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By Marisa Gibbs, CPA, Tax Senior

With the recent passage of the Tax Cuts and Jobs Act of 2017 (the TCJA), there will be many changes and uncertainties for nonprofits. One change that will greatly impact colleges and universities is the repeal of the deduction for athletic event seating rights.

What changed?

Under the preceding tax law, individuals who contributed to a college or university in exchange for athletic event seating rights could deduct 80 percent of the payment as a charitable contribution. Under the provisions of the TCJA, the amount given for the seating priority is no longer deductible.

Why was it changed?

This change was based on the fact that Congress decided taxpayers should only be allowed to deduct the amount equal to the amount given to charity without benefit.  The House Ways and Means committee also decided that if this revenue is so important to state-based colleges, then the states can provide the tax benefit rather than the federal government.

How does this Change impact colleges and universities?

This provision of the TCJA could deter donors from contributing to colleges and universities when their payment is not going to be tax deductible. As a result, one of the larger contribution sources for colleges and universities could see a marked decrease.

The problem that these colleges and universities will now face is how to absorb the loss in contributions from the seat license revenue and how to record the revenue they do receive.  According to Bloomberg, priority seating generates millions of dollars in annual revenue for some universities. Some believe with the high demand for the tickets, the lack of deduction will not matter in the grand scheme of things.

What’s next?

This year will be a big year for nonprofits, as they try to decipher the provisions of the TCJA and what those provisions mean for their organizations. The HoganTaylor Nonprofit practice will be keep you updated on any developments or issuance of regulations and/or industry standards.

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