New tax law could impact collegiate sports fundraising in major way

By Mack McCarthy

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I assure you this will not be about politics, but the tax bill that is being considered in the United States Congress could have a major impact on college athletics and its boosters.  While this may or may not end up in the final bill -- and this has been brought up on multiple occasions previously -- there are presently several provisions that affect the tax status of fundraising and other critical athletic revenue.  

 Senate Majority Leader Mitch McConnell on Thursday. PHOTO: Zach Gibson     

Senate Majority Leader Mitch McConnell on Thursday. PHOTO: Zach Gibson  

 

I’ll see if I can explain it as it has been explained to me by several collegiate fundraising professionals. Under the new tax bill, philanthropic gifts would continue to be 100-percent tax deductible.  Any donations that did not include benefits (like tickets, preferred parking, status, etc.) or specific campaign gifts would still be deductible.  As of now, the gifts given in order to receive benefits are allowed at an 80% deductible rate.  This is what would change and become a non-deductible donation.  That ruling would have huge implications on people’s giving and the fundraising arm of every college athletic program in the country. 

Under the new bill,  the licensing and trademark revenue would also be taxed for the first time, further impacting a major revenue stream at many institutions. And finally this excerpt from the USA Today coverage of this legislative proposal:

Colleges would be affected by changes that would impact a variety of tax-exempt non-profit organizations. Private-activity bonds, a form of financing that colleges use for construction projects including athletic facilities, would no longer be tax exempt. Also, tax-exempt organizations would be subject to a 20% tax on compensation in excess of $1 million that’s paid to any of their five most highly compensated employees; that would cover scores of college coaches and athletics directors.

All of these possibilities combine to be a real concern for athletic administrators at every level of athletics, and all of our universities as a whole.    It's common for fund raisers at NCAA schools to tout the 80-percent tax deduction as a major benefit to donors.  The charts below from N.C. State's Wolfpack Club, and Duke University's Iron Dukes, list the tax deduction for giving as the very first benefit for members.

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If the deduction is eliminated in the new tax bill, the impact could be substantial for major donors and the NCAA schools who rely on donations to fund their athletic programs. 

 

And now to this week's ACC Power Rankings:

There was some movement in the Power Rankings this week, with the Tarheels benefitting.

1.   DUKE.  The question is becoming when or if Duke will lose.  Youth will probably bite them some night along the way, but it’s a legitimate consideration.

2.   NORTH CAROLINA.  It’s looking like the only blemish on the Heels’ record going into ACC play will be the loss to Michigan State. As many expected,  they could very well end up being the main challenger to Duke.  Luke Maye’s numbers (20.8 ppg, 10.3 rebs, 56.4 FG%)  compare amazingly well to folks like Jordan, Jamison, and Hansborough.

3.   NOTRE DAME.  Losing, in their last real test before league play, to Michigan State, showed the Irish still have some work to do.  But, they’ll still be around in March..

4.   FLORIDA STATE. Probably could have moved the ‘Noles up more with a big win (their fourth straight in this rivalry) over the 5th ranked Gators of Florida, but still the first legit win of the year.  Depth, athleticism, and defense are going to make FSU tough going into league play.

5.   VIRGINIA.  Playing their trademark defense, the Cavs continue to impress. They have a big challenge/opportunity Tuesday night in Morgantown playing the antithesis of their style in WVU.  Must watch TV.

6.   MIAMI.  Love the Canes experience, defense, and win at Minnesota, but we won’t learn much more about how good they are until league play due to their schedule.

7. VIRGINIA TECH.  A couple power five wins last week for the Hokies vs Iowa and at Ole  Miss showed continued improvement for Buzz’s crew.

8 LOUISVILLE.  While they have really good players and defend with the same passion they did under Pitino, the Cardinals dropped their first real tests of the season at Purdue and vs Seton Hall.  I’ve left them in the ranking thweek due to the talent and eyeball test, but . . . .

*NC State, Syracuse, and Clemson trying to expand my list.  Not yet.


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About the Author:  Mack McCarthy has spent over 40 years in Division I Athletics including 19 years as head basketball coach at Chattanooga, VCU, and East Carolina.  Mack led his Chattanooga teams to the NCAA Tournament five times including a trip to the Sweet 16.  Mack works as a TV Color Analyst for multiple networks covering the ACC, SEC, Conference USA, Big South, and Southern Conferences. 

William Rothpast