by Sasha Egorova, Academic Impressions
The new tax law passed in December 2017 has the potential to significantly affect athletics fundraising. The law repealed an 80% tax deduction that donors could previously take on contributions tied to the right to purchase athletic tickets. Division I schools that rely heavily on these types of gifts could potentially lose millions of dollars in contributions if their donors decide to no longer make these payments.
This News Has Made Universities Nervous
In April 2018 Academic Impressions surveyed institutions to understand how the law is expected to affect athletics fundraising and how different universities are responding to this change. We found that:
- Among Division I schools, 57% of respondents believe that the change will affect their fundraising bottom line.
- In the meantime, only 22% of respondents feel prepared to respond to this tax change at their institution.
Here’s How They’re Responding
Things are still very much in flux, as schools are figuring out their way forward. There are many things to consider: interpretation of the law, accounting implications, campaign and fundraising goal-setting, donor communications, receipting, fund restructuring … the list goes on.
Overall, there are two ways institutions are responding.
RESPONSE 1
Some schools are trying to find a way for donors to still keep contributions like these deductible. In essence, that entails finding a workaround to the law. To do this:
- Some are considering switching to requiring donations for event parking, rather than seats.
- Others are considering implementing or revamping their points systems to increase the “distance” between donations and seating or ticketing benefits.
This option is still far from clear, according to many of the survey respondents:
“We have been participating in a lot of conference calls about the subject, but no one has really found a solution that is fool-proof.”
RESPONSE 2
While some institutions are looking for creative ways to keep the deductibility of these gifts, others are continuing business as usual with a few adjustments. These schools still require certain amounts to be paid to receive preferential seating or tickets. But:
- They’ve informed their donors that their gifts will no longer be deductible and have changed their acknowledgement and receipting procedures.
- Some are starting to put this money into a separate bucket for accounting purposes.
“We are requiring that gifts receiving benefits go into a specific fund. They will still be acknowledged the same.”
“Now we just send an acknowledgement instead of a receipt.”
“The donation associated with seat purchases is now receipted differently. It includes and note that this may be non-deductible contribution.”
However, most (70%) of Division I institutions will continue counting these contributions towards internal fundraising and campaign goals.
Here’s the Missed Opportunity
Though there is a lot of energy around this topic, only a few institutions are thinking strategically about how they can strengthen the relationships with their athletic donors amid this change. Most of the changes schools are implementing are technical and procedural – rethinking their models, receipts, and acknowledgements, rather than thinking about their donors and what motivates them to give. We implore institutions to seize this opportunity to shift the philanthrophic conversation.
Many acknowledge that donations related to seating and ticketing have always been transactional. But, relying on these gifts is not necessarily a sustainable model, as evidenced by this change in the tax legislation. Transactional giving can disappear when the incentive—such as a deduction—is removed. Giving inspired by loyalty and alignment of passions and interests, on the other hand, lasts despite legislative changes.
Some schools are starting to think along these lines:
“Donations associated with premium seating have been and will continue to be an integral part of our fundraising efforts and substantially impacts our bottom line. We are working to improve our donor communication to reinforce this message and reiterate that these funds benefit student-athletes scholarships.”
You need to be asking: “How can we foster truer philanthropic giving to our athletics department and guard our fundraising against legislative and political uncertainty?”
Learn More
In this webcast, join us to hear from Lynne Wester and her colleague Jacqueline Mattson at University of Texas Athletics to hear how taking a strategic approach to donor relations for athletics supporters is more important than ever.