Collegiate Athletics and the Unrelated Business Income Tax

In recent years, many university athletic programs have turned to program and scoreboard advertisements, corporate sponsorships, and other nontraditional sources of revenue to supplement their operating budgets. As confirmed by several high-profile court cases, these nontraditional revenue sources can be subject to federal unrelated business income tax—-a consequence often overlooked by athletic administrators and those involved in sport management programs. This article discusses the unrelated business income tax and its impact on collegiate athletic programs. Court cases and Internal Revenue Service pronouncements are reviewed, where applicable. Compliance and planning issues are also briefly addressed.