Some Final Four teams could suffer under seat tax proposal
Sunday, March 29, 2015
March Madness is almost over. As with taxes, numbers are critical.
We've gone from the First Four to the Select 64 to the Sweet 16 to the Elite Eight to today's games to determine the Final Four. Those four teams will meet up on Saturday, April 4, to decide which two men's college basketball teams will vie on Monday, April 6, for the NCAA championship.
Click bracket for a larger view (opens as PDF).
Also check out SBNation's full college basketball and NCAA tournament coverage.
Ending a college sports tax break: College sports are huge money makers. We're still waiting to see how financial remuneration for student athletes will shake out.
Meanwhile, there's a budget proposal hanging out there that would affect not just college basketball programs, but all sports at institutions of higher learning.
President Obama's 2016 fiscal year budget contains a proposal to cut federal subsidies for premium seats at college sporting events.
Under current tax law, donors to charities who receive benefits in exchange for their contributions must reduce the value of their deduction by the fair market value of the benefits they receive.
Gifts to colleges count as charitable donations. But they get special tax treatment. Here tax law allows donors to colleges and universities who, in exchange for their contributions, receive the right to purchase athletic event seating to deduct 80 percent of their contributions.
In the FY16 budget summary, Treasury notes that some colleges and universities give exclusive or priority purchasing privileges for sports ticket sales to donors, with the priority often dependent on the size of the gift. Donors may deduct 80 percent of the contribution, even when the value of the right to purchase tickets is far in excess of 20 percent of the contributed amount.
As a non-ticket buying donor to my alma mater, Texas Tech University, I think the president's suggestion is a fair one. Tax breaks should be granted for things that provide overall benefits to the country, not to reward deep-pocketed donors who want to cheer on their favorite schools.
If a special tax break is the only way some folks will give to their colleges, then they aren't very loyal alumni. Look for the donations to dry up when the football or basketball teams start stinking.
The potential cost to colleges: Which college hoops programs would suffer? Mike Ozanian details over at Forbes which college basketball teams Obama's sports tax would hit the hardest.
Ozanian say the Louisville Cardinals, a 2015 Final Four contender (UPDATE: Louisville lost to Michigan State) and a team that Ozanian's colleague Chris Smith has determined is the most valuable in college basketball, would definitely feel the pain. "During 2012-13 (the fiscal year for which the 2014 values were based on) the program received donor contributions of $21.5 million, or 53% of its revenue," writes Ozanian.
The Kansas Jayhawks, the third-most valuable basketball team, pulled in $14 million in contributions, he notes, while two more valuable college basketball teams got hefty donations tied exclusively to tickets. The Ohio State Buckeyes took in $6.5 million in ticket-related gifts, with the Indiana Hoosiers pocketing $6 million.
Will the Obama proposal pass? Not likely. Every lawmaker representing a sports' powerhouse is going to oppose the tax deduction change.
But it's definitely something to think about as Congress examines not only this and future budgets, but as a part of possible overall tax reform.
Finally, given the money tied to college sports, specifically right now college basketball, and Obama's proposal to end the tax break for school gifts connected to sports tickets, this week's By the Numbers figure is four, in honor of the Final Four.
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