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Virginia Mens Basketball Board

Hoo Robb

Joined: 9/5/13 Posts: 4101
Likes: 1125


That's what caused the problem. Schools trying to lure better coaches are


competing and one result was trying to be creative and overly accommodating in the contract--incentives other than base salary. For several years schools (P5 and down) have tried to outsmart tax law by structuring buyouts as the sale of a contract between two schools, rather than compensation to the coach, for example. A couple of legal scholars opined that (theoretically) you could do this (among other legal fictions) to treat the buyout as something other than income to the coach. I looked at this for a couple of clients and my opinion was that the risk was not worth the possible reward: there was no benefit for the university, only a possible tax benefit for the coach. Not worth becoming a test case for the IRS, which I think we will see in the next year or two. However, the pressure to hire "bigger" sucks ADs into trying such tactics that they have no business or rational reason to be attempting in order to bring in a coach that could potentially raise the level of the program and create excitement in the fan base.

On a $3M contract, avoiding income tax for the coach on paper starts around $1M, notwithstanding AMT and other factors. Pretty significant benefit for the coach and an upsell for the university, but at what cost. Things have been turned inside out and the institution is taking significant financial risks long into the future on a new hire. This is but one example. There are plenty of other creative clauses to create alternative forms of compensation, all in the chase for a perceived next-level coach. As the coaching carousel has sped up, especially for younger coaches with a little bit of shine, mid-majors that get caught in this trap are then faced with negotiating with coaches who have these types of contracts already to not only terminate the existing contract but also negotiate a new contract that is probably even more aggressive. UCF is a perfect example.

Ultimately, it seems to me that employees/agents are creating the pressure and driving the changes, but institutions are more than happy to accommodate, and have been drafting some fairly questionable and unwise terms into employment contracts. I don't see it changing much until a coaching buyout is slammed in court and some heads roll at a major institution. Right now everyone seems to be comfortable being aggressive and creative because that hasn't happened.

(In response to this post by Haney)

Posted: 04/21/2017 at 11:17AM



+1
Current Thread:
 
  
According to Stanford, Dawkins pulled an Al Groh -- confuzionrains 04/21/2017 08:19AM
  There's a contractual fix for this issue -- Chowder 04/21/2017 1:51PM
  Definitely a "meh" for me ** -- NJHoo 04/21/2017 10:52AM
  K's coaching tree is like a cactus... -- Guy Caballero 04/21/2017 10:09AM
  Motivation? Parol Evidence, baby ** -- Plano Hoo 04/21/2017 09:42AM
  As we have seen very easily. ** -- Mg234 04/21/2017 10:24AM
  Still shocking, though. ** -- Guy Caballero 04/21/2017 10:27AM
  Ding ding! ** -- Hoo Robb 04/21/2017 09:34AM
  Interesting circumstances. ** -- SaxonHoo 04/21/2017 09:00AM
  The Guy in the Glass! ** -- ThatDadgumBiscuit 04/21/2017 08:51AM
  He was such a sensitive guy. Misunderstood. ** -- Hoo Robb 04/21/2017 09:02AM
  One with nature.. and the 3-4 defense ** -- ThatDadgumBiscuit 04/21/2017 09:19AM
  And don't forget his pelt-collecting hobby! ** -- ThatDadgumBiscuit 04/21/2017 09:13AM
  Go stick your face in a fan. ** -- SaxonHoo 04/21/2017 09:32AM
  What some people call smart, others call bad faith and immoral. -- Warrior Wahoo Wolverine 04/21/2017 09:17AM
  The contracts say what they say. -- TheManUpstairs 04/21/2017 09:34AM
  Correct. ** -- Hoo Robb 04/21/2017 09:36AM

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