By Mike Parker
Kinston Free Press
October 5, 2016
Late last Monday, the National Collegiate Athletic Association (NCAA) pulled seven championship events from the North Carolina, citing HB2 as the reason. Two days later, the Atlantic Coast Conference (ACC) followed in lockstep, pulling 10 conference championship events from this state.
“Fairness is about more than the opportunity to participate in college sports, or even compete for championships,” said NCAA president Mark Emmert in a statement.
“We believe in providing a safe and respectful environment at our events and are committed to providing the best experience possible for college athletes, fans and everyone taking part in our championships.”
“The ACC Council of Presidents made it clear that the core values of this league are of the utmost importance and the opposition to any form of discrimination is paramount,” Commissioner John Swofford said in a statement.
“Today’s decision is one of principle.”
Please understand that both the NCAA and the ACC are 501(c)3 organizations. One of the core values of organizations operating under the non-profit code is that those with the 501(c)3 designation cannot engage in political activity.
According to “The NCAA, Tax Exemption, and College Athletics” by John D. Columbo of the Illinois University School of Law, in order to operate as a 501(c)3 organization, an organization must meet two criteria. In an article published Jan. 4, 2010, he outlined those criteria in these words:
“First, the entity must be properly organized as a charitable organization. This ‘organizational test’ generally means that it must observe certain organizational technicalities: it must be organized as a state-law nonprofit organization (either a nonprofit corporation or charitable trust), must limit its authorized activities to charitable ones, and must have a provision in its organizing documents that its assets will be transferred to another charity or to the government if it goes out of business.
“The second general requirement is the ‘operational test’ and is where the real action is. The operational test requires that the entity in question actually must engage ‘primarily’ in charitable activities, such as educational activities. But the statute and common law also have specific operational limitations that an organization must observe in order to qualify as charitable: for example, an organization cannot engage in more than an ‘insubstantial’ amount of legislative lobbying and cannot intervene in any way in a political campaign.”
Given those two criteria, the NCAA and ACC meet the first criteria, but both fail the second criteria.
IRS Publication 4221 is titled: “Compliance Guide for 501(c)(3) Public Charities.”
The section of this publication that deals with what Professor Columbo refers to as “lobbying” says:
“A public charity is not permitted to engage in substantial legislative activity (commonly referred to as lobbying). An organization will be regarded as attempting to influence legislation if it contacts, or urges the public to contact, members or employees of a legislative body for purposes of proposing, supporting or opposing legislation, or advocates the adoption or rejection of legislation.”
The clear purpose of the action of both the NCAA and the ACC is to influence legislation in North Carolina. Any private person, including Mark Emmert and John Swofford, may use any legitimate means to influence legislation. However, organizations that present themselves as 501(c)3 non-profits must abide by the rules of the IRS Code.
Another issue making the actions of the NCAA and ACC more egregious is that HB2 is currently being challenged in the courts. Shouldn’t all parties concerned have their day in court? If the NCAA and ACC feel strongly about the unconstitutionality of HB2, then their attorneys should file a “friend of the court” brief to bolster the case against HB2.
My guess is both organizations have probably already filed such briefs — which I believe is legitimate under the rules for a 501(c)3 organization. Operating through legal channels is not the same thing as using economic pressure and publicity to influence legislation. Both the NCAA and ACC advocate the repeal of HB2. However, pulling a total of 17 championship events from this state does not qualify as “insubstantial.”
In 2012, the NCAA brought in $860 million in revenues. Of that amount, the organization distributed $503 million to Division I schools and conferences. In 2012, the NCAA was sitting on a half billion dollars in net assets and had an “endowment” fund of $260 million.
Maybe North Carolina should appeal to the IRS to revoke the 501(c)3 tax-exempt status of both of these pseudo-charitable organizations — as a matter of principle.
Mike Parker is a columnist for The Free Press. This opinion piece was posted with permission of the author. It first appeared in the Kinston Free Press.
