Final Four Teams Win Millions in Tax-Free Funding

An NCAA Final Four appearance can be the highlight of a lifetime for a college’s athletic program. But there’s a financial lure as well: each Final Four team has already locked down over $8 million in tax-free funding for its conference.

Auburn University, Michigan State University, Texas Tech, and the University of Virginia will face off April 6. Two teams will advance to the NCAA Men’s Basketball final April 8, capping off a weeks-long March Madness tourney. Every team that makes the tourney receives funding pooled from tournament revenue.

For every game played up to the Final Four, the funding shares for conferences increase, which means all-time high contributions from Auburn and Texas Tech—both schools made their first-ever Final Four appearance.

While this amount changes yearly, the reported payout for the 2019 tournament is about $1.69 million, disbursed in six yearly installments of about $281,000. For every additional game played in the tournament, a team gains an additional $1.69 million to be paid out over six years.

The NCAA is a nonprofit organization, so income received by the association is tax-exempt, according to Stacey Osburn, NCAA director of public and media relations. This includes millions from television contracts and merchandise sales.

Osburn told Bloomberg Tax she believes most if not all Division I conferences are also nonprofits, which would also exempt them from income taxes.

Conference Contributions

Each of the Final Four teams earned $8.19 million for their respective conferences.

Teams eliminated in this year’s tournament still collected revenue for their conferences, as money is awarded on game appearances, not wins. The Big Ten Conference secured the highest amount—$35.5 million from 21 games played— followed by the Atlantic Coast Conference (ACC) with $33.8 million from 20 games played, the Southeastern Conference (SEC) with $32.1 million from 19 games played, and the Big 12 Conference with $22 million from 13 games played.

Beyond the top four conferences, the Pac-12 Conference earned $11.8 million from seven games played, and the West Coast Conference and Big East each earned $1.41 million from five games played.

Sometimes conferences benefit from a sole team. In 2018, eleventh-seeded “Cinderella” Loyola Chicago secured 100 percent of the funding for the Missouri Valley Conference.

First Year for Bets

This year’s Final Four marks the first time that viewers can legally wager on the action in eight states. The American Gaming Association estimated Americans will wager $8.5 billion both legally and illegally throughout the 2019 NCAA tourney.

New Jersey, Pennsylvania, Delaware, Mississippi, Rhode Island, and West Virginia have legalized sports betting following the U.S. Supreme Court’s May 2018 ruling in Murphy v. NCAA, which repealed the federal Professional and Amateur Sports Protection Act of 1992 (PASPA). That law had prohibited states from authorizing gambling related to professional and amateur sports leagues. In the 2018 tournament, only Nevada had legalized amateur sports betting.

In New Mexico, only tribal casinos can take sports bets. Sports betting is legal in Arkansas, New York, Oregon, and the District of Columbia, but those jurisdictions aren’t taking bets yet. Nearly another two dozens states are considering legalizing sports betting, according to the AGA.