The Rise of NewCo in College Athletics

In the wake of the House settlement and continued pressure on athletic department budgets, many universities are rethinking how collegiate athletics is structured, operated and funded. One trend gaining momentum is the creation of a separate entity (often referred to informally as NewCo) to house some or all athletics-related activity. At a high level, the NewCo movement reflects a desire for flexibility to generate new revenue, operate more commercially and manage financial risk in a rapidly evolving environment.

While this may feel new to many institutions, the concept itself is not. For decades, some athletic departments have operated as separate 501(c)(3) athletic associations. Many more have long relied on separate 501(c)(3) athletic foundations or booster clubs to handle fundraising and donor engagement.

What is new is the scope and speed at which athletics programs are now considering moving additional revenue streams, expenses and operating functions into existing nonprofits, newly formed nonprofits, or even for-profit LLCs owned by those nonprofits.

Before jumping on the NewCo bandwagon, athletics leaders should slow down and think carefully about what they’re trying to accomplish — and what they may be taking on.

Here are five critical questions to address before pursuing this path.

Question 1: Why Are You Doing This (Really)?

“Everyone else is doing it” is not a strategy. Creating or expanding a NewCo structure should be driven by a clear, institution-specific business case, not fear of falling behind. Compelling reasons we are seeing include:

• The ability to operate in a more commercial, revenue-focused manner
• Greater flexibility around restrictive state statutes
• Fewer limitations in how certain employees are compensated
• Relief from institutional procurement limitations
• Protection from state open records or FOIA requirements
• Enhanced ability to differentiate the athletics brand and strengthen positioning

If the NewCo structure doesn’t clearly benefit the institution, the athletics program and the university’s broader mission, the added complexity may outweigh the upside.

Question 2: How Will This Impact Your People?

Not every institution moves employees into the NewCo, but many do.

When staff transitions from a public university to a separate entity, the impact can be significant. Differences in retirement and health benefits, vesting schedules and employment protections can materially affect recruitment, retention and morale.

Even when employees remain institutionally employed, new reporting lines, shared services agreements or dual roles can introduce confusion and risk. People impacts should be modeled, communicated and planned for early. Don’t treat it as an afterthought.

Question 3: What Goes into NewCo and What Stays Behind?

Every NewCo conversation eventually comes down to a “NewCo vs. RemainCo” decision.

While the focus often starts with obvious revenue and expense lines, the real complexity emerges in the second-order operational and financial effects that accompany a separation. Functions that were once managed informally now require formal pricing, documented agreements and deliberate cash settlements, whether for facilities usage, shared services or administrative support.

Compounding this are existing third-party interests. Existing financing arrangements should be front of mind. Revenues pledged against bonds or subject to debt covenants may restrict reassignment of those revenues to a different entity. Also consider ticketing platforms, sponsorship agreements, donor systems and other critical tools that are often institution-centric and may not be easily transferable. Reassigning, renegotiating or duplicating these arrangements can add both cost and operational friction if not addressed early in the process.

Even where legal barriers don’t exist, the practical mechanics of funds flow can be challenging. Separate entities, timing differences in cash movement and disparate accounting records increase administrative effort and the risk of misalignment if not tightly managed. Separation can also create additional complexity in NCAA financial reporting and increase scrutiny around transparency.

What looks like a clean structural move on paper can quickly become messy if these intercompany relationships, system dependencies and restrictions are not fully mapped out in advance.

Question 4: What Are the Tax Implications?

Tax is one of the most underestimated risks in the NewCo movement. New revenue streams (particularly those tied to sponsorships, private use of facilities or other commercial activities) may generate unrelated business taxable income (UBTI). Over time, an excessive level of unrelated activity could raise questions about the tax-exempt status of the 501(c)(3) or the university it supports.

We’re not saying not to do it because of the tax impacts. But this isn’t an area for shortcuts. Institutions should engage with experienced nonprofit tax counsel to vet structures and revenue flows before implementation, not after. And then consider the tax impacts on the bottom line in your financial forecasting to determine whether the new activities make sense.

Question 5: Who Else is In, and What Do They Get?

Some NewCo models contemplate outside capital, whether from private equity or “friendly” investors such as prominent boosters. While these arrangements can provide near-term financial relief or growth capital, they introduce meaningful governance, valuation and compliance complexity that institutions must fully understand before proceeding.

At the core of these discussions are fundamental questions about how the athletics program is being valued, what economic rights the investor is receiving and what level of influence or control is being ceded (explicitly or implicitly). Revenue participation, preferred returns, board representation and veto rights can all shift decision-making in ways that may not be obvious at the outset but become material over time. Athletics leaders need to remember that NCAA bylaws require the institution to retain control of its athletics program. Even minority ownership interests can complicate compliance, particularly when paired with enhanced investor rights or performance-based economics.

What may appear to be a straightforward capital infusion can carry long-term implications for governance, compliance and institutional autonomy if not structured with care. As with other aspects of NewCo, these arrangements require deliberate design to avoid unintended consequences.

NewCo structures can create opportunity. But they can also complicate things. For some institutions, the complexity will be worth it. For others, that may not be the case. The key is intentionality: knowing why you’re doing this, what you’re moving and how it affects the institution as a whole.

And if you’re going down this path, you don’t have to do it alone. The James Moore Collegiate Athletics CPAs and consultants can help. Getting the structure right on the front end can make the difference between a strategic advantage and a long-term headache.

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