The new tax bill that President Donald Trump’s signed Friday will add a tax to nonprofit organizations with employees making more than $1 million per year, meaning the Gophers likely have a new bill coming for football coach P.J. Fleck (whose salary averages $3.5 million) and men’s basketball coach Richard Pitino ($1.7 million).
This excise tax on those two salaries would cost the Gophers $672,000 per year.
Gophers officials on Thursday were working to grasp the full impact of the federal tax bill, after the House gave final approval and Trump signed it into law.
“The impact right now is to be determined, but there will be an impact,” said Jake Ricker, the Gophers’ director of strategic communications. “It’s a challenge that’s going to face every school in a Power Five conference.”
The University of Minnesota and other nonprofit organizations will pay a 21 percent excise tax on annual compensation above $1 million for the five highest-paid employees. At Minnesota, the only two athletic department employees making more than $1 million are Fleck and Pitino.
Michigan’s excise tax, for comparison, will be about $1.75 million per year, with football coach Jim Harbaugh ($7 million salary) and men’s basketball coach John Beilein ($3.37 million). Iowa’s tax will be about $911,000 for Kirk Ferentz and Fran McCaffery, and Wisconsin’s will be about $620,000 for Paul Chryst and Greg Gard.
“I don’t think this is going to impact coaches’ salaries,” said Tom McMillen, president of the LEAD1 Association, a organization that represents athletic directors. “I think schools are going to start cutting things that aren’t core to the business, and that could mean cutting from Olympic sports.”
Beyond the excise tax, the new tax bill on Trump’s desk also eliminates tax deductions for scholarship seating donations, which has turned into a critical component of Minnesota’s athletics budget.
The Gophers have scholarship seating programs for football, men’s and women’s basketball, men’s hockey and volleyball. In a statement posted this week on the Gophers’ official website, athletic director Mark Coyle said the school took in $11 million last year in scholarship seating donations, which made up about 10 percent of the total operating budget.
“This change to tax law would mean Scholarship Seating contributions will no longer be 80 percent tax deductible,” Coyle said in his statement.
The Gophers e-mailed renewal forms to football season-ticket holders Monday, offering the chance to pay their 2018 scholarship seating donations before Dec. 31, which would allow them to take the 80 percent deduction before the new law comes into effect.
According to USA Today, the new tax bill’s rules governing “unrelated business” could affect colleges that make money from a university golf course and sports camps. Gophers officials are studying how those rules will affect their bottom line.
“It’s certainly a concern,” Ricker said. “We’re still trying to figure out exactly how [the tax bill] will affect Minnesota.
“My number one concern is how will it affect our fans? We certainly want to do whatever we can to mitigate whatever impact this will have on them.”