Congress May Join IOC Fray

Prompted by the worst corruption scandal in Olympic history, a move is afoot in Congress to strip or limit the International Olympic Committee’s tax-exempt status--a major threat since nearly three-fourths of its revenue comes from U.S. companies.

The proposed legislation, circulated by two Republican senators, also would limit tax deductions for the IOC’s chief sponsors, nine of 11 of which are U.S. companies. Each of these “corporate partners” pays the IOC about $10 million annually.

Among a slew of other provisions, the proposal also calls for revisions to the IOC’s control and share of billions in broadcasting revenues. A redistribution could dramatically shift power between the IOC and the U.S. Olympic Committee.

That such a far-reaching proposal could be under serious consideration in Washington indicates the scandal may ultimately transform the Olympic movement--with financial and legal pressure from the outside, not by changes from within.

“If the IOC is not going to clean up its act, then the United States, as one of the guardians of the Olympic movement, has every reason to consider using that leverage to bring about needed changes,” said Trevor McCabe, legislative director for Sen. Ted Stevens (R-Alaska), who with Sen. John McCain (R-Arizona) is behind the proposed legislation.

Hearings in the Senate Commerce Committee, which McCain chairs, could begin within weeks, officials said.

Two dozen IOC members have been implicated in the scandal, which stems from allegations of bribery in Salt Lake City’s winning bid for the 2002 Winter Games. Four IOC members have resigned; five more have been expelled, pending an all-members meeting March 17-18 at IOC headquarters in Lausanne, Switzerland.

A six-member IOC investigative commission is due to meet this weekend to discuss cases against the others--among them Kim Un Yong of South Korea, a former IOC vice president and long an Olympic power broker.

The course of action on Capitol Hill, officials said, depends on the extent of reforms the IOC enacts beginning at the March meeting, as well as suggestions due Monday by an inquiry panel chartered by the USOC.

Headed by former Sen. George Mitchell (D-Maine)--who since leaving Congress has helped broker the peace process in Northern Ireland--the committee’s report will include suggestions of “structural reforms” to the process by which cities bid for the Games, a source said.

Over the last few weeks, meanwhile, Stevens--who long has been active in Olympic affairs--has quietly let it be known that the proposed legislation is not an empty threat.

Anita DeFrantz, IOC vice president from Los Angeles, said she “had a discussion” with Stevens a few weeks ago.

She said, “What is the purpose and what is the intent? Why are we singling out the IOC from all the [tax-exempt groups] in the world?”

Accountability and uniformity, said members of Stevens’ staff. Neither he nor McCain could be reached for comment.

“Really and truly, the main thing he wants is to restore not only U.S. confidence but the confidence of the world in the Olympic movement,” said Stevens’ spokeswoman, Connie Godwin. “You can do that by increasing the IOC’s accountability.”

Moreover, she said, Stevens has hopes that other nations will follow if the U.S. takes the lead in reshaping the rules under which the IOC does business.

“If you can bring about a uniform international policy, you’re ahead of the game,” Godwin said.

Stevens wrote the 1978 Amateur Sports Act, which gave the USOC exclusive control over Olympic sports in the United States. He was one of three senators in 1980 to vote against the U.S. boycott of the Moscow Summer Games and is a recipient of the IOC’s highest honor, the Olympic Order.

During Stevens’ 30-year tenure in the Senate, Anchorage submitted losing bids for the 1992 and 1994 Winter Games.

Asked if retribution also might be on the senator’s agenda, Godwin replied: “That didn’t play into it at all.”

Details of the proposed legislation remain to be sketched out and, accordingly, its prospects for passage are uncertain. A summary of the “International Olympic Accountability Act,” obtained by The Times, recommends that provisions take effect Aug. 1, 2000--if the IOC has not by then enacted internal reforms.

For instance, the IOC currently enjoys 501(c)(4) status under U.S. tax law. That means it is exempt from paying federal income taxes but does not qualify for tax-deductible contributions.

The legislation would “limit” that status. The summary does not provide further details.

U.S. entities provide about 70% of the Olympic movement’s money, IOC officials have said. Details of the IOC’s finances have not been made public.

U.S. tax law, meanwhile, allows the IOC’s corporate “partners” to take business write-offs on their annual returns. Sophisticated business planners recognize that such deductions can be every bit as important to company finances as advertising bang for the buck.

IOC corporate “partners” include the Coca-Cola Co., McDonald’s, Kodak and others.

As the law stands now, the write-off is 100%, said Ted Seto, a corporate tax specialist and professor at Loyola law school in Los Angeles. For example, a company that spent $10 million on advertising is entitled to a $10-million tax write-off, he said.

The legislation would “limit the deductibility of sponsorships, contributions and other payments by U.S. entities to the IOC, even as business expenses.”

DeFrantz, a lawyer, noted, “I’m not sure what they expect. It seems to me it will be quite difficult in the future to encourage sponsorship if sponsors can’t deduct business expenses if they are doing business with the IOC.”

Another provision of the proposed legislation would give the USOC exclusive rights to Olympic broadcasts in the United States. The IOC now holds those rights.

USOC officials called that provision vague and were unsure of its potential impact, saying they would prefer an excise tax on rights fees paid by a U.S. network to the IOC.

That would, in effect, give the USOC a larger percentage of money paid to the IOC by a U.S. network. Under an existing agreement, the IOC gives 10% of U.S. broadcasts rights to the USOC through 2004, then will increase that to 12.75% through 2008.

NBC is paying the IOC $3.5 billion to televise the Games through 2008.

A senior USOC official, speaking on condition of anonymity, said the USOC is intrigued by the possibility of redistributing the wealth.

“We don’t know today the intricacies of the IOC’s funding,” the official said, continuing with a reference to Canadian Dick Pound, who is heading the internal IOC inquiry into the scandal: “Our guess is that part of what Pound and his commission will recommend is more openness in terms of how all these components are funded. Once we all see that, then there may be some need for redistribution.”

Pound could not be reached for comment. Nor could Michael Payne, the IOC’s director of marketing.

The proposed legislation also calls for changes in the selection process of IOC members and for uniform drug-testing standards for athletes.

And it calls for the IOC to prepare a report every four years that would make public “all IOC receipts and expenditures” as well as all gifts received by IOC members.