I know most don't care about the legal and financial ramifications that Huff's contract presents, but it is an indication of just how poorly things are done in Shewey. If the athletic department strikes out so drastically on major issues like this, imagine all of the minor details they completely whiff on:
There are many bigger issues with Huff's contract other than the ones mentioned in the other thread that make me question the school's legal counsel and athletic director. I, too, spend too much time reviewing/correcting/advising on contracts. Two FBS coordinators actually use me for contracts instead of agents. One of the coordinators was just fired a month ago, so I am familiar with reading legitimate coaching contracts.
The first issue below could be an issue, especially for a cash-strapped school, but the third could be a far bigger issue that Marshall missed on in this contract:
1) The Tax Cuts and Jobs Act (2017) makes tax-exempt organizations (that's Marshall!) liable for a 21% tax (referred to as "excise tax") for any employee who makes more than $1 million in a year. Looking at Huff's contract, it isn't far-fetched for him to reach $1 million.
Huff's $755K salary + $30K for winning record + $100K for annual ticket sale bonuses twice + $50K for C-USA championship + $50K for making a bowl . . . depending on if his two vehicles, golf membership, etc. would be considered taxable income (I'm not a CPA), he would be over that $1 million threshold, and none of those bonuses are unreasonable. That means Marshall is now on the hook for a 21% excise tax.
So how should Marshall get around that while also being able to pay enough and have reasonable bonuses to attract top talent? They have Nike or any other "vendor" agree to their own contracts with the head coach. Instead of Marshall being the one to pay Huff for the tv/radio appearances, the marketing rights holder should be doing that. Marshall enters into that agreement separately from the marketing rights holder, and as a result of that agreement, the marketing rights holder agrees to pay that much to the head coach (future regulations by the IRS may make these separate agreements unwise, but for now, they are fine). Instead of Marshall paying the head coach for his appearances at Big Green Scholarship Foundation events, the Big Green pays the coach directly (and the same agreement applies between Marshall and the Big Green). This ensures that Marshall will not have to face a 21% excise tax if Huff hits a few of those bonuses. What else does it do? It reduces payroll taxes for Marshall (which even as a public institution, Marshall has to pay).
Virginia Tech does this with their coaches. Their Nike contract pays their coaches a certain amount and then gives the school a certain value of Nike products. Want to know what smarter (read: "Not Marshall") schools are doing? Instead of entering into an agreement with Nike wherein the school receives $X amount of free gear for the entire sports program, the university has Nike pay the head coach directly. They then reduce the amount of free gear the school receives, and Marshall can buy that gear directly from Nike (at a reduced rate).
I have no idea what Marshall's Nike agreement is. For the sake of discussion, let's say Nike gives Marshall $400K of gear each year. In return, Marshall agrees to wear their gear, have their signage, etc. Smart schools have Nike reduce the amount of free gear to $200K. Then, they have Nike pay $200K directly to the head coach. Since Marshall will need more than $200K worth of gear, Marshall then buys directly from Nike (at a reduced rate). So each party basically gets the same value from each other as the old way of doing contracts. What does this accomplish? First, it avoids any chance that Marshall will have to pay the excise tax. Just as important, it LOWERS MARSHALL'S PAYROLL TAX! For a school that needs to watch every nickel and dime, it's something the AD should be doing. Just as good, since Marshall is exempt from sales tax, their purchases of the Nike gear isn't increased by sales tax.
Do you really think Roy Williams at UNC is the 44th highest paid basketball coach? Of course not. He has the same structure. I believe Learfield Sports, a Tar Heel booster company, and others pay him directly.
This is shit that should have been considered in 2017 when the TJ&J was first passed. Marshall has had enough time to get their ducks in a row on this and consult with other universities to see how they do it, because I assure you, those other universities don't do it like Marshall.
Chance Marshall could have to end up paying excise tax, which I am guessing they haven't planned for? I'd guess 40%. That's too high to be this sloppy and unknowledgeable on this issue.
2) Let's say Huff shits the bed . . . he's god awful in his first two years (goes 3-9, 2-10, etc.), rubs fans the wrong way, is awful at running a team. Marshall is forced to fire him without cause. Marshall is on the hook for his $755K X 2 years left on his contract. That forces Marshall into paying him out on the rest of his contract. Intelligently, Marshall structured the contract to make these payments monthly to cover the remaining duration of the contract, but they still may be susceptible to the deferred compensation rules (section 409A), but McLaughlin doesn't pay me enough to post on this board for me to review all of those rules). I use "intelligently" loosely, because I don't think they were smart enough to structure the remaining buyout to avoid excise tax, but rather, because they realized they don't have the means to pay a few large parachute payments.
Chance Marshall could have to pay excise tax due to this? I'd guess <10%, because their financial predicament allowed them to not look stupid in this respect.
3) This is the most likely issue Marshall could face having to pay a lot more than they expected:
Let's say Huff is let go after two years. The contract stipulates that he must make reasonable attempts to be employed in a similar position (which translates to "coaching in college football"). It makes no mention of accepting "reasonable" compensation for that position. If there is bad blood between Huff and Marshall if he were to be let go, it's reasonable he could try and stick it to Marshall. Assume he holds up the end of his agreement. He gets fired and then makes reasonable attempts and succeeds in being employed elsewhere as a coach. Let's say he decides to take a D2 head coaching position. He knows there isn't much money to go around for his staff, but he's still getting paid by Marshall. So instead of accepting a $90K D2 HC contract, he agrees to take a $5000 annual salary for that position so his D2 school has a bigger budget for assistants. His Marshall buyout is offset by his earnings from a new position, but if he is fired, he probably wants to help his new school by saving money (more money for the football budget). He will be getting paid the same amount regardless. Let's say he ends up going to FAU as the running backs coach after Marshall fires him. If FAU (and Huff) is smart, they will sign him to a two year contract (or however much is left on his Marshall contract), pay him $1000/year, and use the remaining allocated budget for a RB coach to get other/better coaches. Marshall is then on the hook for the remainder of his contract minus the $1000 annual deal he has at FAU. Marshall pays, FAU saves a lot of money, and it's a double loss for Marshall.
When Texas fired Charlie Strong, Strong took many of his staff members to USF with him. Texas got royally screwed, because all of those guys accepted less than market value at USF which stuck Texas paying more than they should have. Yes, the contract had a mitigation to the buyout based on salary earned elsewhere, but the mitigation was only 50% of the new salary AND it didn't have a clause about accepting a market-rate salary commensurate with the job and experience.
Based on what schools have been doing contractually for a number of years now, it's almost negligent for Marshall to not have at least #3 built into the contracts.
To avoid this, what did UCLA do in 2017? All of their assistant football coaches (and strength coach) contracts have clauses in their contracts that remove UCLA from having the liability of paying salary owed to them if the coaches are fired and then accept employment for a salary less than what is consistent and reasonable based on their experience and the position.
Chance of this happening is probably <15%, but the financial ramifications of it could be a lot. Considering the guy has never been a true coordinator let alone a head coach, he has a higher likelihood to monumentally bomb in a couple of years compared to a guy with previous HC or coordinator experience. Having this gap in the contract is absurdly foolish.
Even big money schools like Michigan find ways to save money on these big contracts. To save money on Harbaugh's contract, Michigan agreed to give him a $2 million loan. This loan was to be used to purchase a high-payout life insurance policy. Harbaugh would then be able to "loan" himself from that life insurance policy during the course of his life. It's the same as getting paid for him directly from Michigan. If he were to die, Michigan gets their $2 million loan from the life insurance policy and the remaining goes to Harbaugh's estate. The advantage for Harbaugh is huge, as his "loans" aren't taxed. It's essentially untaxed compensation which allows Michigan to pay him less. So Harbaugh saves taxes, Michigan doesn't have to pay him as much as result of it, AND Michigan doesn't have to pays as much in excise taxes (or in Marshall's case, wouldn't have to worry about surpassing the $1 million to have excise tax liability).
There are many bigger issues with Huff's contract other than the ones mentioned in the other thread that make me question the school's legal counsel and athletic director. I, too, spend too much time reviewing/correcting/advising on contracts. Two FBS coordinators actually use me for contracts instead of agents. One of the coordinators was just fired a month ago, so I am familiar with reading legitimate coaching contracts.
The first issue below could be an issue, especially for a cash-strapped school, but the third could be a far bigger issue that Marshall missed on in this contract:
1) The Tax Cuts and Jobs Act (2017) makes tax-exempt organizations (that's Marshall!) liable for a 21% tax (referred to as "excise tax") for any employee who makes more than $1 million in a year. Looking at Huff's contract, it isn't far-fetched for him to reach $1 million.
Huff's $755K salary + $30K for winning record + $100K for annual ticket sale bonuses twice + $50K for C-USA championship + $50K for making a bowl . . . depending on if his two vehicles, golf membership, etc. would be considered taxable income (I'm not a CPA), he would be over that $1 million threshold, and none of those bonuses are unreasonable. That means Marshall is now on the hook for a 21% excise tax.
So how should Marshall get around that while also being able to pay enough and have reasonable bonuses to attract top talent? They have Nike or any other "vendor" agree to their own contracts with the head coach. Instead of Marshall being the one to pay Huff for the tv/radio appearances, the marketing rights holder should be doing that. Marshall enters into that agreement separately from the marketing rights holder, and as a result of that agreement, the marketing rights holder agrees to pay that much to the head coach (future regulations by the IRS may make these separate agreements unwise, but for now, they are fine). Instead of Marshall paying the head coach for his appearances at Big Green Scholarship Foundation events, the Big Green pays the coach directly (and the same agreement applies between Marshall and the Big Green). This ensures that Marshall will not have to face a 21% excise tax if Huff hits a few of those bonuses. What else does it do? It reduces payroll taxes for Marshall (which even as a public institution, Marshall has to pay).
Virginia Tech does this with their coaches. Their Nike contract pays their coaches a certain amount and then gives the school a certain value of Nike products. Want to know what smarter (read: "Not Marshall") schools are doing? Instead of entering into an agreement with Nike wherein the school receives $X amount of free gear for the entire sports program, the university has Nike pay the head coach directly. They then reduce the amount of free gear the school receives, and Marshall can buy that gear directly from Nike (at a reduced rate).
I have no idea what Marshall's Nike agreement is. For the sake of discussion, let's say Nike gives Marshall $400K of gear each year. In return, Marshall agrees to wear their gear, have their signage, etc. Smart schools have Nike reduce the amount of free gear to $200K. Then, they have Nike pay $200K directly to the head coach. Since Marshall will need more than $200K worth of gear, Marshall then buys directly from Nike (at a reduced rate). So each party basically gets the same value from each other as the old way of doing contracts. What does this accomplish? First, it avoids any chance that Marshall will have to pay the excise tax. Just as important, it LOWERS MARSHALL'S PAYROLL TAX! For a school that needs to watch every nickel and dime, it's something the AD should be doing. Just as good, since Marshall is exempt from sales tax, their purchases of the Nike gear isn't increased by sales tax.
Do you really think Roy Williams at UNC is the 44th highest paid basketball coach? Of course not. He has the same structure. I believe Learfield Sports, a Tar Heel booster company, and others pay him directly.
This is shit that should have been considered in 2017 when the TJ&J was first passed. Marshall has had enough time to get their ducks in a row on this and consult with other universities to see how they do it, because I assure you, those other universities don't do it like Marshall.
Chance Marshall could have to end up paying excise tax, which I am guessing they haven't planned for? I'd guess 40%. That's too high to be this sloppy and unknowledgeable on this issue.
2) Let's say Huff shits the bed . . . he's god awful in his first two years (goes 3-9, 2-10, etc.), rubs fans the wrong way, is awful at running a team. Marshall is forced to fire him without cause. Marshall is on the hook for his $755K X 2 years left on his contract. That forces Marshall into paying him out on the rest of his contract. Intelligently, Marshall structured the contract to make these payments monthly to cover the remaining duration of the contract, but they still may be susceptible to the deferred compensation rules (section 409A), but McLaughlin doesn't pay me enough to post on this board for me to review all of those rules). I use "intelligently" loosely, because I don't think they were smart enough to structure the remaining buyout to avoid excise tax, but rather, because they realized they don't have the means to pay a few large parachute payments.
Chance Marshall could have to pay excise tax due to this? I'd guess <10%, because their financial predicament allowed them to not look stupid in this respect.
3) This is the most likely issue Marshall could face having to pay a lot more than they expected:
Let's say Huff is let go after two years. The contract stipulates that he must make reasonable attempts to be employed in a similar position (which translates to "coaching in college football"). It makes no mention of accepting "reasonable" compensation for that position. If there is bad blood between Huff and Marshall if he were to be let go, it's reasonable he could try and stick it to Marshall. Assume he holds up the end of his agreement. He gets fired and then makes reasonable attempts and succeeds in being employed elsewhere as a coach. Let's say he decides to take a D2 head coaching position. He knows there isn't much money to go around for his staff, but he's still getting paid by Marshall. So instead of accepting a $90K D2 HC contract, he agrees to take a $5000 annual salary for that position so his D2 school has a bigger budget for assistants. His Marshall buyout is offset by his earnings from a new position, but if he is fired, he probably wants to help his new school by saving money (more money for the football budget). He will be getting paid the same amount regardless. Let's say he ends up going to FAU as the running backs coach after Marshall fires him. If FAU (and Huff) is smart, they will sign him to a two year contract (or however much is left on his Marshall contract), pay him $1000/year, and use the remaining allocated budget for a RB coach to get other/better coaches. Marshall is then on the hook for the remainder of his contract minus the $1000 annual deal he has at FAU. Marshall pays, FAU saves a lot of money, and it's a double loss for Marshall.
When Texas fired Charlie Strong, Strong took many of his staff members to USF with him. Texas got royally screwed, because all of those guys accepted less than market value at USF which stuck Texas paying more than they should have. Yes, the contract had a mitigation to the buyout based on salary earned elsewhere, but the mitigation was only 50% of the new salary AND it didn't have a clause about accepting a market-rate salary commensurate with the job and experience.
Based on what schools have been doing contractually for a number of years now, it's almost negligent for Marshall to not have at least #3 built into the contracts.
To avoid this, what did UCLA do in 2017? All of their assistant football coaches (and strength coach) contracts have clauses in their contracts that remove UCLA from having the liability of paying salary owed to them if the coaches are fired and then accept employment for a salary less than what is consistent and reasonable based on their experience and the position.
Chance of this happening is probably <15%, but the financial ramifications of it could be a lot. Considering the guy has never been a true coordinator let alone a head coach, he has a higher likelihood to monumentally bomb in a couple of years compared to a guy with previous HC or coordinator experience. Having this gap in the contract is absurdly foolish.
Even big money schools like Michigan find ways to save money on these big contracts. To save money on Harbaugh's contract, Michigan agreed to give him a $2 million loan. This loan was to be used to purchase a high-payout life insurance policy. Harbaugh would then be able to "loan" himself from that life insurance policy during the course of his life. It's the same as getting paid for him directly from Michigan. If he were to die, Michigan gets their $2 million loan from the life insurance policy and the remaining goes to Harbaugh's estate. The advantage for Harbaugh is huge, as his "loans" aren't taxed. It's essentially untaxed compensation which allows Michigan to pay him less. So Harbaugh saves taxes, Michigan doesn't have to pay him as much as result of it, AND Michigan doesn't have to pays as much in excise taxes (or in Marshall's case, wouldn't have to worry about surpassing the $1 million to have excise tax liability).
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