The athletic seating deduction/counting issue arising from the recently passed tax legislation disallows 80% of the tax-deductible “gift.” This means athletic departments now require individuals to pay for the privilege of purchasing season tickets. When I think about this, I am reminded of the title of the jazz standard so frequently recorded: “All of me. Why not take all of me?” Let me explain and bear with me as I know I will tread some well-worn territory.
- When these athletic seat licensing required contributions were initially introduced, they were frequently and largely treated as a gift, a charitable contribution as it related to donors and could be fully or largely counted by Universities as gifts for VSE purposes and in campaigns and yearly total giving amounts. Even though there was some awareness that this “gift” had an element of quid pro quo, that is, there was a benefit returned to the donor. What was not clear was the exact value of that benefit, and what was the true value of that gift? Each institution was expected to make a good faith estimate, which many institutions felt was nearly impossible.
- Congress, through tax legislation, set in stone the quid pro quo portion of the “gift.” It determined that 80% of that “gift” or required contribution would be considered a charitable contribution and 20% would not. Why this amount? Just because—it was an arbitrary determination. With that legislation, how the required contribution was reported for gift (IRS) purposes changed, with only 80% qualifying as a gift for IRS purposes. Changes in how the required contribution was also counted in giving totals for universities, with most following the split enacted by the legislation. Remember, this 80% had no rational or logical basis. It just was a means to determine the quid pro quo element of the “gift.”
- The new tax legislation, enacted in 2017, disallowed for tax purposes including any of the required contributions as a charitable gift. It was determined that 100% of the fee was for quid pro quo.
- That new classification of the required contribution as a non-charitable contribution led CASE and VSE to disallow the counting of that 80% in reporting fundraising and campaign totals. This had two immediate effects:
- The 80% that had been included in fundraising totals submitted to VSE would no longer be included and would not be included in total gifts raised in a given year. The dip in reported yearly giving for many universities would be substantial, creating a perception problem for the universities and, for those development officers with incentive pay structures, a real problem with their potential compensation.
- CASE determined that the 80% would not be included in campaign totals—a real and immediate problem for many universities with announced campaign goals that factored the deductible portion of these required contributions into the determination of that goal.
- The negative impacts of not continuing to count the 80% led many universities to decide not to follow the CASE guidelines and to continue to include the 80% of the required contribution in yearly fundraising and campaign counting.
- The rationale that led most to continue counting (and the rationale for presenting the required contribution to its season ticket holders) was that it was used to help student athletes by providing scholarships, academic tutoring and advising, life-skills training and the like. So, these required contributions were presented as quasi-gifts—with some degree of justification. The money was used to help students, irrespective of it being considered a charitable contribution. If it functions like a gift, we’ll treat it like a gift—that was the basic rationale.
- CASE has now reversed its stance and allows institutions to continue counting 80% of the required contribution as it did before the tax legislation was enacted. Also, because CASE has recently purchased the VSE report from CAE, that 80% can continue to be reported to VSE. This is the standard, CASE-approved approach, until new standards are approved in another couple of years.
So, here we are—back where we started before the legislation was enacted. Please note, I am not taking issue with the decisions that have been made by universities or by CASE in reversing itself. This goes back to the song “All of Me.” It seems that following the logic for continuing to treat the seat required contribution as a “gift” (it helps students) would count 100%, rather than just counting the 80%.
Here’s my rationale: Having disassociated the tax deductibility of the required contribution from counting standards, why would we only use the 80%, rather than 100%? The 80% was based upon what could be considered the charitable gift portion of the required contribution in the tax code and, as stated previously, that 80% had been arbitrarily determined by Congress.
In reversing the counting standard, essentially, we are saying that, in this instance, our counting standards are now completely unrelated to tax law and the potential deductibility of the contribution for tax purposes. Yet, we are acting as if it were still tethered to a now non-existent piece of tax legislation.
If we have made the case for the required contribution and for counting that contribution in gift totals on the basis for helping students, are we saying only 80% of the money helps students? Or does 100% help? And if it’s 100%, since we are no longer even referencing tax deductibility in our counting standards, why not “All of me. Why not take all of me?”