If you are trying to come at me about a brilliant loophole and not knowing how things work, please find someone else. As long as he is being paid FMV (i.e. not paying an assistant strength coach $500k), good luck proving anything, especially if you give a promotion to go along with it. He is an existing employee, he is not being hired new by the school, and as long as you set up the right documentation (i.e. compensation studies and comparisons to similar level employees at other schools, compared to other employees of a similar band at the school, etc.), there will be zero issue.
I have spent my career doing tax consulting for tax exempts, which includes a number of universities and athletic associations. The hoops that 501c3s need to go through to establish fair market value for compensation on an annual basis to avoid questions of private inurement/benefit and an IRS investigation is absurd. I will defer to you on IC and scholarship counter rules, but you can find someone else to talk down to about this being some big deal or suspect red flag for the NCAA.
