Filed under: Education, Not-for-Profits, Tax Compliance & Planning
Die-hard college sports fans are not cheering about one change made in the Tax Cuts and Jobs Act (TCJA). Boosters have traditionally been allowed an 80% charitable contribution deduction for donations to their favorite institute of higher education, when what they received in return for this contribution was a right to purchase seating at the athletic event in a stadium of such institution.
Contributions made after December 31, 2017, for this type of contribution will no longer be afforded any charitable contribution deduction. Unlike other individual tax deduction changes in the TCJA, this change does not expire at the end of 2025; it is permanent unless Congress acts to reinstate the deduction.
What’s a Good College Sports Fan to Do?
We have checked with the office of two universities, but you will want to check with your season ticket office to confirm their rules.
Generally, for 2018, universities are allowing contributions made in 2017 to count towards seating priority in 2018. Because the charitable contribution deduction is lost only for contributions made in taxable years beginning after December 31, 2017, donors will not have their contributions disallowed for 2017—even though it allows them seating benefits in 2018.
For the University of Washington, which has a seat reallocation year in 2018, boosters will want to estimate what level of Tyee donation they want to make to achieve the level of ticket priority they desire.
If donors overshoot the mark, the university will allow donors to redirect any excess contributions to any area within the university. If the donor falls short in their estimate, they can make an additional payment in 2018. However, in keeping with the new tax law, there will be no deduction allowed for the additional payment; because it is associated with the purchase of stadium tickets.
How Much Should You Contribute in 2017?
Following are three examples of how a donor can decide how much to contribute, before year end, for the University of Washington’s 2018 seat reallocation.
Example 1:
A Tyee seat in section 231 requires an estimated donation of $550 to secure a football seat for the 2018 season. To be conservative, a donor may contribute $650 per seat because they also donate to the business school each year. Any excess over the required amount for the seat allocation can be redirected to the business school for a 100% deductible charitable contribution.
The seat allocation portion is still deductible at 80% ($440) of value because it was paid in 2017. If it turns out the $100 excess is not needed it results in a combined charitable contribution of $540.
Example 2:
If the entire $650 is paid in 2017, and ultimately was needed to secure the section 231 seats, the donor will receive a donor acknowledgment for 80% of the $650—or $520 total.
Example 3:
If the donor pays $550 in 2017, 80% of which is tax deductible, and it turns out an additional $100 is needed to secure section 231 seating, the additional $100 per seat paid in 2018 is non-deductible. Although the booster pays $650 per seat, they receive a charitable contribution deduction of $440.
Questions?
If you have questions about this article or recent changes resulting from tax reform, please visit our Tax Cuts and Jobs Act page, or contact a Clark Nuber professional.
Go Dawgs!
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