Like other non-profit organizations, colleges will be responsible for paying a 21% excise tax on annual compensation above $1 million that goes to any of the organization’s five most highly compensated employees. The tax is set to take effect on compensation earned, beginning Jan. 1. It also will be applied to certain types of what the legislation calls “parachute payments,” or separation payments like a buyout. At many FBS schools, coaches and/or the athletic director are among the institution’s five highest-paid employees and making more than $1 million.
"That’s not tax reform – that’s trying to discourage seven-figure payments to college sports figures and pick up a little revenue,” said Duke law professor Richard Schmalbeck, who has been a longstanding critic of the deduction for college-sports donations that provide seat-purchase privileges.
According to data compiled by USA TODAY Sports, in the sport of football alone, there are 90 head or assistant coaches making more than $1 million this season. It’s possible not all of those coaches are among their respective schools’ five highest-paid employees, and certain forms of deferred compensation will not be subject to the excise tax. But based on pay for the 2017 season, 65 public schools would have faced a combined total of about $30 million in tax just for their football coaches. (Private schools will be subject to the tax.)