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.