New Tax Bill and Potential Effect on SASO Donations

[ShockTalk]

Sorry if this has been posted or being discussed elsewhere. Since we do not have an individual Wichita State Athletics forum, I'll place this here for those that may have not seen it.

Dear Shocker Supporter:

As the end of the calendar year approaches, we want to make sure you are aware of recent news concerning tax reform and its potential effect on seat-related contributions in support of college athletics. Tax reform bills are currently making their way through Congress and it is possible that we may see legislation passed before year-end. If the proposed legislation is enacted effective
January 1, 2018, any donations received prior to December 31, 2017 would not be subject to the proposed legislation and would therefore maintain tax deductibility under current IRS regulations.

If you would like to make a donation to Shocker Athletics for next year, in the 2017 tax year, to preserve the current tax benefits associated with your donation, you may do so. The proposed legislation could eliminate the tax deductibility of such gifts. Changing tax rates and the proposed elimination of tax deductions for certain seat-related gifts could decrease the tax benefits of your charitable deductions in future years.

Wichita State Athletics cannot provide tax advice. We encourage you to consult with your financial and/or tax advisor with any questions or concerns.

Holiday Office Hours:
The Athletic Development office will be closed on December 25^th and 26^th. We will reopen on Wednesday the 27^th through Friday the 29^th from 10am – 2pm. Credit cards must be processed by December 29, 2017 in order to receive credit for 2017 (even if the postmark date is 2017). If you would like to make a contribution, please have your contribution to us no later than 10am on the 29^th. Due to the University Holiday shutdown period, all of our facilities will be locked. If you want to come in person to make a donation, you will need to call 316-978-7276 in advance to make an appointment to be let in.

You may also go to the Foundation’s website (wichita.edu/foundation) to make a credit card payment until December 31^st to get 2017 credit. Please notify us if you make a donation on the Foundation’s website so we may coordinate with them.


Wichita State Athletics

[Rocky Mountain Shock]

I could be misreading this, but I believe the elimination of the deduction of entertainment expenses is what they mean to be referring to.

Charitable contributions haven't been affected, other than the limit being raised to 60% of AGI--that is, as long as you can still itemize after the standard deduction is raised.

[BOBB]

I could be misreading this, but I believe the elimination of the deduction of entertainment expenses is what they mean to be referring to.

Charitable contributions haven't been affected, other than the limit being raised to 60% of AGI--that is, as long as you can still itemize after the standard deduction is raised.

I think the bigger issue is the raised standard deduction. Those without big mortgages are likely to claim the standard and then not be able to write off the donation. I am making next year's charitable gifts this year and will likewise double up for 2019 and 2020.

[1972Shocker]

I could be misreading this, but I believe the elimination of the deduction of entertainment expenses is what they mean to be referring to.

Charitable contributions haven't been affected, other than the limit being raised to 60% of AGI--that is, as long as you can still itemize after the standard deduction is raised.

I don't believe that is accurate. My understanding is that these payments required to be able purchase certain seats (i.e. SASO contributions) are specifically disallowed as a charitalbe contribution. Now if you make a stand alone SASO contribution with no seating/parking rights tied to that you could still deduct that. While the charitable contributions have not been effected these payments, if required to purchase certain seats, are no longer deemesd to be charitable contributions. Whether schools will be able to restructure their policies to work around this remains to be seen.

Also Universities will face a 21% excise tax on compesation in excess of $1 million for its 5 highest paid employees. For 3G that's around a $500k hit, Also this applies to severance payments that exceeds 3 times the employees average earnings. So that could hit some of these big buyouts. IIRC the details of 3G's deal that would cost WSU another$2 to $2.75 million if they every bought out 3G. Of course, that will never happen because WSU simply would never be able to fund a buyout of 3G's contract by paying him for the 6 to 7 years that is always remaining on his contract anyway.

I think it is fair to say fund college athletics isn't getting any help from this tax law.

https://www.jdsupra.com/legalnews/co...rm-bill-64129/

• Increases the adjusted gross income limit on deductibility of cash contributions to public charities and certain private foundations from 50% to 60%, repeals the charitable contribution deduction for payments made in exchange for college athletic event seating rights, and repeals the donee-reported substantiation exception for a contribution of $250 or more.

• Imposes on certain tax-exempt organizations and related entities a 21% excise tax on compensation paid to any of the five highest compensated employees of the tax-exempt entity in excess of $1 million for the year and on severance pay to highly compensated employees that exceeds three times the employee’s average income over the five previous years, with certain exceptions for medical professionals.

Another article on the deduction for "seatting donations": http://www.businessinsider.com/house...llions-2017-11

Whether business enterprises could take the postion that the SASO donations tied to seat purchases are simply part of the cost of the seats and take those expenses as entertainment deductions (if they otherwise qualify and there are a lot of hoops to jump through and documentation required to qualify and usually only 50% is deductible) is a different question. My opinion, based on what I know at this point, is that would be reasonable position to take.

Here's a brief review of those rules under existing tax law: http://www.peoriamagazines.com/ibi/2...nment-expenses

[WheatShock]

Isn't 3G's salary privately funded? That may change whether or not the excise tax applies.

[1972Shocker]

I don't believe that how it is funded changes anything. It's who the employer is and whether they are a tax-exempt entity. In this case, Wichita State University is the employer and it is a tax-exempt entity.

[Aargh]

I'm having trouble understanding any type of logic or reason for charging "certain non-profits" an excise tax on highly paid executives, but not for-profits.

I can see some reasoning for an excise tax on some of the charities whose executives skim off big chunks of the donations for themselves. Using an excise tax to discourage skimming of donations intended to go to victims of some type seems reasonable, but athletic departments? Taxing universities if they need to remove an unsuccessful coach? That only makes sense if it's intended to be just plain mean.

[Rocky Mountain Shock]

I don't believe that is accurate. My understanding is that these payments required to be able purchase certain seats (i.e. SASO contributions) are specifically disallowed as a charitalbe contribution. Now if you make a stand alone SASO contribution with no seating/parking rights tied to that you could still deduct that. While the charitable contributions have not been effected these payments, if required to purchase certain seats, are no longer deemesd to be charitable contributions. Whether schools will be able to restructure their policies to work around this remains to be seen.

Also Universities will face a 21% excise tax on compesation in excess of $1 million for its 5 highest paid employees. For 3G that's around a $500k hit, Also this applies to severance payments that exceeds 3 times the employees average earnings. So that could hit some of these big buyouts. IIRC the details of 3G's deal that would cost WSU another$2 to $2.75 million if they every bought out 3G. Of course, that will never happen because WSU simply would never be able to fund a buyout of 3G's contract by paying him for the 6 to 7 years that is always remaining on his contract anyway.

I think it is fair to say fund college athletics isn't getting any help from this tax law.

https://www.jdsupra.com/legalnews/co...rm-bill-64129/

• Increases the adjusted gross income limit on deductibility of cash contributions to public charities and certain private foundations from 50% to 60%, repeals the charitable contribution deduction for payments made in exchange for college athletic event seating rights, and repeals the donee-reported substantiation exception for a contribution of $250 or more.

• Imposes on certain tax-exempt organizations and related entities a 21% excise tax on compensation paid to any of the five highest compensated employees of the tax-exempt entity in excess of $1 million for the year and on severance pay to highly compensated employees that exceeds three times the employee’s average income over the five previous years, with certain exceptions for medical professionals.

Another article on the deduction for "seatting donations": http://www.businessinsider.com/house...llions-2017-11

Whether business enterprises could take the postion that the SASO donations tied to seat purchases are simply part of the cost of the seats and take those expenses as entertainment deductions (if they otherwise qualify and there are a lot of hoops to jump through and documentation required to qualify and usually only 50% is deductible) is a different question. My opinion, based on what I know at this point, is that would be reasonable position to take.

Here's a brief review of those rules under existing tax law: http://www.peoriamagazines.com/ibi/2...nment-expenses

Well that's interesting. Thanks for the info. My firm has been trying to understand all the changes with the tax law and we haven't come across this one yet. This law is a minefield.

This was supposed to be a tax "simplification." Other than the standard deduction raising, which would cause some clients not to be able to itemize anymore, we haven't agreed with the politicians that this has simplified anything.

[shocker3]

I could be misreading this, but I believe the elimination of the deduction of entertainment expenses is what they mean to be referring to.

Charitable contributions haven't been affected, other than the limit being raised to 60% of AGI--that is, as long as you can still itemize after the standard deduction is raised.

Under current law when you make a SASO contribution for the right to buy basketball tickets, you can treat 80% of the contribution as a charitable deduction while the remaining 20% is treated as an entertainment expense. Under the tax bill passed this week, you can no longer treat any of the contribution as a charitable contribution.

[1972Shocker]

It's only an entertainment expense if it is an ordinary and necessary business expenditure and it meets all the other requirements for deducting entertainment expense. I doubt this applies to the majority of Shocker season ticket owners.

[shocker3]

1972Shocker you are right. It is only the corporate sponsors and some business owners that may be deducting part of the remaining 20% as an entertainment expense. Most season ticket holders are only able to deduct the 80% as a charitable contribution and now they will no longer be able to.

[Rocky Mountain Shock]

For those corporate sponsors, though, the allowance for 50% of entertainment expenses is going away. Going forward, 100% of entertainment expenses are disallowed. It looks like the 50% allowance for meals will be intact though.

[shocker3]

Well that's interesting. Thanks for the info. My firm has been trying to understand all the changes with the tax law and we haven't come across this one yet. This law is a minefield.

This was supposed to be a tax "simplification." Other than the standard deduction raising, which would cause some clients not to be able to itemize anymore, we haven't agreed with the politicians that this has simplified anything.

I agree this bill did not simplify the tax code. It added 500 more pages of very complicated rules. This source does a good job summarizing the changes: https://www.jdsupra.com/legalnews/co...rm-bill-64129/

[1972Shocker]

The new deduction for 20% of business income from pass through entities looks like it could be a complicated mess and perhaps open the door to a lot of tax litigation in the future.

Also don't hold your breath on getting regulations issued quickly. For one thing Trump issued an executive order that requires 2 existing regulations to be dropped for every one added.

[Rocky Mountain Shock]

Yes, I agree on the 20% business income deduction. It's going to suck for those phased out. We're thinking we'll have to advise them not to take bonus or 179, which is going to piss off and/or confuse a lot of small business owners.