Administrators at some of the largest educational institutions in the United States are sweating things out as the proposed GOP tax reform plan hangs in the balance in Washington. As the supporters of the bill seek to whip support with the narrowest of margins, the fate of some serious budget dollars for high-profile collegiate sports powerhouses hangs in the balance.
As reported earlier in November, the proposed changes to the tax code include the elimination of a tax break that benefits major athletic programs. Currently, donations made to certain booster clubs or university general funds – which are often tied to the ability to purchase the best season tickets for a school’s sports teams – are tax deductible up to 80%. The subsequent tickets are not deductible, but the donations are often many times the face value of the tickets themselves, much like a Personal Seat License.
The economics of modern college athletics are extraordinarily complex, but the reaction by some of the top administrators in collegiate sports illustrates just how big of an impact this might have.
On November 20, Syracuse University Chancellor Kent Syverud sent a letter to U.S. Rep. John Katko outlining the damage the GOP tax reform would do to his university’s bottom line. According to Syracuse.com, the letter focused on the deductions students and staff would lose, but also noted the downside for the “economic model that supports a bold Carrier Dome renovation.” Syracuse requires a $295 donation to buy the best seats for football and $800 for the best seats to see the Orange’s storied basketball program. Memberships in the Orange Club run from under $50 to $50,000 and carry rights to buy tickets to things like postseason games and VIP access.
“While the ability to deduct premium seating as a charitable contribution has not been without critics, the fact remains that funds generated by such payments play a significant role with regard to supporting investments in athletic infrastructure, scholarships and student programs,” Syverud wrote. “Those investments, in turn, support an athletics enterprise at Syracuse University responsible for more than 3,249 local jobs and more than $140 million in annual contribution to the local economy.”
Syverud is far from a lone voice on the topic. Louisiana State University athletic director Joe Alleva was quoted in a story by ESPN’s Darren Rovell on how much it would hurt his operation.
“We take in $50 million to $65 million a year in donations related to tickets,” said LSU athletic director Joe Alleva. “If even 10 percent of people say, ‘We’re not going to do that anymore,’ that’s at least $5 million to us. We have no other place to make that money up.”
Rovell’s story details several other programs with big fears that their revenue stream will dry up when donors can no longer claim a deduction against their big gifts. At LSU, a prime seat football season ticket costs $425, but only after a $1,025 per-seat donation to the Tradition Fund. North Carolina State center-court basketball seats generate a one-time $25,000 donation per seat, with the promise of an additional $7,200 donation – after which Wolfpack fans purchase the tickets themselves. A $4,000 donation to Alabama gives fans the right to buy a seat in the Ivory Club suite area at Bryant-Denny Stadium.
“While we certainly do not know the exact repercussions, we expect that it would have a damaging effect,” said Alabama athletic director Greg Byrne. “The philanthropic support of donors is instrumental, and although the amount of contributions from institution to institution varies, it is of equal importance across the board when you look at financial structures. Very few college athletics programs actually make a profit. Take that funding away, and it will be difficult to operate without making dramatic changes.”
Proponents of the bill point out that the deduction for such donations is effectively forcing the taxpayer base at large to subsidize big-time donor entertainment. It is part of a GOP tax reform effort, but a similar measure had been proposed in a tax bill put forward by the Obama administration.
“I don’t believe the deduction was ever intended to apply to donations related to season tickets,” the bill’s author, Representative Kevin Brady (R-Texas), told ESPN.
Libertarian think tank Cato Institute – linked to the Koch brothers political organization – championed the provision with a post on Thursday morning, calling it “A Tax Bill Provision Only Athletic Directors Could Hate.”
“It’s an absurd deduction that I’ve complained about periodically, and it’s nice to see it targeted for elimination,” writes Neal McCluskey. “And in case we need a reminder that this deduction has zilch to do with the “public good” that higher ed so often gives as its excuse for every special treatment it demands, USA Today has reported that this season 12 big football schools alone are on the hook for at least $70 million to buy out fired head coaches. Sounds like a lot of private good there.”
It is still uncertain at this time whether or not the GOP tax reform effort will pass – senate leadership needs to convert one of three undecided members of their caucus as of Friday morning. It is also uncertain exactly how wide-ranging the impact will be. As Rovell points out, the majority of collegiate sports fans do not pay such license fees with their season ticket purchases. But if the bill passes and the worst case scenario envisioned by the top tier of collegiate administration comes to pass, it could make for massive shifts in how the college sports landscape operates.