The Power 5’s and NCAA’s lobbying campaign to stakeholders has two potential legal limitations: (1) IRS rules and (2) actions by private market participants that promote anticompetitive behavior.

1. IRS Rules

The NCAA and Power 5 conferences are private 501(c)(3) education nonprofits. As a matter of public policy and common sense, entities exempt from tax liability should not lobby to protect their institutional/corporate interests.

While the IRS permits some lobbying activity, it limits its nature, scope, and cost.

The IRS uses two tests to determine whether a private 501(c)(3) has crossed the line into impermissible lobbying activity: the “substantial part test” and the “expenditure test.”

The “substantial part” test is qualitative and asks whether an organization’s “attempts to influence legislation, i.e., lobbying, constitute a substantial part of its overall activities.” 

The IRS looks at all the “pertinent facts and circumstances” in each case. It considers a “ variety of factors, including the time devoted (by both compensated and volunteer workers) and the expenditures devoted by the organization to the activity, when determining whether the lobbying activity is substantial.”

The “expenditure test” is quantitative and places dollar limits on lobbying activity. For nonprofits that spend more than $17 million on their stated nonprofit purpose, the lobbying expenditure limit is $1 million annually.

A nonprofit can elect which test applies.

Under the “substantial part” test, the level and priority of lobbying activity by the Power 5 and NCAA is highly unusual in the nonprofit world. 

As explained in the prior section, their lobbying activities are now explicit, core institutional functions and priorities.

Under the “expenditure test,” the NCAA’s and Power 5’s most recently available Form 990 nonprofit tax returns show lobbying expenditures under $1 million (ranging from approximately $400,000 - $650,000). 

However, it's not clear how these numbers are crunched.

Do these figures include only payments made to professional lobbyists?

For the lobbying firms that are also full-service law firms acting as both legal counsel and lobbyists, how are their fees booked? What constitutes “legal advice” distinct from “lobbying”?

Perhaps more importantly, do the NCAA and Power 5 lobbying disclosures include the costs of their wide-ranging institutional, “grassroots” campaigns, including, for example, the NCAA convention and Charlie Baker’s and Power 5 conference commissioners’ frequent trips to Washington?

These are questions properly left to tax experts. However, there has been a curious absence of discussion on these issues.

In an Advice Memorandum dated May 23, 2023, the IRS asserted its authority to express concerns over whether nonprofit NIL collectives were properly operating within their nonprofit designation.

One has to wonder why the IRS’s curiosity on tax issues in college sports doesn’t extend to the NCAA and Power 5’s institutional lobbying campaigns.

2. The Noerr-Pennington Doctrine

The NCAA is a serial violator of federal antitrust laws, and a unanimous U.S. Supreme Court essentially said so in Alston. Rather than change its behavior, the NCAA seeks absolute immunity from free competition laws.

This raises an interesting question: Is the NCAA’s (and Power 5’s) external advocacy for an antitrust exemption a violation of federal antitrust laws in itself? 

It depends.

The U.S. Supreme Court in Eastern Railroad Presidents Conference v. Noerr Motor Freight (1961) and United Mine Workers v. Pennington (1965) carved out an exception to potentially anticompetitive activity for private companies seeking antitrust protection through appeals to governmental authorities.

Relying on First Amendment rights, the doctrine allows companies to petition Congress, administrative agencies, or use courts to seek relief from antitrust laws. 

Under Noerr-Pennington, the Power 5 and NCAA can seek antitrust immunity from Congress. Similarly, as in Alston, the Power 5 and NCAA acted lawfully in seeking a judicially created antitrust immunity in federal court. 

While the extent of the NCAA and Power 5’s lobbying of the executive branch is unknown, their June 2023 engagement with the White House—through a celebration of “College Athlete Day” and former Presidents who were college athletes—and the IRS’ interest in nonprofit NIL collectives suggests a lobbying emphasis on the Executive branch.

But what about their long-standing institutional lobbying-oriented advocacy outside governmental entities to justify their anticompetitive business model?

Does that public persuasion campaign directed to non-governmental audiences raise antitrust issues?

Could the NCAA/Power 5 institutional lobbying be subject to scrutiny by the Department of Justice’s Antitrust Division?

There appears to be little interest in looking at these issues, illustrating once more the influence the NCAA and Power 5 wield in the corridors of power.