College athletic departments depend heavily on donations from alumni to fund buildings and programs. Lots of these donations come from rich boosters who see this as a way of giving back to the schools where they got their degrees or met their spouses or got the idea for the item that made them rich.
These monetary donations have, in the most part, been tax deductible as charitable gifts. Rich people love to make charity donations. It makes them look like good people who give back to the community. There’s nothing better than looking generous while helping your alma mater get a new football stadium or workout facility. And it’s even better when one can use that gift as a tax deduction.
It’s no secret that the recently passed tax bill wasn’t exactly the most well-thought of bills. There were no hearings on the bill. Most people didn’t get to see any part of the bill until just before it came up to vote. The bill was ripe with cries of fraud. There were all of the stories on the infamous Corker Kickback where a senator who had been against the bill suddenly changed his vote after a clause was added to the bill that would allow him to make millions of dollars.
Right before the final votes that led to the bill’s passage, news stories stopped appearing in sports pages and on sports bogs and emails started popping up in boxes of donors to college athletic programs. The stories and emails warned of provisions in the tax bill that would no longer make it possible for donations to college athletic programs to be deducted as charitable gifts.
The email from the University of Houston came after the bill’s passage. It states as follows: “As you probably heard, Congress has passed a tax reform that will potentially affect the tax deductibility of gifts made to college athletic programs. At this point, we are still uncertain as to what the final income will be and how it will affect gifts you make to Cougar Pride.”
The University of Alabama went into panic mode, claiming that the charitable gifts have allowed the college to fund 21 athletic programs. The University of Texas noted that the charitable gifts would no longer be deductible at 80 percent. And all schools made the same request, to please make any and all donations to the college by December 31, 2017.
To make it even better, the new bill also requires that non-profits, like colleges, pay a 21-percent tax on the five highest paid employees making over a one million dollars. That means the Aggies will end up having to pay over $90 million in taxes for Jimbo Fisher — that money is on top of what the Aggies will actually have to pay to Fisher (Alabama will pay have to pay out an extra $1.2 million in taxes a year on top of the $7.125 million it pays yearly to Nick Saban).
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This is not to say that allowing donations to athletic departments to no longer be written off as tax deductions is a bad thing. Only the very naive believe that such donations are actually charitable gifts. Sure, many of the donors might actually have lots of love and affection for their old school, but given the chance to donate to the school or to get a huge tax deduction, the odds are that most will swiftly and eagerly choose the tax deduction over funding the women’s volleyball team.
This will undoubtedly be a huge problem for universities. Imagine the pain the Aggies might have to suffer through if this school has to pay that huge tax on Jimbo Fisher without Tony Buzbee plunking down millions of dollars in charitable donations to the school. And would Tilman Fertitta have been as willing to fund the new basketball arena at UH if his donation was no longer tax deductible?
This is the kind of thing that happens when a bill is passed hastily and without undergoing intense scrutiny. It may cause some hassle for a year or two, but it’s more than likely that in a year or two things will be put right after some influential donors to some influential athletic programs who also happen to be influential donors to influential congressmen and women will use their influence to get the tax deduction reinstated for charitable gifts to university athletic departments.
This will likely happen just in time for the Aggies to find another football coach. Because if there is anything certain in life, beyond death and taxes, it’s that the Aggies will always be in search for a head coach who will finally put the football team over the top.