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Mailbag: 49ers’ Turnaround, Tax Law’s Impact on College Athletics

Along with some wonderful Christmas cards and gifts, this holiday season brought a few questions from Inside Track subscribers

Q. Gary, with your inside knowledge of “things important to couch potatoes”, what is the reason for the Niners’ turnaround to a team looking more like past teams? New management, new coaches, new QB are making a difference so far. Is it all because the team is now inspired and excited to play football at a high level again?

A. It’s all of the above. The management—new GM John Lynch and Executive VP Paraag Marathe—drafted well, made a number of smart personnel moves, and stole Jimmy Garappolo for a second-round draft pick. Head coach Kyle Shanahan is as good, or better, than advertised. Defensive coordinator Robert Saleh, a first-time DC, has orchestrated marked improvement on his side of the ball.

But the biggest reason is the quarterback. Quarterback is the most important position in all of team sports. A good quarterback makes everyone better, including the coaching staff. As we noted last week, Jimmy G has the ability to see the field and get the ball out quickly. But it’s not just the quick release…it’s also the accuracy and the ability to hit receivers in stride.

How does Garappolo affect the rest of the team? The offensive line doesn’t have to hold its blocks as long. The ground game has more room to run because opposing defenses can’t stack the box. The receivers run better routes because they know the ball will arrive on time and where they can catch it. The defense is inspired because the offense is avoiding “three-and-outs” and scoring points. And the coaches can expand their playbook because they have a quarterback who can make all the throws.

Suddenly, the 49ers have won four straight and look like a potential playoff team in 2018.

Q. The tax laws passed by the House and Senate eliminated deductions for “college athletic seating rights.” Do you know if this change was included in the final bill passed last week?

Yes, it was. In fact, two of the least publicized elements of the new law are causing a lot of sleepless nights for athletic directors throughout the country. The two changes, which take effect in 2018, will require budgets to be re-cast, compensation packages to be re-written, and fund-raising efforts to be re-classified.

The first shot across the bow was the aforementioned elimination of tax deductions for seat licenses, or “college athletic seating rights,” as referred to in the bill. At many high-profile football and basketball schools, seat licenses generate millions of dollars that are used to fund coaching salaries, facility improvements, and non-revenue sports.

Currently, 80% of the cost to the ticket holder is tax deductible. That means if you are required to contribute $4,000 to a university to purchase four season football tickets, you can take a $3,200 tax deduction. Starting on January 1, 2018, those payments are no longer deductible, which may give more than a few season ticket buyers pause before making their investment.

The second shoe that dropped was a 21% excise tax on any annual compensation over $1 million paid by tax-exempt organizations (including colleges and universities) to their five highest-paid employees. Ouch!

To put it mildly, this will be a huge hit to schools in the Power Five conferences that are shelling out exorbitant coaching salaries. According to USA Today, there are at least 240 head coaches and athletic directors making more than $1 million. Many schools employ three, four, or five athletic employees in that price range.

A few examples. Alabama’s Nick Saban made $11,132,000 this year. With the new tax, Saban will cost the Crimson Tide another $2,127,720. Closer to home, according to USA Today, Stanford’s David Shaw made $5,680,441. Now Stanford will have to come up with an additional $983,893.61 in tax payments.

Or consider the most ludicrous example, the $1.7 million that Oregon is paying to defensive coordinator Jim Leavitt. Next year, the Ducks will need another $147,000 just for the excise tax on Leavitt’s compensation…and that’s for an assistant coach!

No doubt some schools will try to re-structure contracts so that compensation from equipment, apparel and media agreements will be paid directly to the coaches, rather than funneled through the university. That may lessen the impact somewhat, but it’s still going to be a major blow.

Playoff Preview: Last year’s College Football Playoff semi-finals were both blowouts—Alabama manhandled Washington, 24-7, and Clemson shut out Ohio State, 31-zip. This year’s games should be much closer. I like Clemson over Alabama in the Sugar Bowl and Georgia over Oklahoma in the Rose. In tonight's game, I think Stanford will upset TCU in the Alamo.

Signs that the Apocalypse is Upon Us (with apologies to Sports Illustrated): The Fiesta Bowl is teaming with an outfit called Blizzard Entertainment to host the National Collegiate Overwatch Championships in February. For those of you who are uninitiated (as I was until my grandson, Jake, a noted video games champion, explained all this to me), Overwatch is a very popular video game often played in e-sports competition. Professional e-sports leagues, supported by a number of NBA teams, are springing up throughout the country. And several colleges and conferences are exploring opportunities relative to e-sports participation. The Fiesta Bowl tournament will host the “Final Four” of Overwatch college competition and crown the new national champ.

Pete’s Passing: We learned this morning that Pete Liebengood had passed away. Pete was a real class act. I was privileged to work with him for several years on the Stanford football TV highlights show, and was in the booth with him when he called “The Play” at the 1982 Big Game. Pete was a terrific broadcaster and an even better guy. RIP.

Gary Cavalli - Bowl and League co-founder, author, speaker 

Gary Cavalli, the former Sports Information Director and Associate Athletic Director at Stanford University, was co-founder and executive director of the college football bowl game played in the Bay Area, and previously was co-founder and President of the American Basketball League.

Get in touch//@cavalli49//

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