End of tax write-off for premium seats might hit hard at UH

When the New Year dawns Monday, so, too, will an anxious and fiscally challenging chapter in University of Hawaii athletic department fundraising.

One consequence of the new federal tax bill that was passed by Congress last week is the elimination of an 80 percent deduction for donations connected to premium seat purchases, UH and national officials said.

The impact “will be huge for our members,” said Tom McMillen, president and CEO of the Maryland-based LEAD1 Association. McMillen, a former Rhodes Scholar, NBA player and congressman, has put estimates at hundreds of millions of dollars overall for the 130 Football Bowl Subdivision schools, including UH, his organization represents.

In good years UH has grossed as much as $4.4 million annually from its premium seat contributions and parking initiatives, or as much as 10 percent of the revenue it takes to run the 21-team athletic program in Manoa.

PSCs, premium seating contributions, are the fees that season ticket holders pay in order to purchase and retain seats in prime locations at many UH sporting events. For example, UH football season tickets in preferred locations required a PSC of $35 to $300 per ticket, depending on the area.

To purchase two seats in the midfield loge level at Aloha Stadium for the 2017 football season required a premium seat contribution of $300 per seat on top of the face value of the tickets, according to the UH website. That meant $240 per season ticket qualified for a tax deduction.

The UH website says: “The premium seating and parking program is a key component of ‘Ahahui Koa Anuenue’s (the athletic booster organization) annual effort to raise funds in support of UH athletics. It provides an opportunity for fans to support student-athletes from all 21 teams, while enjoying the best seats and parking available at Aloha Stadium, Stan Sheriff Center and Les Murakami Stadium.”

But with the passage of the Republican tax bill last week and UH membership packets scheduled to go out next month, the school has been notifying its donors by email: “As you may know, our federal government has approved changes to the tax code effective Jan. 1, 2018. These changes will impact the tax deductibility of your future contributions to ‘Ahahui Koa Anuenue and UH athletics.”

UH athletic director David Matlin said, “We’ve obviously been looking at this closely.” UH has advised its donors to consult their tax advisers.

Donna Vuchinich, president and CEO of the UH Foundation, said in an email: “It is our sincere hope and belief that the commitment and passion of our fans for UH athletics will continue, and through their charitable giving help retain competitive excellence for student-athletes, coaches and trainers. The impact of their private support will far outweigh the loss of benefit for preferred seating privilege for those willing to pay a premium to get preferred seats, albeit without tax benefit.”

In an effort to mitigate the immediate impact of the new tax law, some schools this month have been suggesting that their athletic donors ante up before Jan. 1.

Meanwhile, in its emails, UH said: “Previous IRS policy allowed for donations related to collegiate athletic event tickets, such as premium seat or H-Club contributions, to be tax-deductible at 80 percent of the gift amount. The new tax legislation eliminates this provision. Beginning Jan. 1, 2018, donations related to ticket purchases will no longer be tax-deductible.”

UH added: “Please rest assured we anticipate no other changes in 2018 to H-Club benefits, program structure, or membership levels. H-Club will continue to provide the value, recognition and opportunity to support our student-athletes that you have enjoyed in the past.”

Nonticket and nonbenefit-related donations to athletics are not impacted. Whether donors itemize the deductions on their tax returns will also be a factor, officials said.

For years some critics of major college athletics have decried the loss of potential tax revenue in the form of write-offs to businesses and big donors who help subsidize the growth of big-time athletics. The tax bill also carried an excise tax on any of a school’s five leading employees who make $1 million or more per year, a provision largely aimed at the most highly paid coaches.

None of UH’s coaches currently fall in that category.

For UH, however, the change in the tax law is fraught with concern as the Rainbow Warriors are already bracing for the likelihood of a dropoff in season ticket sales following a 3-9 football season.

An NCAA study has said that about 80 percent of major college athletic programs, including UH, do not operate in the black.

The fear, at UH and elsewhere, is that ending the deduction will make it easier for fans and businesses, which use the tickets for entertaining, to decide not to renew.

McMillen said he is concerned how a drop in funds could impact the so-called Olympic sports. Those are sports such as golf, tennis, swimming, softball and track that do not produce revenue at most schools and are dependent upon funds brought in by football and basketball.