The University won't lose their tax exempt status - the athletic department will. Here is an article from
2009. It has already come into question by Iowa's own Chuck Grassley.
https://www.jonesday.com/en/insight...ferences-applicable-to-intercollegiate-sports
In order to be tax exempt in this country, you have to have a qualifying exempt purpose. That exempt purpose is education at the University. But when the balance tips away from education toward making money, it calls the exempt status into question.
Here is an interesting quote from the article - remember that this is from 13 years ago.
The Report states that "concerns have arisen that some activities undertaken by colleges and universities are only loosely connected to educating students and might be viewed as unrelated to the schools' tax-favored purpose." The Report cites the "highly commercialized" nature of some athletic programs, along with the "large sums" of revenue that they generate,[3] and questions "whether those sports programs have become side businesses for schools and, if they have, whether the same tax preferences should apply to them as to schools in general."