on that.

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    University Diaries » ‘In applying this excise tax to nonprofit executives, the Ways and Means Committee Majority Tax Staff also raised the idea in its summary that highly paid nonprofit executives actually divert resources from exempt purpo…

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