Manny's Compensation was $9.5 million in the year ending 5/31/2020 (had to come back for this one)

[hoops156]

Wait, couldn’t the university negotiate with Temple and have Temple and Manny agree to void the contract, and UM pay $4M directly to Temple Under separate arrangement?

I would imagine if we took a deep dive into other schools, its probably common practice. just bc Blake sucks at his job doesn't mean every single person does there (Blake isn't sitting here doing their contracts).

 

[CANEMC]

Class A Felony. Dude's just robbin UM and the players.

 

[TheOriginalCane]

Not sure that's true. The payment would have been for/under the Temple contract, which was a Phily job. Phily is one of the highest tax jurisdictions in the country. Maybe Manny's advice was he never worked there, but I'd guess the contract itself (and the Temple withholding paperwork) located the position in Phily.

In any case, my math would only make the cost higher and decision worse for UM.

Trust me, I've been doing this stuff for 25 years. Florida payroll was paid to a Florida employee. What Manny did with the money is his business, but he's buying out a contractual obligation. Manny himself is not paying any payroll-type obligations, he is paying a corporate entity to be excused from a contract. It's "damages". Not subject to payroll withholding obligations. I understand your point, I realize the underlying nature of the deal was for employment, but the $4 million payment from a person (former employee) to a corporate entity would not be subject to withholding in PA.

 

[TheOriginalCane]

I will take your word for it if this is your bailiwick. It's a dumb way for the contracting parties to organize their behavior, but I'm not sure more should be expected of football coaches and non-profit institutions that spend other people's money. It should certainly be feasible to write the contract differently. But if 'buying' institutions are willing to pay a tax gross up, I guess no one involved in the contract even cares. Temple got its money. Manny got his. The U paid some grossed up vomitous amount to hire away a Temple coach who never coached a game.

All of this is true, and yes it is offensive. Even if we did a national search and hired away someone else's coach, we still would have paid SOMEONE'S buyout, and we still would have grossed it up. It's sad, and you are correct, it's "other people's money", but it has become standard operating practice across the country. If Miami tried to take a stand and NOT pay a tax gross-up on buyouts, then the coaching candidate is going to turn us down and go to a school that does. Which is why I said that Miami needs to start BUDGETING for buyouts, setting aside $1 or $2 million per year in a reserve account for this express purpose.

And Hurricane Club needs to double its fundraising to help pay for both buyouts and more staff if we intend to exist and compete in the new world order.

 

[TheOriginalCane]

Wait, couldn’t the university negotiate with Temple and have Temple and Manny agree to void the contract, and UM pay $4M directly to Temple Under separate arrangement?

You could try. Step transaction doctrine. Substance over form. And then the IRS could audit you. And impose fraud penalties.

But the short answer is no. Anything you pay, even indirectly, that relieves another person of an obligation that he/she once had, is considered compensation.

 

[TheOriginalCane]

Yes sir, partner. Lol

Giddy-up!

 

[Ethnicsands]

Trust me, I've been doing this stuff for 25 years. Florida payroll was paid to a Florida employee. What Manny did with the money is his business, but he's buying out a contractual obligation. Manny himself is not paying any payroll-type obligations, he is paying a corporate entity to be excused from a contract. It's "damages". Not subject to payroll withholding obligations. I understand your point, I realize the underlying nature of the deal was for employment, but the $4 million payment from a person (former employee) to a corporate entity would not be subject to withholding in PA.

You're probably right anyhow but I was not saying quite what you wrote there. The payment to Temple obviously is just a revenue to Temple. It's the payment to Manny to make him whole for his liability to Temple that is the payment that would be subject to withholding. It makes sense that that is a Miami to Manny payment and they'd situate it in Florida. Don't know what his Temple contract said.

 

[Ethnicsands]

All of this is true, and yes it is offensive. Even if we did a national search and hired away someone else's coach, we still would have paid SOMEONE'S buyout, and we still would have grossed it up. It's sad, and you are correct, it's "other people's money", but it has become standard operating practice across the country. If Miami tried to take a stand and NOT pay a tax gross-up on buyouts, then the coaching candidate is going to turn us down and go to a school that does. Which is why I said that Miami needs to start BUDGETING for buyouts, setting aside $1 or $2 million per year in a reserve account for this express purpose.

And Hurricane Club needs to double its fundraising to help pay for both buyouts and more staff if we intend to exist and compete in the new world order.

You're right on all of that.

I'd just add that it wouldn't be that hard to write these contracts in a way that allowed the buy-outs to be postured as institution to institution settlement agreements. But you'd have to do it up front. No idea why they don't. It would save +/-40% of the money that goes to buyouts overall.

 

[Ethnicsands]

Wait, couldn’t the university negotiate with Temple and have Temple and Manny agree to void the contract, and UM pay $4M directly to Temple Under separate arrangement?

It's possible but you'd have to have the right factual starting point. If the contract makes the buy-out Manny's obligation, it's likely not going to work from the IRS's perspective to avoid the taxes on the amount that flows to or around him to satisfy Temple. You'd need to change the underlying contract.

 

[TheOriginalCane]

It's possible but you'd have to have the right factual starting point. If the contract makes the buy-out Manny's obligation, it's likely not going to work from the IRS's perspective to avoid the taxes on the amount that flows to or around him to satisfy Temple. You'd need to change the underlying contract.

You'd need to get to a point where it would be an industry-wide practice. That every "took-another-job-buyout" is structured as an obligation to be paid by the new employer. You'd have to set it up so that the new employer creates the breach of contract.

 

[Ethnicsands]

You'd need to get to a point where it would be an industry-wide practice. That every "took-another-job-buyout" is structured as an obligation to be paid by the new employer. You'd have to set it up so that the new employer creates the breach of contract.

I agree that's what needs to be set up, but it doesn't need to be a general practice - each claim can be judged on its own.

It would take some care in drafting, but it certainly should be doable.

 

[TheOriginalCane]

I agree that's what needs to be set up, but it doesn't need to be a general practice - each claim can be judged on its own.

It would take some care in drafting, but it certainly should be doable.

I'm saying, if you don't want courts and/or the IRS challenging this, it needs to become an industry practice, not a case-by-case crapshoot.

 

[TheOriginalCane]

So the most accurate calculation seems to support a direct payment of $6.4 million to fund Manny's $4 million buyout (plus an extra $1.3 million excise tax), which would put Manny's actual salary for Year 1 at around $3.1 million.

Any questions?

 

[Fluffhead]

So the most accurate calculation seems to support a payment of $7.7 million to fund Manny's $4 million buyout, which would put Manny's actual salary for Year 1 at around $1.8 million.

Any questions?

One edit. The excise tax would not be included in the $9.5M on his W-2, just the gross up. So it is actually worse. The University's total outlay on Manny Diaz salary and buyout expenses for the first year would be the $9.5M from the 990/W-2 plus the $1.8M or so of excise tax for a total of $11.3M. Manny's actual salary would be $3.5M for that first year.

 

[Fluffhead]

I'm saying, if you don't want courts and/or the IRS challenging this, it needs to become an industry practice, not a case-by-case crapshoot.

If you have a good coach who is actually in demand, let's say Mario Cristobal, you would actually want to structure it this way to dissuade schools through a higher actual cost in buyout. I get it is a bit circular, but if you have a hot commodity coach, this is better.

 

[Ethnicsands]

I'm saying, if you don't want courts and/or the IRS challenging this, it needs to become an industry practice, not a case-by-case crapshoot.

I understand your point. I don't think any courts or the IRS will challenge a contract if it's written properly. Contractual disputes / interpretations don't have baselines of 'industry-wide' standards.

 

[Ethnicsands]

So the most accurate calculation seems to support a direct payment of $6.4 million to fund Manny's $4 million buyout (plus an extra $1.3 million excise tax), which would put Manny's actual salary for Year 1 at around $3.1 million.

Any questions?

Sounds right, but implies that the payment wasn't made until months after he was hired.

 

[Sigma_Cane_7]

Let me win this lottery and I’ll see what I can do.

 

[TheOriginalCane]

Sounds right, but implies that the payment wasn't made until months after he was hired.

Huh? I made no such implication.

 

[Ethnicsands]

Huh? I made no such implication.

The file you're basing your calculation on was a may over may file. He was hired in January. If the Temple payment had been paid before May of his first year, it can't be the explanation for the 9.5 mm figure in the disclosure.