Out of their control

Meet the Georgia Way’s latest crisis:

The tax treatment of college football donations has turned into a bewildering tangle thanks to last year’s tax overhaul, the most far-reaching rewrite of the U.S. tax code since 1986. Buried in the bill was the repeal of a write-off for so-called seat donations. Internal Revenue Service guidance on lingering questions about the change isn’t expected for months.

Seat donations are a longtime practice of many athletic departments. Under this policy, fans of prominent college sports programs across the country typically donate $50 to $4,000 or more per seat to a school’s athletic foundation. In return, fans get the right to buy season tickets in stadiums’ premium locations. Under prior law, fans could take an 80% tax deduction for the seat donation.

These seat donations became integral to college athletic fundraising. Often the donation far exceeds the cost of the tickets.

At many schools, donations and other tax-deductible donations also yield “priority points,” loyalty rewards that accumulate over years. Donors with the most points get first crack at choice seats when available, plus other benefits…

… Seat donations can make up half or more of the funds raised by athletic foundations. At the University of Georgia’s athletic foundation, seat donations provided $40 million of $80 million raised for fiscal 2018…

… A looming question is how the repeal affects priority points — the loyalty rewards that determine a donor’s place in the fan pecking order. Points accumulate over years, and the more points a donor has, the closer he can move toward the coveted 50-yard line or the more extra tickets he can secure for a rivalry game.

A key phrase of the law says contributions aren’t deductible if they could lead “directly or indirectly” to a right to purchase seats.

This phrase raises the possibility that fans who make other athletic donations, such as a large gift to a capital campaign, can’t take a tax deduction if they also get priority points that provide prized home-stadium seating benefits. But the law isn’t clear.

This lack of clarity is leading to difficult conversations with potential major donors to Georgia giving $100,000 or more, said athletics official Matt Borman.

“They want to have a major impact, and we’re having to tell them we don’t know if the gift is going to be deductible if they get priority points,” he said.

Guidance from the IRS, the referee on this issue, is likely to arrive after many schools have required fans to sign up for next season’s tickets. It also will arrive after athletic foundations have issued letters to many donors detailing 2018 deductions early next year.

Tax specialists say it’s hard to predict how the IRS will rule. The agency has sometimes been lenient on popular issues where valuation is difficult, such as the taxability of frequent-flier miles.

Michael Graetz, a tax scholar at Columbia University and Georgia fan, said, “It will be hard for the IRS to ignore donations that improve a giver’s seat — but it’s not out of the question, especially if the priority points have little value.”

Tell that to the folks who used their Magill Society contributions last year to obtain Notre Dame tickets they resold on the secondary market for a profit.

No doubt Matt, Greg and Jere are sending up silent prayers for the IRS to take pity on the poor ol’ reserve fund.

(h/t)

26 Comments

Filed under Georgia Football, It's Just Bidness

26 responses to “Out of their control

  1. Somebody should have thought about this when he proposed a ridiculous hike in ticket prices last year soon after the tax reform bill passed. Those Magill Society donors made those pledges with the thought they would receive bonus points and road game ticket priority (and that they would be 80% tax deductible).

    The chickens are coming home to roost.

    Like

  2. Hogbody Spradlin

    It’s an obscure point, but I’d like to know how valuation figures into the thinking. To this Hogbody, the issue can be disposed of thus: (i) the donations are both necessary and sufficient for seats or seat buying rights, and (ii) higher donations earn rights to better seats; therefore, there’s a price and a non-charitable quid pro quo.
    Any other desk practice nerds out there have thoughts?

    Like

  3. Former Fan

    It was way past time for those contributions to no longer be a tax deduction. What a loop hole it provided to the schools and the donors!

    Like

    • 81Dog

      Like a lot if other things, as originally designed, it was ok. As the influx of money came pouring in over the years, it became a facade for schools to launder cash. For the big contributors, it was a way to save money on something they’d buy anyway. Seems like it mostly affects rich guys; the increased personal deduction makes it unnecessary for most folks, right? So, the rich are finally paying their fair share! Vive le proletariat!

      Of course, mcjughead may have to scrimp on his new Mercedes because he couldn’t hire someone who can read and think, but sacrifices must be made by Les aristos.

      Like

  4. Mayor

    It’s not just how the IRS will rule. It’s how the Tax Court will rule and maybe the appellate courts, even possibly the Supreme Court. This issue won’t be resolved for years.

    Like

    • MGW

      If the IRS gives favorable guidance, it’ll be a non-issue (similar to a DA choosing not to prosecute). If the IRS takes a hard line, then yes it will take quite a while.

      Liked by 1 person

  5. 79Dawg

    The article goes on to state that while other schools are being proactive and trying to develop positions to help their donors (such as any donation over the minimum is charitable), the folks at Butts-Mehre, in the spirit of dithering that brings back unsweet reminisces of the Todd Gurley suspension, is just throwing up their hands and giving a big “whelp!”

    Like

  6. Chopdawg

    Now I’m trying to remember if I made my Hartman contribution before the end of last year, when it was still deductible in TY2017.

    Time to drag out the dog-eared tax folder.

    Like

  7. Dolly Llama

    When you look up “First World Problem” in the dictionary, I think this is used as the example.

    Like

  8. The Truth

    It delights me to no end that the extortionists in the UGAA are getting hoisted on their petard. To have ever thought something would be a “gift,” given that no one would choose to make it except for the benefit attached to the other end, is ludicrous.

    Like

  9. Bright Ifea

    Don’t you love it when the IRS gets to interpret law? This is why you have to keep the program hot and schedule Clemson and Texas, a product people will buy even without the tax break. On the other hand, can you keep the program hot if the donations disappear because of no tax break?

    Like

    • Tony Barnfart

      I know, right…….”OK, PEOPLE, AS YOUR ELECTED REPRESENTATIVES WE HAVE LISTENED TO THE CONSTITUENTS FAR AND WIDE…..AS A RESULT WE HAVE DECIDED TO CHANGE OUR TAX LAWS….

      “Now, stay tuned so that unelected people you never voted for and probably have never even heard of tell us what that law actually is. Much like your Mr. McGarity, we wouldn’t want to actually take a stand (and risk our re-election) by actually having to decide whether this should be deductible or not.”

      Like

  10. South FL Dawg

    Eventually Congress will take it out of their hands. There’s a rising tide to treat athletic associations like what they are – for profit organizations.

    Like

    • doofusdawg

      Funny how there is no discussion of the 20% surtax on incomes over $1,000,000 for non profits. If anything I would expect the democrats to try and repeal this… for causes they deem worthy that is.

      Like

  11. DawgPhan

    Still amazed that college football ended up on the wrong side of republican tax policy.

    B-M also got hit with a luxury tax on several coaches as well.

    Like

  12. Debby Balcer

    Or this year when those same people bought all the sec championship tickets and are selling them. Second year in a row we were eligible to get tickets because our points were high enough but did not get them. I see people selling tickets for outrageous amounts already. We used to have no issue getting seats when we went.

    Like

    • ATL Dawg

      This year’s point cutoff for SEC tickets hasn’t been announced yet. UGA will announce that sometime this week. If your point total was high enough for you to place an order (30k points), you’ll find out this week whether you got tickets when they announce the point cutoff.

      The tickets that you’ve seen for sale up to now are ones that people get from the SEC. As for tickets that will come from UGA, even people who are fairly certain that they’ll get them (i.e. they are well above the 30k point mark) still don’t know their seat location yet.

      Liked by 1 person

    • illini84

      Yea, how do you know you didn’t get theM

      Like

  13. HiAltDawg

    I still can’t wait for my seats to be live auctioned off and I get escorted out because someone walked to my seat held up a penny and gets priority for 1 cent (although my F/S ain’t the best).

    I always thought tax write-offs for charity were dumb but one of the posters above has it dead on — the Likker Barons are gonna get their access tax break or no so it really doesn’t matter (and hey, good for them). The fact that it upsets the Athletic Association that HATES OUR GUTS, actually ends up funny to me (you know, the bad 5% of the fan base).

    p.s. I saw McGarrity at the Dry Cleaners and thought about all the old school South Georgia season ticket holders from the 80’s that are getting hosed now and stood down despite the shameful, undisciplined and angry thoughts in my head. To all the Old Dawgs out there, I apologize for my temperance and reserve.

    p.s.s. that might not happen if I see a tech supporter with a piece of hedges on Saturday. Pop your corn and peruse the mug shots in the Banner-Herald you’ll know if it’s me, lol

    Like

    • 79Dawg

      In regards to tickets being auctioned off, when we were in traffic heading to the LSU game, about 5 or 6 hours before kickoff, my wife’s LSU cousin, who scored us tix to the game (in the upper deck), said he got an email that “upgrades” were available. So for $80/ticket, we moved from the upper deck to right behind the LSU bench. Apparently, if you are a season ticket holder who can’t use your seats, if you “return” them and allow the school to “re-sell” them, you get some sort of credit/share of the upcharge. In hindsight, wish I had saved my money…

      Like

  14. ATL Dawg

    Penn State, Ole Miss, and North Carolina sure think they are going to get away with something, don’t they? Penn State is telling donors that they can deduct donations “that can improve home-game seating”. Ole Miss and North Carolina are telling donors that they can deduct donations “that help…with seating at away games”. These seem to blatantly violate the repeal of the tax deductibility of seat donations.

    I hope the IRS takes a hard line on this garbage.

    Like

  15. Anonymous

    Those donations never should have gotten the 80% tax deduction anyway. If you want to make the argument that it is for helping education, the money should go to the University itself and not the Athletic Department. Tax policy doesn’t exist to subsidize entertainment. Yes, athletics help further the mission of the Universities, but their administrations should allocate funds so that athletic funds compete directly with the Chemistry department, etc..

    Like

    • Normaltown Mike

      Not sure how it happens at other schools, but all the money that goes to priority points at UGA (the Hartman fund) is transferred to UGA and used for scholarships. The money they make elsewhere (licensing, TV, advertising) is used for other operations.

      Like

  16. 69Dawg

    As usual the UGAAA screwed the pooch. Not satisfied with all the little people’s yearly donations, they tried to sweeten the pot for the big money guys by coming up with the McGill BS. Now, having worked for the IRS for eleven years of my youth I can almost guarantee that they will take a hard line on any contribution that results in seating priority. They will do this until either the tax court or the congress stop them. Why you say, well it’s not their job to do equality. We used to have a saying “We don’t make the laws we just take pleasure in their enforcement.” UGAAA should have just kept naming rooms, scholarships etc. after the big donors but they had to step right into a quagmire. I think those people that pledged to donate over time will now be rethinking the wisdom of it. Hell you get a better tax deal giving it to the Salvation Army.

    Like