A legal spokesman for a group of colleges said yesterday he is optimistic that the Internal Revenue Service will rule that income from the broadcasting of sports events should continue to be tax-exempt.
Following a three-hour meeting with IRS administrators and lawyers. Sheldon S. Cohen, a Washington attorney who was IRS commissioner during the Johnson administration, said, "I was optimistic before and I'm still optimistic. I think they're going to rule favorably."
The IRS, by law, cannot comment on the case since it is still technically in the initial stages of a routine audit. No ruling is expected for a few months.
At issue are millions of dollars that colleges across the country derive from radio and television broadcasts each year, revenue that athletic directors say is crucial to the operation and sometimes the survival of their sports programs.
The current case involves only the Cotton Bowl Athletic Association, which Cohen represents: Southern Methodist University: Texas Christian University, and the University of Kansas, schools that have played in the Cotton Bowl.
A negative ruling by the IRS would apply uniformly to all other colleges and could involve back taxes as high as $150 million by some estimates. Cohen and about 10 representatives of the three colleges said they have no estimates of the amount involved.
Broadcasting income from college sports events has traditionally been tax-exempt. But, in a routine audit of the Cotton Bov 1 last year, an IRS agent in Dallas decided that such revenue was business income unrelated to the basic purpose of colleges - education.
Before making a ruling, the Dallas IRS office asked Washington for some "technical advice," a procedure that led to yesterday's conference here.
Ritchie Thomas, a Washington lawyer whose firm represents the National Collegiate Athlethe Association, was present at the conference as an adviser. He said he was not representing the NCAA, whose leaders have said they will fight a negative ruling through the courts or Congress.
"We had a nice full conversation about all the issues in the case," said Cohen. "The Service wanted more information . . . This is a new beast for them and they want to look at it from all points of view . . .
"There was some indication that the lower technicians (in Dallas) were having a problem reaching a decision."
Gate revenue and income from parking and concessions were not in question in the case, Cohen said.