Erin Guruli (LL.M. Georgetown) has published Commerciality of Collegiate Sports: Should the IRS Intercept?, 12 Sports Law J. 43 (2005).  Here is the Introduction:

In recent years, college and university athletic programs have been earning increased revenues from bowl games, tournaments, television advertisements, and corporate sponsorship…. Therefore, the IRS should revisit its guidelines for classifying income from certain activities engaged in by exempt organizations as tax-exempt or as taxable unrelated business income.

While some of the activities that colleges and universities engage in clearly generate unrelated business taxable income, … large amounts of revenue escape taxation because it is not difficult for a university to prove that a particular activity is substantially related to its exempt function. In other words, if a college or university can prove that a particular activity is related to its educational function, the income generated from such activity is exempt from taxation. The IRS has consistently emphasized the close relationship between college athletics and education, and has pronounced that "an athletic program is considered to be an integral part of the educational process of a university, and activities providing necessary services to student athletes and coaches further the educational purposes of the university." Consequently, this has encouraged liberal application of the test to determine whether certain income is subject to the unrelated business income tax (UBIT). Most scholars have argued, however, that many intercollegiate athletic programs are not substantially related to the institution’s exempt purpose … The goals of intercollegiate athletics are out of sync with the mission of our [*45] universities." These statements are clear evidence that there is a need for IRS reform in this area.

The purpose of this Article is to examine the relationship between collegiate sports and the exempt purpose of colleges and universities, and to consider some of the problems associated with the operational test under § 501(c)(3) and the Unrelated Business Income Tax (UBIT) in light of increased revenues being earned through the commerciality of college sports. Part II presents a brief overview of the current laws applicable to tax-exempt organizations, including the corporate sponsorship regulations. Part III examines some of the more controversial commercial activities undertaken by educational institutions, as well as discusses the operational test and the UBIT as applied to colleges and universities. Part IV discusses some proposed solutions and possible legislative amendments to the operational test and the UBIT. Finally, Part V suggests that although the IRS recognizes a relationship between the operational test and the UBIT, these two independent tests should be integrated for the purpose of restricting excessive related, as well as unrelated, commercial activity undertaken by exempt organizations. Integration of the operational test and the UBIT would also prevent the IRS from making a UBIT determination to avoid revoking the exempt status of an organization.