New tax law makes PSD donations non-tax-deductable

Submitted by JamieH on

So, I just found out about this when I made my PSD payment for the 2018 season. Apparently PSD donations are no longer 80% tax deductible as donations to the university. I realize that with demand for Michigan tickets high, people will probably not care and will still foot the bill. But some schools have really tapped this out. For example, the ESPN article I link here says Duke basketball requires a $4,000 per seat donation. If you can't write that off anymore, that is a huge price increase.

 

What effect do people think this will have on ticket pricing? Will people just suck it up and pay anyway? Will schools adjust and find a different way to get money from people? Nothing ever gets cheaper so I can't imagine the tickets will. I only have 4 tickets in the Blue, so my PSD was only $840. The tax savings writing off $672 was not that big, but I know lots of people are getting hit much harder than me on this.

 

http://www.espn.com/college-sports/story/_/id/21437392/college-administ…

 

Please try not to make this into a political thread--try to keep it to a discussion of how the new tax law will affect college athletics.  Also, i realize this is insignificant next to the crap going on in EL. Just happened to find out about it as I paid my PSD.  

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gbdub

January 27th, 2018 at 7:53 PM ^

Not all fed spending is equal. Interstates and military bases in North Dakota benefit the whole country, even though they result in effectively high per capita spending. In theory anyway, federal spending is supposed to be for fpthings that benefit the whole country (or for programs that benefit individuals in every state). In any case, ALL California state taxes stay in California, so it’s not clear why the federal government should subsidize that. The fact that poor people in Alabama or wherever need federal welfare doesn’t mean that CA has an excuse to raise their local taxes at the expense of the federal budget.

Joined: 02/16/2010

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Arb lover

January 27th, 2018 at 8:54 PM ^

It's my understanding this is complicated for two reasons. 

1) taxpayers still have the opportunity to choose to deduct certain non profit/charitable contributions if they don't want to take the largely expanded standard deduction. 

2) (the espn article above is November old) Whether or not any specific contribution to athletic funds or whatnot is considered a charitable contribution is entirely up for debate. It's essentially on the University to mark it correctly. Personally if the charitable contribution does not guarantee a season ticket or specific seat/area, it should still count as a charitable donation, and to a certain extent its up to the taxpayer to retain records and support any claimed charitable donation. That's easy enough for the university to wiggle around, especially with waiting lists. Actually charitable donations that are really quid pro quo have never been acceptable to deduct for tax purposes, it's just a shot across the bow that the IRS is probably going to take a harder look at these things from here on out. 

As far as big picture what should be done with taxes, I don't want to touch that here. This is just what is as of now. 

Joined: 11/26/2017

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HL2VCTRS

January 27th, 2018 at 12:07 AM ^

Sure... I think there’s a chance that a thread on a topic that is the specific result of policy won’t become political. For what it’s worth, if there’s a good product on the field there will be demand for tickets regardless of psd being tax deductible or not. A mediocre product? Now I’m looking at all the financial ramifications.

Joined: 06/24/2012

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JamieH

January 27th, 2018 at 12:24 AM ^

is specifically what will fans and or universities do? The political stuff is pretty irrelevant at this point, because even if new tax law is written again, I doubt anyone is going to be clamoring to put back in tax breaks for college sports tickets. It was an arcane rule than universities took advantage of to artificially drive up the prices of their tickets because they were tax deductible, probably not legitimately. I'm interested in what the ramifications of the gravy train ending is going to be.

Joined: 09/05/2009

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crg

January 27th, 2018 at 12:18 AM ^

The only reason it was a "donation" and not just "advance ticket payment" was for the tax deduction. Either way, it makes no difference to my $300 PSD.

Joined: 04/30/2015

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UMxWolverines

January 27th, 2018 at 12:20 AM ^

Maybe schools should look at God forbid, decreasing prices. With one of the worst sexual assault cases in history going on people up at MSU are still going "But but but Simon was so good at raising funds!" How about we start to tone it down a bit, because this is gonna be a big blow to a lot of schools.

Joined: 03/01/2009

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JamieH

January 27th, 2018 at 12:26 AM ^

that the natural result to losing the tax deduction should be that ticket prices, or the PSD, should go down. I also believe 100% that it won't. At all. I'm curious if that will result in people dropping their tickets, or just sucking up the additional cost. I'm talking more broadly than Michigan here---our PSD is actually light compared to some places.

Joined: 09/05/2009

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buddha

January 27th, 2018 at 12:27 AM ^

Genuine question of curiosity: Why were these tax deductible to begin with? I thought most ADs were - essentially- separate P&Ls from the university? Maybe not everyone...but this seems like a superfluous tax break.

Joined: 10/08/2009

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Sambojangles

January 27th, 2018 at 10:14 AM ^

There was a very specific carve out in the law that allowed 80% of the PSL to be deductible. It was the worst kind of legislation, a benefit for a small group that was politically favored (rich boosters of SEC football schools, basically). Read this for a much better explanation: https://www.google.com/amp/www.chicagotribune.com/news/opinion/zorn/ct-…

Joined: 12/15/2008

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Maize in Cincy

January 27th, 2018 at 12:29 AM ^

How did you as a season ticket holder miss all the emails about this in December? Tickets are all about supply and demand, if this causes a small decline in demand then there will be a small decline in price.

Joined: 06/14/2015

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Muttley

January 27th, 2018 at 11:22 AM ^

as the price discovery impact won't be immediate.  (Universities always will seek to charge more. Customers will always want to pay less.)  

It's a defacto, across the board ticket price increase that universities will want to leave in place, seeing if inertia allows it to be born by the consumer.  The impact should be most immediate/elastic at athletic programs with high PSDs and struggling attendance.

Joined: 07/07/2009

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UMForLife

January 27th, 2018 at 9:10 AM ^

It makes me think that people who have season tickets but not rich would give up and more rich would be able to buy it. I am not advocating for handouts but just wanted to point out the difference in the cliche. Supply and demand is our way of life but a balance was struck to keep season tickets in a family. This change could affect that.

Joined: 11/04/2013

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Muttley

January 27th, 2018 at 5:27 PM ^

society's allocation of athletic tickets should be well down the list IMO.

EDIT: Actually, now that I think of it, the tax deductible aspect of PSDs made the cost cheaper for higher income brackets versus lower income brackets: the higher your marginal tax bracket, the bigger refund you get back.  (My original point still stands, this being an example of how special interest tax breaks can be perverse.)

Joined: 07/07/2009

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JamieH

January 27th, 2018 at 11:15 AM ^

Because I spend all my waking time paying attention to how new tax law affects my Michigan ticket purchases and not, say, working a billion hours a week and spending time with my family.

I've been busy. I hadn't heard about this. UM has a junk email for me so I rarely read their email.

Joined: 09/05/2009

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ppToilet

January 27th, 2018 at 5:05 AM ^

Different rules. Don't worry, there will be a new scheme to beat taxes. One idea will be to route the PSD through a business if you can. Or the University could count donations to the athletic department towards the PSD. Ultimately, we'll need to wait for some guidance from the IRS and I'm sure that universities are all trying to figure out a solution. Unfortunately, I think this doesn't lower ticket prices or the PSD but rather prices some people out of the market.

Joined: 04/18/2011

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Indiana Blue

January 27th, 2018 at 9:24 AM ^

it isn't "entertainment" it's "promotional activities" ... think of it as Ads in the paper or on TV.  That expense IS still deductible for businesses.  True "entertainment expenses" are not deductible .... but no one entertains any more (haha) ... that is why there is no longer any deduction for country club dues (boo !)

Go Blue!

Joined: 09/19/2010

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GoBlue96

January 27th, 2018 at 10:29 AM ^

Sports tickets are absolutely entertainment and are now nondeductible. It doesn't matter if you're entetaining customers or not.  The only deductible entertainment is for company wide parties.  The new code has been out since mid December.

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