Tax reform could cost big-money culture of college football millions


Football field

For 30 years, sports fans and higher education institutions have saved and made millions from an easily-overlooked exemption in the Internal Revenue Code comprised of only 150 words. Section 170(l) allows sports boosters to deduct 80 percent of contributions made to their teams for “the right to purchase tickets for seating at an athletic event in an athletic stadium.” In an apparent effort to generate more tax revenue to pay for tax cuts in other portions of the new tax law, Section 13702 of the Tax Cuts and Jobs Act (the act) repeals this tax exemption entirely.

Does such a small exemption make a big difference? In 2015, schools with powerhouse football and/or basketball programs, such as Texas, Ohio State, Michigan, Alabama, Penn State and others, collectively amassed an estimated $500 million from these seat donations alone. Along with media rights and ticket sales, seat donations have become one of the top three revenue sources in college sports. For example, The University of Virginia and Louisiana State University receive roughly $20 million and $60 million respectively in annual seat donations.

On the spectator side, where the minimum donation required for the opportunity to purchase football tickets in a particular area can range from $78 to as high as $90,000 (tickets are an extra cost after the donations), it is easy to see the appeal of the 80 percent exemption.

Will big revenues drop drastically? The federal government expects the change to increase federal revenue by $200 million per year. Whether colleges and universities will see a chilling effect in giving is debated among experts who have conflicting views on how much impact there will be on total donations. Some have calculated up to a 20-30 percent drop in giving, while others suggest the change will be negligible. But even if the drop is as small as 5 percent, a college previously bringing in $20 million will need to look elsewhere for the $1 million loss.

The most likely avenue for this recoup could be an increase in the net cost of tickets – a possibility that may concern Big Ten fans when rivalry matches for the 2018 season are already priced just under $200 per seat. (2018 OSU single-game tickets for the Michigan game are priced at $195, with season tickets starting at $681.)

The change will take effect in 2018. While it is unclear whether the reform will, in fact, have any effect, some have already proposed state-based action as a way to remedy the effect. A House Ways and Means Committee spokesperson proposed, “[i]f seat license revenue is important to state-based colleges and universities, then states themselves can provide this tax benefit rather than federal taxpayers.” Schools have also already begun responding to the implications. The University of Michigan, which has a Preferred Seat Donation program, released a statement in response to the new legislation ensuring that monetary minimums and ticket pricing will remain the same for the upcoming season. But the university made no promises with respect to changes for the “pivotal” program.

Higher education institutions should carefully consider the impact of this and several other aspects of the act on their projected budget and program offerings. 


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